Boeing (BA) didn't deliver the first KC-46 tanker to the Air Force by the end of 2018 as planned due to remaining problems with the plane, a senior defense official told IBD on Wednesday.
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The official said the Defense Department wasn't willing to accept the plane for delivery because of the deficiencies, adding that the delay wasn't due to James Mattis' abrupt departure as defense secretary.
The senior defense official said that a number of things with the hardware and software still need to be addressed before the Pentagon is satisfied that the product the military is receiving is what was agreed upon in the contract.
Boeing didn't immediately respond to a request for comment. But last week, Boeing spokesman Chick Ramey told IBD that there are glitches that still haven't been completely resolved, and three serious deficiencies remain. But he added that the company had "reached a path forward" with the Air Force to implement fixes once the plane is delivered.
Boeing expects to build 179 of the aerial refueling tankers in a deal worth more than $40 billion. But the program has been plagued by technical glitches and schedule delays that have cost Boeing more than $3 billion in pretax charges under its fixed-price contract.
Shares of the aerospace giant closed up 0.4% at 323.81 on the stock market today.
Who Will Accept The KC-46?
The Pentagon's stance on the KC-46 appears to align with its former chief's. Mattis had said he was "unwilling" to accept any deficiencies on the KC-46 tanker.
When Mattis announced his resignation in late December, he said he planned to stay on until February, giving him time to decide on the KC-46 issue. Then President Donald Trump announced last week that Mattis would leave at the end of the year, giving him just a few days.
With Mattis gone, the decision to sign off on the tanker will likely fall to Pentagon acquisition chief Ellen Lord, the defense official said, rather than Air Force Secretary Heather Wilson.
Acting Defense Secretary Patrick Shanahan can't sign off on the plane due to his past work at Boeing. Lord also comes from the defense industry and previously was an executive at Textron (TXT).
"Under his Ethics Agreement, Mr. Shanahan has recused himself for the duration of his service in the Department of Defense from participating in matters in which the Boeing Company is a party," said Joe Buccino, a spokesman for Shanahan, via email.
Boeing KC-46 History Of Delays
The very first KC-46 plane originally was expected to be delivered in the spring of 2016, and the company's contractual obligation was to deliver the initial 18 aircraft by August 2017.
Boeing later said the aircraft would be delivered by September 2017. Then the Air Force set a new deadline of December 2017 — only to push it back to the spring of 2018 as technical glitches lingered.
In June, Boeing and the Pentagon said the first tanker would be ready in October, with 17 more arriving by April 2019. But problems emerged related to the new high-tech boom specifically designed for the aerial refueling plane, and that October timeline also came and went.
The KC-46 tanker wouldn't be the first plane to be delivered with deficiencies. Lockheed Martin's (LMT) F-35 still has deficiencies it needs to work out before full-rate production begins next year.
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The post Boeing KC-46 Glitches, Not Mattis Exit, Delayed Delivery To Air Force appeared first on Investor's Business Daily.
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