USAF to pay Boeing $882m of withheld KC-46 payment

3 April 2020 (Last Updated April 3rd, 2020 15:02)

Boeing has secured an agreement with the US Air Force (USAF) to receive $882m of withheld payments for ongoing flaws with the KC-46 tanker to help maintain cash flow during the ongoing Covid-19 coronavirus pandemic.

USAF to pay Boeing $882m of withheld KC-46 payment
A 22nd Air Refueling Wing KC-46A refuels a C-17 Globemaster III from Joint Base Lewis McChord’s 62nd Airlift Wing over the Arabian Gulf. Credit: USAF / Staff Sgt Daniel Snider.

Boeing has secured an agreement with the US Air Force (USAF) to receive $882m of withheld payments for ongoing flaws with the KC-46 tanker to help maintain cash flow during the ongoing Covid-19 coronavirus pandemic.

The USAF had been withholding the money due to ‘previous non-compliance’ in 33 KC-46 deliveries; it recently also detailed a new Category 1 flaw with some of the tankers suffering fuel leaks.

The release of the funds is seen as a way to help keep Boeing afloat as the Covid-19 coronavirus pandemic continues to threaten some industries across the US.

The USAF said that it recognised the threat posed by Covid-19 to the US and its defence industrial base and so was releasing the withheld funds to ensure ‘successful performance under the programme’ going forward.

In a statement, the USAF said: “This agreement provides Boeing $882 million of withheld payments for previous non-compliance in 33 KC-46 deliveries.

“This withhold release is in line with Department of the Air Force and Department of Defense policies to maximise cash flow, where prudent, to combat coronavirus impacts on the industry base. Within 120 days, the Air Force and Boeing will conduct an expedited process to determine final specification compliance or non-compliance.”

The agreement on the withheld funds is one of two memorandums of agreement (MOA) reached between Boeing and the USAF yesterday.

The release of withheld funds comes as the USAF and Boeing also agreed on a final design for the aircraft’s maligned remote vision system, which has been another Category 1 flaw with the aircraft.

Boeing has agreed to redesign and retrofit a new remote vision system (RVS 2.0) onto existing and new KC-46 tankers. The new RVS 2.0 will be installed at no extra cost to the US Government.

The USAF said: “RVS 2.0 will include 4K colour cameras with proper viewing geometry, operator stations with larger screens, a laser ranger for refuelling aircraft distance measurement and boom assistance augmented reality.

“With the help of scientists and engineers from both enterprises, the Air Force will lead design reviews and approve specifications to drive the partnership toward initial fielding in 2023.”

Over the course of the programme, the USAF is set to buy 179 KC-46 tankers, with several foreign sales also agreed to supply the aircraft to foreign militaries, most notably Israel.

In a statement, Boeing Defense, Space & Security President and CEO Leanne Caret said: “The Air Force and Boeing will make the KC-46 synonymous with aerial refuelling excellence. The agreement we announced today takes advantage of new remote vision systems technologies that are orders of magnitude better than what was available when the program started. Generations of women and men in uniform will benefit from the advancements we are making in the science of visualisation systems.

“Not only will these advancements benefit the KC-46 by preparing it for future capabilities like autonomous refuelling, but they will also benefit other programs for years to come. The investments we continue to make in the KC-46 clearly demonstrate Boeing’s commitment to Pegasus being the standard by which all future refuelling aircraft are measured.”

The USAF said: “The Air Force and Boeing are committed to delivering a fully-operational tanker to the warfighter and ensuring the continued viability of an essential member of the defence industrial base.”

Boeing has been hit particularly hard by the spread of the Covid-19 pandemic with the drop in air traffic hurting its commercial division which was already struggling with the aftermath of two fatal accidents with its 747 MAX commercial airliner last year.

Boeing has also been forced to temporarily stop operations at facilities in areas across the US, this has seen the production of the KC-46 tanker, P-8 Poseidon Maritime Patrol Aircraft, H-47 Chinook, V-22 Osprey and MH-139A Grey Wolf temporarily paused.

Since the end of February Boeing has seen its share value drop by over half and the company’s market cap dropping from $155bn on February to $70bn today.