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August 19, 2016Loren B. Thompson, Ph.D

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Five Reasons Boeing’s Big Bet On Air Force Tankers Will Pay Off Handsomely (From Forbes)

August 19, 2016Loren B. Thompson, Ph.D

The Air Force announced on August 18 that it had awarded the Boeing Company a $2.8 billion contract for the first two production lots of the KC-46 aerial refueling tanker.  With development issues now behind it, Boeing will begin delivering the first of 179 planes to the service in about a year.  Unfortunately, the company will need to absorb about a billion dollars in after-tax expenses it hadn’t expected because development cost more than planned.  However that is a small price to say for a program that might ultimately be worth $200 billion in revenues.  Not only is Boeing likely to build a lot more than 179 tankers in the end, but it will have the inside track on sustaining them during decades of operation.  It thus has preserved a 60-year franchise in aerial refueling, in the process blocking rival Airbus from becoming a major supplier to its most important military customer.  Militarized jetliners are looking like a core offering for Boeing’s defense unit through mid-century and beyond.  I have written a commentary for Forbes here.

 

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