Monday, August 22, 2016

Boeing tanker moves into production with $2.8 billion contract


The U.S. Air Force awarded The Boeing Co. a $2.8 billion contract for production of two batches of refueling tankers, moving along a program that has to this point been hampered by delays and cost overruns for the Chicago aircraft manufacturer.

Under the contract, which is being managed out of Wright-Patterson Air Force Base in Dayton, Boeing will deliver two low-rate initial production lots of seven and 12 KC-46A tankers. The Air Force is seeking 179 of these planes to replace about a third of its aging tanker fleet.

Richard Aboulafia, a Fairfax-based aviation consultant at the Teal Group said with this contract "removes a lot of the remaining risk on the program — better late than never.”

The risk Aboulafia speaks of is largely related to the cost overruns Boeing has had to shoulder at various stages of the development of the program. Boeing won the contract for the tanker in February 2011 and did so by bidding very aggressively for a fixed-price contract. Boeing has had to take several charges totaling more than $1.5 billion as a result of this arrangement.

Boeing's worst days with the program seem to be behind it, though Aboulafia said the company isn't completely out of the woods.

Further challenges could hit the company if "transitioning to production costs more than anticipated" or "there is some kind of glitch that shows up when producing,” he said. These are "not nearly as severe as the challenges associated with making an aircraft meet the mission requirement, but still, they’re there.”

Wright-Patt announced earlier this year that Col. John Newberry was taking over as system program manager for the KC-46 Pegasus development program. In that role he oversees the remainder of the test process and initial production deliveries by Boeing of the new air tanker.

Wright-Patt is Ohio’s largest single site employer, with more than 26,000 workers and supporting roughly 60,000 jobs locally when you factor in the defense contractors and other companies that are here because of the Air Force presence. Wright-Patt alone accounts for more than $4 billion in economic impact locally each year.

Ohio is the No. 1 supplier to Boeing, which has an office in Dayton and spends more than $11 billion with at least 375 suppliers in the state, including many in the Dayton region.

Among the local suppliers for Boeing are UTC Aerospace Landing Systems in Troy, which has 700 employees.

In addition to large national employers like UTC, the Dayton area also is home to Boeing suppliers such as Projects Unlimited Inc., which has about 165 workers. Also, Centerville-based SelectTech Services provides support in structural engineering, while Boeing uses Troy-based Dare Electronics for devices that monitor voltage or perform sensing or control functions.

In Middletown, Magellan Aerospace has about 120 employees and makes a variety of products for Boeing such as exhaust systems for the 767, large access doors on the new KC-46 tanker and F-15 engine shrouds.

Among the other local suppliers listed by Boeing are Dayton Aerospace in Beavercreek, Konecranes in Springfield and Esterline Corp. in Xenia, as well as Renegade Materials Corp. in Springboro that supplies polyimide composite materials for aircraft and was named a top supplier for Boeing in the 2015 supplier awards.

James Bach - Dayton Business Journal)

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