Pentagon Accepts Flawed Boeing Tankers for Air Force, Sources Say 

(Bloomberg) -- The Pentagon has decided to let the Air Force accept its first delivery of Boeing Co. aerial refueling tankers despite unresolved deficiencies in the long-delayed plane, according to an official familiar with the decision.

The first of 179 planned KC-46A aerial tankers will be accepted this month -- more than two years late -- according to the official, who asked not to be identified ahead of the the Air Force’s formal announcement expected on Thursday. Boeing shares rose in pre-market trading.

As part of the decision to accept the delivery, the Air Force has imposed financial hooks to ensure the company makes timely corrections to what is expected to be a $44 billion program, according to the official.

The tanker’s flight-testing program has been beset by technical issues for what was once envisioned as a low-risk development project. The plane is already far behind schedule: The first KC-46 was originally expected to be delivered between April and June 2016.

The service had previously signaled its confidence that the Chicago-based company can fix its issues if given more time, but former Defense Secretary Jim Mattis had given the project special scrutiny. The ex-Pentagon chief, who resigned last month, sent a sticky note to his chief of staff in November 2017 saying that he’s “unwilling (totally)” to accept deficient planes.

Mattis has since been replaced on an acting basis by his deputy, Patrick Shanahan, a former Boeing executive who has recused himself from decisions on company projects. That left the decision in the hands of Ellen Lord, the Defense Department’s undersecretary for acquisition.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net, Larry Liebert

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