Air Force accepts long-delayed, still-troubled Boeing tanker

By Tony Capaccio / Bloomberg News

The U.S. Air Force has accepted the first delivery of Boeing’s long-delayed aerial refueling tanker despite flaws that remain to be fixed.

The first eight of 179 planned KC-46 aerial tankers, which are assembled in Everett, will be accepted from now through February. That’s more than two years late — and it might take as long as four more years to upgrade the troubled camera system used in refueling operations. At this stage, Boeing is under contract for 52 of the tankers, which are built on the airframe of the company’s 767 commercial model. The entire program is worth $44 billion.

The Air Force is withholding as much as $28 million from the final payment on each aircraft as a financial hook to ensure Boeing makes the necessary improvements.

“We have identified, and Boeing has agreed to fix at its expense, deficiencies discovered in developmental testing of the remote vision system,” Captain Hope Cronin, an Air Force spokeswoman, said in a statement Thursday.

The Pentagon’s approval of the Air Force plan to accept the flawed planes was caught up in turmoil at the top of the Defense Department. The decision was waiting on the desk of Defense Secretary Jim Mattis when he announced his plan to resign by the end of February.

President Donald Trump ordered him to clear out before Jan. 1. Mattis had previously chafed at accepting the planes with deficiencies. In November 2017, he sent a sticky note to his chief of staff saying that he was “unwilling (totally)” to accept deficient tankers.

Instead, the tanker decision was made by Ellen Lord, the undersecretary for acquisition and sustainment, because acting Defense Secretary Patrick Shanahan, a former Boeing executive, has recused himself from decisions on the company’s projects.

Once the first four aircraft are delivered to McConnell Air Force Base in Kansas, possibly by the end of this month, the tanker program will move into operational combat testing that’s expected to last until about June. Those tests will determine whether the aircraft is effective for combat and can be maintained. A second batch of four planes will be delivered next month to Altus Air Force Base in Oklahoma to begin flight and ground crew training, Cronin said.

Leanne Caret, chief executive officer of Boeing Defense, Space & Security, said in a statement that the tanker is a “proven, safe, multi-mission aircraft that will transform aerial refueling and mobility operations for decades to come.”

Members of Congress are likely to ask questions about the decision to accept the aircraft with the flaws. But Air Force officials said that taking them with a clear plan for fixes to be made at Boeing’s expense will allow crews to fly training missions rather than have the planes sit unused at a company airfield.

“The Air Force has mechanisms in place to ensure Boeing meets its contractual obligations while we continue with” the combat testing, said Cronin, the Air Force spokeswoman.

The Defense Department is “in complete agreement” with the Air Force plan to accept delivery of the tanker, according to Lt. Col. Mike Andrews, a Pentagon spokesman.

The tanker’s 59-foot extended refueling boom is guided with a joystick by an airman using a system of seven cameras. But shadows or the glare of the sun can hamper the view in rare instances, possibly resulting in scraping the other plane or difficulties in performing a refueling, according to the Air Force. The service says that could lead to undetected damage to specialized coatings used on F-35 and F-22 stealth fighters and B-2 bombers, or cause structural damage.

The deficiencies don’t preclude most refueling missions, and many military aircraft, such as Lockheed Martin Corp.’s F-35, have been accepted with scores of deficiencies that will be fixed later.

Separately, the Air Force has agreed to pay the cost of redesigning the boom through which fuel flows to eliminate its deficiencies, Cronin said.

The first KC-46 was originally expected to be delivered between April and June 2016. The Air Force said that the tanker has demonstrated key capabilities in more than 1,000 flights and 4,000 refueling contacts that involved transferring four million pounds of fuel.

Still, the tanker’s development has been beset by technical issues for what had been envisioned as a low-risk project when Chicago-based Boeing won the contract in 2011.

Boeing already has absorbed almost $4 billion in cost overruns on the KC-46.

Before deciding to accept the first tankers, the Air Force and Boeing officials conducted an extensive review with a “human factors unit” to improve the camera-based system. Human factors studies look into how people interact with technology.

They developed nine new, highly technical performance parameters that “are pretty significant changes,” Cronin said. The parameters will be incorporated by Boeing at its expense and will take an estimated three to four years to complete, Cronin said.

In the meantime, as planes are delivered, the Air Force will withhold as much as $28 million of each aircraft’s price until the nine agreed-upon fixes and improvements are installed and verified, Cronin said. The Air Force currently estimates the average procurement cost for each tanker over 179 aircraft will be about $203 million.

Cronin pointed out that if the entire $28 million is withheld from Boeing on each of the 52 aircraft contracted to date the amount would approach $1.5 billion.

Bloomberg’s Julie Johnsson contributed.