Boeing disclosed Friday that it would take a $536 million after-tax charge to address fuel-system issues on the KC-46A Pegasus tanker it is developing for the Air Force. The fueling system was the last major item on the aircraft that needed to pass qualification testing before an intensive flight-test regime commences, and problems were found. All four test aircraft will require rework and repair to keep the program on track for delivery of 18 production tankers by August 2017. The program has now used up all of the cushion that planners built into the schedule for unforeseen problems during development, but there do not appear to be any show-stoppers that would prevent it from becoming a core franchise for Chicago-based Boeing. If Pegasus ends up replacing all of the Air Force’s decrepit tanker fleet, its long-term value to the company will be well in excess of $100 billion. I have written a commentary for Forbes here.
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