SEATTLE — Boeing has now racked up more than $3 billion worth of pretax charges on the KC-46 due to cost overruns and schedule delays, but the head of its defense business told reporters Thursday that the program’s problems are, for the most part, in the rearview mirror.
Last week, the company disclosed another $81 million-pretax penalty on the program in its financial report for the first quarter of 2018.
Leanne Caret, the CEO of Boeing’s defense sector, put a positive spin on the cost growth, saying that the expense indicates the work that is being done to get the product right as the company sprints toward a contractual obligation to deliver 18 certified tankers this year.
“The charges we took are tied to the certification efforts and the test efforts as we continue to finish up towards first delivery,” she said Thursday during a media visit to the company’s KC-46 production facilities in Everett, Washington.
According to the terms of Boeing’s fixed-price development contract with the U.S. Air Force, the company is responsible for any costs over the $4.9 billion award.
“I think what you’re seeing is that the amount of charges has continually decreased over time, again showing there has been no new technical issues,” Caret said. “But we are still in a development program, and I want to make certain that the capability we’re delivering to the war fighter meets their intent. So we’ll do the right thing as we move forward, as we have historically.”
The past several months have been difficult ones for the KC-46 development program as Boeing comes down to the wire in its efforts to deliver the first tanker this summer.
Caret has also maintained that the company can meet the “required assets available” obligation, or RAA, to deliver a total of 18 certified KC-46s and nine refueling pods this year — although the actual deadline is in October.
“This isn’t about one aircraft, and then we’re going to get started on another one,” she said. “We have an entire fleet of tankers here, and as we head toward the first delivery, we’re going to be able to start really ramping up and getting these to the customers the way we need.”
But the Air Force is more pessimistic, saying that its assessments show that the first delivery will likely not occur until the end of the year, with RAA occurring some time next spring.
Air Force Secretary Heather Wilson has been publicly dismissive of the Boeing’s progress, telling lawmakers that the company has perhaps been too focused on its lucrative commercial business to give the tanker program the attention it deserves.
“One of our frustrations with Boeing is they’re much more focused on their commercial activity than on getting this right for the Air Force and getting these aircraft to the Air Force. And that’s the message we took to them in Seattle last week,” Wilson told lawmakers in March.
Boeing obviously sought to combat that perception during its media trip, in which reporters spoke with the men and women fabricating the refueling booms, installing the wiring, flight testing the aircraft and performing quality control at its Everett Modification Center. There, reporters saw four KC-46s awaiting the final touches inside, another seven tankers outside the facility and eight KC-46s about 40 miles away at Boeing Field.
In total, Boeing has 34 KC-46s in some stage of production, and the first four aircraft planned for delivery have already flown and are in storage.
Caret, who took the top Boeing defense gig in February 2016, told reporters that she wanted them to understand the magnitude of work being accomplished in Washington state and the passion of the company’s workers.
Overall, the picture she gave of the program’s trajectory was sunny — and sometimes at odds with the Air Force perception of Boeing continually overselling how quickly it will be able to fulfill its delivery obligations. She downplayed tension with the Air Force, saying that she was “totally in line with them in terms of their sense of frustration” on the program.
Although Air Force leaders have said they are dissatisfied with Boeing’s performance, Caret said Boeing had not made any “specific change” to production efforts because the company had already devoted its full resources to its No. 1 program.
“The real disconnect is working through flow times,” she said. “There’s a lot of paperwork associated with delivering a system such as this, working through our paperwork, working through the FAA and the military paperwork and making sure all of those flows align, and that’s what we’re in conversations with the government on, and it’s collaborative.”
In order to be fully certified, the KC-46 must receive an amended type certificate for the aircraft’s commercial systems and a supplemental type certificate for its military-specific systems. So far, the Federal Aviation Administration has issued an ATC, and the aircraft in April wrapped up the testing necessary for the STC.
The next step will involve additional flight tests with the C-17, F-16 and KC-135 to ensure those aircraft can receive fuel from the KC-46, as well as closing out a key deficiency with the aircraft’s remote visual system that must be corrected before delivery.
So does that mean the Air Force should be doing more to make receiver aircraft available and to expedite the testing process?
“This is a team sport,” Caret said. “We all collectively need to make certain that we’re doing all the proper analysis, that we’re having the right conversations. So I feel very comfortable with our relationship with the U.S. Air Force and the transparency that we have.
“We collectively work together to look at every opportunity, likewise every risk to make sure that there’s a balance going forward and we’re doing the right thing for the war fighter.”
Check back with Defense News on May 7 for an in-depth look at Boeing’s plans to fix ongoing KC-46 technical issues.
Valerie Insinna is Defense News' air warfare reporter. She previously worked the Navy/congressional beats for Defense Daily, which followed almost three years as a staff writer for National Defense Magazine. Prior to that, she worked as an editorial assistant for the Tokyo Shimbun’s Washington bureau.
