Archive for June, 2011

Reports that KC-46 Contract Already Showing Cost Growth

Bloomberg is reporting that the U.S. Air Force has been briefing Congress in preparation for the FY12 budget that the KC-46 tanker contract with Boeing (BA) is already showing growth beyond the initial award price. The first part of the program is for development and testing as well as the delivery of the first 18 aircraft.

The value awarded was $4.9 billion but the indications are that it will be at least $300 million more. The way the contract is structured Boeing will have to cover that cost increase themselves. Boeing, though, seems confident that when all is complete the contract will be executed for close to the $3.9 billion and will not cost the company.

Boeing was awarded the contract in February for the new tanker program. The Air Force plans this as the first phase of a new program that could buy several hundred new tankers to replace the KC-135 and KC-10 fleet currently supporting operations. Boeing will ultimately build over 150 of the KC-46 tanker based on their commercial 767 airliner design. Boeing has also sold 767 based tankers to Italy and Japan with Italy just taking possession of their first aircraft.

The current estimate though of about a six percent cost increase is not a good sign for a program just starting which is going to be held to strict cost standards. One of the major reasons that Boeing won was their much lower price then their competition from Europen aerospace giant EADS (EADS:P) U.S. subsidiary, EADS North America. Their proposal based on the KC-30 tanker ordered by Australia and the U.A.E. was more expensive but was a larger aircraft that could carry more fuel. Further cost growth will only bring more scrutiny and criticism from Congress.

This was the third attempt by the Air Force to award the new tanker contract since 2001. An attempt to award a sole source lease to Boeing was derailed by fraudulent activity by Air Force acquisition chief Darleen Druyun and Boeing’s CFO. In 2008 EADS teamed with Northrop Grumman (NOC) won a contest that was overturned on protest by Boeing. This latest contract is the result of the new competition held due to Boeing’s successful protest.

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Boeing Releases Video of the Italian KC-767

Boeing (BA) has released a video on their Youtube channel of the Italian acceptance of the first two of their four KC-767A tankers.

The video may be found here.

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Recent Tanker News Link Round Up

The site has been quiet since the award of the KC-46A contract to Boeing (BA), but here are some links to articles about different aspects of the program and the companies involved in the contest:

Boeing is slowly releasing information about the KC-46A design.

World Trade Organization softens ruling against EADS (EADS:P). Boeing and U.S. still claim victory.

House puts strong cost controls on KC-46A with mandatory reporting requirements for Air Force.

First Australian KC-30 arrives at RAAF base for introduction into service.

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