US Air Force Has Withheld $360M — and Counting — For Boeing’s Tanker Woes

A fourth KC-46 Pegasus lands on the flight line, May 18, 2019, at Altus Air Force Base, Okla.

U.S. Air Force / Airman 1st Class Breanna Klemm

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A fourth KC-46 Pegasus lands on the flight line, May 18, 2019, at Altus Air Force Base, Okla.

That’s about one-fifth of the total bill for the 13 aircraft delivered so far.

The U.S. Air Force has withheld $360 million from Boeing due to problems with the company’s KC-46 tanker, according to a service official. It’s the first time the Air Force has disclosed the total amount being held back until Boeing fixes various problems with the planes. 

Service officials previously said they could withhold up to $28 million per plane, roughly 20 percent of its delivery cost. Wednesday’s disclosure shows that the Air Force is following through with that pledge. To date, Boeing has delivered 13 tankers to the Air Force, meaning the firm has been shorted nearly $27.7 million per plane.

“The Air Force is withholding payments to protect our interests and incentivize Boeing to deliver KC-46s that meet all specification requirements in the contract,” Capt. Cara Bousie, an Air Force spokeswoman, said in an email Wednesday. “To date, the Air Force has withheld approximately $360 [million] from Boeing for KC-46s delivered so far.”

Asked when Boeing hopes to eventually get the money, spokesman Todd Blecher declined to comment.

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The problems with the plane largely involve the video systems used to monitor planes approaching the tanker during refueling. The fix requires both software and hardware changes, according to a June Government Accountability Office report. Boeing must pay for those fixes.

Separately, the Air Force has routinely found tools and trash inside the KC-46 tankers Boeing has delivered, prompting the Air Force to twice stop accepting planes into its squadrons. Will Roper, the head of Air Force acquisition, has called ita cultural issue within Boeing’s assembly lines.

The tanker withholdings come amid a massive losses from the grounding of Boeing’s 737 Max, the passenger airliner involved in two deadly crashes. Boeing reported a $5 billion loss due to the 737 Max grounding when it reported second quarter earnings Wednesday. It’s still building the Max, but has not delivered any of those planes since regulators grounded the aircraft in March.

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