Cobham to pay extra £160m to Boeing over KC-46 aerial refuelling delays

Talal Husseini 19 February 2019 (Last Updated February 19th, 2019 17:22)

UK engineering firm Cobham has accepted a £160m ($206m) additional charge from Boeing to settle a dispute over delays in the KC-46 tanker aircraft aerial refuelling programme.

Cobham to pay extra £160m to Boeing over KC-46 aerial refuelling delays
Cobham has agreed to pay Boeing an additional £160m to settle a dispute over the KC-46 aircraft aerial refuelling programme. Credit: US Air Force/Christopher Okula.

UK engineering firm Cobham has accepted a £160m ($206m) additional charge from Boeing to settle a dispute over delays in the KC-46 tanker aircraft aerial refuelling programme.

The £160m sum consists of one £86m payment relating to the settlement of the dispute, and a further payment of £74m to complete Cobham’s Wing Aerial Refuelling podded system programme for the KC-46 as well as to cover rescheduling and costs of further possible delays.

Upon completion of the settlement, Cobham will deliver the refuelling system in mid-2020, following associated flight tests this year.

In 2017, Cobham was forced into a rights issue after making a string of statements that its profits were lower than expected. Last year, Cobham was rocked again by a £40m charge from Boeing for problems with its KC-46 aerial refuelling programme. This charge alone led to a 10% fall in share price in one day.

After the announcement of the latest settlement charge today, however, Cobham’s share price rose from 115.30p per share to 120.35p per share.

Boeing has been developing the KC-46 tanker aircraft under contract with the US Air Force (USAF) to deliver 52 KC-46’s of an expected 179 tankers in total.

The KC-46 tanker was originally scheduled to be in service with the USAF by 2017 but the troubled programme has suffered from technical and certification delays. Boeing withheld payments for the KC-46 aerial refuelling system to Cobham until the dispute over delays was settled. Boeing itself has forfeited more than $3bn in pre-tax charges relating to cost overruns on the fixed-price KC-46 tanker programme, which has already cost billions of dollars more than expected.

The KC-46 tanker is expected to have a maximum fuel capacity of 212,000lb and the aircraft will be fitted with a flush-mounted air-to-air refuelling receptacle that can transfer fuel at a speed of 1,200 gallons per minute.

In January 2019, the USAF accepted delivery of six KC-46A Pegasus tanker aircraft despite finding a number of technical deficiencies. In response, Boeing agreed to fix the deficiencies at its expense.