Air Force Releases $882 Million to Boeing for Coronavirus Relief

The U.S. Air Force will release $882 million withheld from Boeing Co. over deficiencies in its military tanker program as part of coronavirus relief efforts for the aerospace company, according to an Air Force memo.

Boeing and the Air Force reached agreement Thursday on releasing the money, which had been being withheld on 33 KC-46 refueling tankers delivered to the service that arrived with serious flaws.

“This withhold release is in line with Department of the Air Force and Department of Defense policies to maximize cash flow, where prudent, to combat coronavirus impacts on the industry base,” Ann Stefanek, an Air Force spokeswoman, said in a statement.

The Air Force payment gives Boeing extra cash as the aviation industry contends with its worst crisis ever amid a travel collapse caused by the coronavirus pandemic. The planemaker, already reeling from the grounding of its 737 Max jet after two deadly crashes, has been pushing for $60 billion in federal aid for the aerospace industry. Boeing is also preparing buyout offers for employees and cutting other costs as jetliner demand fades.

Fuel Leak

The KC-46 program’s troubles were mounting long before the pandemic. The most recent of five “Category One” defects in the tanker cited by the Air Force was a “pervasive fuel leak.”

Leaks were discovered in July and “as the Air Force learned more about the pervasiveness” in various locations and the impact on aircraft availability, the service made the decision this week to elevate the deficiency to its highest level, according to an Air Force statement. Boeing is contractually obligated to remedy the deficiency at its own cost.

Earlier: Boeing’s Calhoun Warned on Tanker Flaws

The Air Force has taken delivery of 33 tankers to start aircrew and logistics training even as Boeing continues to work on fixes; 67 are under contract. Last year, the service started to withhold as much as $26.5 million per plane.

The Air Force and Boeing also reached agreement Thursday on corrections for flaws with the airplane’s remote vision system for refueling jets in midair.

Trump’s Praise

While the withholding of funds provides the military with leverage on projects that fall short of their promised performance, the Trump administration has been looking for ways to provide relief to major companies hit hard economically by the coronavirus pandemic.

President Donald Trump has repeatedly praised the Chicago-based company and said he wants to be sure the government helps it. On March 29 he singled out the company’s offer to help fly in medical supplies aboard its Dreamlifter cargo plane.

Two days earlier, Trump said, “Boeing will probably need a hand, and we’re going to bring Boeing back to health.” The president has spoken frequently with new Chief Executive Officer Dave Calhoun.

--With assistance from Julie Johnsson.

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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