Leeham News and Analysis
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Leeham News and Analysis
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Pontifications: Boeing wins certification of KC-46A; B-52 MRO model may be key to profits
By Scott Hamilton
Sept. 10, 2018, © Leeham News: While Boeing Commercial Aircraft grapples with more than four dozen unfinished 737s clogging the space at Renton Airport and Boeing Field, Boeing Defense had some good news last week:
The KC-46A received certification from the US Federal Aviation Administration and the first delivery is due for late October.
Final military certification is still to come and the wing-pod drogues need certifying, but at long last, Boeing can move forward.
Light at the end of the tunnel
KC-46As in the Boeing Everett Modification Center, getting military systems installed. Photo by Scott Hamilton.
After years of delay and more than $2bn in cost overruns and write-offs, Boeing can see the light at the end of the tunnel.
Boeing currently has some three dozen KC-46A either in flight testing, produced and in temporary storage at Everett’s Paine Field, in the Everett Modification Center having military systems installed or in final assembly at the Everett plant.
Even though the airplane is late, though a combination of human errors (improperly charging the fueling system), design difficulties (the refueling boom, for example) and other reasons (military programs always seem to run late), officials expect that once the program shifts from the low rate initial production (“LRIP”) to full production, things will smooth out.
LNC examined lessons learned from the “One Boeing” approach in July, followed by the view for international sales.
Production rate
The KC-46A is based on the 767-200ER. It’s assembled on the same line as the civilian 767-300ERF. The production rate is already 2.5/mo, going to 3/mo. Boeing asked the supply chain to do a Rate Readiness Assessment of 4/mo, a rate that could be in the cards for around 2022. The demand for 767 freighters is growing as the in-service 767 and Boeing 757 fleets age.
Winning the contract
For Boeing, winning the contract was a brutal fight with Airbus, which offered the A330-200-based KC-30. Boeing initially won a lease deal for 100 airplanes, but this was canceled following a procurement scandal. The team of Northrop Grumman and EADS (as Airbus’ parent was then known) won the next procurement round. This was overturned by the General Accounting Office’s determination that the USAF had been unfair to Boeing in this competition.
Boeing won the third round with a fixed bid price about 10% below Airbus, which this time bid under its own name when Northrop decided not to participate.
The low, fixed bid price turned into the $2bn in program write-offs so far.
The US Air Force contract calls for delivering 15-18 KC-46s per year. This translates to 1.25-1.5 airplanes a month. The KC-X contract under which this project was awarded calls for 179 aircraft. A follow-on order is likely.
Nevertheless, Boeing believes that over the life of the program, it will be profitable. A good part of this hope is winning the aftermarket maintenance, repair and overhaul contract—and work for any upgrades.
The B-52
Upgrade work can go on for decades. Look at the Boeing B-52.
Boeing B-52. Source: Boeing.
The B-52 entered service with the USAF in 1955. The last one was delivered in 1962—56 years ago. There are still 76 B-52s in service (out of 744 produced).
Throughout the service life of the airplane, Boeing has won MRO and upgrade work.
The Air Force decided to make nearly $12bn in upgrades to the B-52s to extend the service life to the 2030s. This includes an $8bn re-engining program. Boeing will be the systems integrator for much of this work, though its portion of the dollar value of the work has not been revealed.
For the airplane, “This is a valuable program in terms of its operational benefits and cost saving to the U.S. Air Force,” a BDS spokesperson write LNC in an email. “New engines will result in significant fuel savings that will increase the loiter time and range of the aircraft. Reduced sustainment and fuel costs of replacement engines mean this program will pay for itself over the B-52 lifetime.”
Boeing has cartoon videos making the case for re-engining the airplanes. In them, Boeing says the fuel costs can be reduced by as much as 40%. There are also environmental improvements, something that was hardly top-of-mind in the 1950s and early 1960s.
Pratt & Whitney provided the engines and is offering replacements of about the same size. GE and Rolls-Royce also have shown interest. According to press reports, the B-52’s eight engines will be replaced with the same number of new ones. Putting four larger engines of equivalent or greater thrust would require too many modifications and wing/pylon work, boosting the cost.
The work will be done at Boeing’s Oklahoma facilities.
This serves as a good example how Boeing thinks it can make money over the life of the KC-46A program despite the $2bn in write offs so far and a price going forward that may make it difficult to realize a profit just on aircraft sales.
Even more good news for Boeing, new vibration problem for P&Ws powering 2 families of Airbus.
Airbus originally looked really smart when it launched the NEO while Boeing could not make up its mind on what to do. I am starting to wonder though about the strategy. The GTF is having too many issues. The technology and the production system don’t appear to be ready for prime time.
re the 8 small vs 4 mid size engines, the pylons were far from the only driving factor. engine out rudder authority with the “small tail” H models was a significant factor and I believe I read somewhere the nail in the coffin as the long term cost benefits of 4 vs 8 would have outweighed the costs of pylon changes.
…and there was an AV (AFAIK) report stating the B52 draws a tremendous Portion of secondary power from its engines, more than today’s standard Engines supply.
There’s not much about an intercontinental bomber that is environmentally friendly. Reducing refueling missions would be the primary cost saver, I think.
https://theaviationgeekclub.com/usaf-re-engine-b-52-bomber-fleet-rolls-royce-br725/
PW815 vs. F130 (BR700) seems like an interesting choice indeed (note that the Rolls is actually in the USAF inventory; C-37 and E-11). My guess is these will wind up in service through the century mark for the type. Interestingly, the PW800 core is basically what Pratt had bid to go in the A400M.
Why the USAF wants to buy wholly outdated P4062 engines for 175 new 767’s to be flown for 50-75 years on is completely stupefying, though, so it’s tough to handicap their decision probability here, with Boeing.
If the engine choice stays with 8 (likely) then its going to be quite the shoot out.
Pulling out the Green Card (pun intended) is always a winning combo.
The PW 4000 has been updated (pipped) as time has gone by. Its a reliable and fuel efficient engine.
I don’t know how it compares to GE and RR though RR would be more costly and maint needs vs a supposed fuel burn benefit.
Seeing as P&W was the only one to go for and put their money where their mouth was in the GTF (which is the future) some rewards for a rocky period of their history is not out of line.
There is no new engine in the PW4000 class for the KC46s- the latest engines are bigger ( Dreamliner etc) or smaller ( GTF and Leap)
If the big cargo companies can live with the PW4000s or similar so can the USAF, especially in light of the other issues- a new engine would just be another trail of tears.
Cargo companies are still getting their choice of PW, GE. Maybe even RR though I doubt anyone would ask for those.
What class of engines can be used for the re-engine? A CF34 derivative?
NYX: or a Passport engine.
Good questions. Business size engine are not built for longevity as they don’t see the kind of service a commercial airliner does.
RR: BR725 at 17k
GE: CF34-10 at 18-20,000lbs, or the Passport 18-20,000lbs (CF34 would seem to be a longer enduring engine)
P&W: PW800 has the right thrust levels and is designed for heavier duty service.
Safran of course will offer their famous Silvercrest engine.
any one of these engines will have a significantly higher time on wing rating than the TF33s (JT-3Ds circa 1956) even if “pipped” as PW is proposing as the cheap but low capability option…
40% range increase == more time on station or less refueling support required. in the SAC days the Buffs and the KCs would take off together in pairs and the KC would fly with them as far as they could while still giving max offload with enough fuel to fly home, the KC would RTB, refuel and take off again to meet the BUFF on the way home to tank them up.
Incredibly, I think the B-52 fleet ‘only’ has about 23,000 hours on average for the frames remaining in service. For frames built in the early 60’s, it’s sort of remarkably similar to business jet hours, I guess (never thought I’d compare the two). A business jet engine to buy a business jet life span over the next 15-25 years is perhaps appropriate.
It’s the upper wing surface area that is the limiting factor for the airframe (to about 36K hours, hardly NWA DC-9/KLM 747 territory). I have no idea if Boeing is looking at replacing that stuff.
After I posted it occurred to me it was a good question and thank you for the hours numbers.
It is a business jet application so to speak.
I think the PW800 is the newest of the bunch. Beat out RR on the BBD Business jet as I recall, Gulfstream as well?
RR had a stealth engine program , the Pearl for the updated Global 5500 and 6500 programs.
The stretched and new wing Global 7500/8000 models you refer to are powered by the GE Passport.
The PW800s are on the Gulfstream G500/600 the very new slightly wider models.
The ‘XWB’ G650 with the BR725 has been flying since 2009.
On the KC-46 all I can say is its about time.
And they are stealing mechanics from that line to help out the 737 crisis. Shades of Soviet management practices.
I have read somewhere that there might be an advantage for the BR700 as it’s already had a lot of the design work done for a duel installation squashed into a 1950s engine compartment for the Nimrod MR4.
“After years of delay and more than $2bn in cost overruns and write-offs, Boeing can see the light at the end of the tunnel.”
I really don’t think that a delay of 1 year and 9 months (according to the latest GAO schedule risk analysis) qualifies as “years” of delay. Is hyperbole being used to stir up “discussion”?
Also, how much of this $2bn in write-offs is on the development contract and how much of it is on the LRIP contract which would cover production start-up and rework costs, as well as costs akin to 787 deferred production. While all the press and analysts seem to lump it all together to express how badly the KC-46 program has gone, the GAO has a different, and I dare say more informed, view.
Low rate production, and deliveries, were to have happened in 2015, actually. I don’t think I am the biggest “Leeham criticizes Boeing” defender by any stretch, but Boeing’s performance on this financially and time-line wise has been horrible.
Sure, the GAO can take a neutral (nuanced) attitude; it’s a fixed price contract, and being late doesn’t matter much to them.
But as a tanker engineering, integration, production, and certification project, it’s been a pathetic exercise by Boeing.
Uh… Actually no. The original schedule had the LRIP decision (Milestone C) happening in August 2015, with the first delivery in Feb 2016. Currently the first delivery should happen in Oct 2018, so 2 years and 8 months late. However, the deliveries can be condensed now since all of the 18 LRIP units and more have already come off the line. Originally the LRIP batch deliveries should’ve completed in Aug 2017, but now will complete in May 2019, late by 1 year and 9 months, not “years”. Let’s wait and see when the deliveries actually end before we pronounce that the program is “years” late.
I never said I thought Boeing did a good job executing the KC-46 development. I agree that they really botched it up with the wiring, fuel system design, contaminating their test article, and failing to sufficiently oversee Cobham’s certification process. As an aside, I don’t think the boom was a screw-up, but was just one of those things that crops up during flight test.
I also agree that Boeing did a lousy job of managing the cost by bidding too low and poorly executing the program in the ways I mentioned above. However the GAO sees the development cost overruns at more like $1bn. If they are right, the other $1bn is due to early production related costs which could be recoved once Boeing delivers and invoices for the frames.
Just because I’m criticizing the reporting on the program, doesn’t mean I’m not critical of the program itself. If we are going criticize the program, let’s do it honestly without the needless hyperbole.
As a long time Boeing observer, one recurring problem I see is the company places executives on the fast track and keeps promoting irrespective of project outcomes on their watch. The tanker is a classic case in my humble opinion. The company needs to hold executives accountable.
https://www.youtube.com/watch?v=JOq0jmbW6Yo
Boy, I can’t win.
I get criticized for being too critical of Boeing at times.
I get criticized for trying to be upbeat.
And BTW 2.8 yrs late is “years late.”
But we don’t yet know how late all the deliveries will be, do we? It’s the deliveries that really count because that is what matters most to the customer.
Again I’m a bit mystified by the incredulity expressed as to being ‘years late’ and over-runs of ‘only’ a billion or two. Boeing’s own financial reporting indicates development costs 3 billion over planned;
“According to the company’s recently revised calculations, the cost overruns it’s had to swallow over the past three years, including a relatively small increment last quarter, now total a staggering $3 billion.”
I do think it’s interesting that the GAO has noted a decreased development cost, to the government, because the USAF didn’t change requirements. Heh.
https://www.gao.gov/assets/690/683688.pdf
As someone or other famously said: “A billion here, a billion there – and pretty soon you’re talking big bucks…”
Scott:
You somewhat acerbic aproahch works against you. You need to suck up more and be the jovial hand shaking back slapping politico.
Or you can accept you are probably doing it right when you get it form both sides!
So that means theres 18 or so KC46s parked at Everett ( meaning 34 at various stages of production) as well as the 737s parked at Renton and Boeing Field?
Must be creating hell for Boeings cash flow, but it is counted as ‘cash in hand’ as the planes have been sold but not yet paid for.
The Seattle Times said 3 months back that the cost overuns for Boeings books are $3 bill
https://www.seattletimes.com/business/boeing-aerospace/boeing-vows-much-delayed-air-force-tanker-program-will-deliver-first-18-planes-this-year/
And the good news for Boeing is a up the ante contract for 18 more.
https://www.flightglobal.com/news/articles/usaf-awards-boeing-29-billion-for-18-more-kc-46as-451805/
The reality is this is not that technically hard, its just program management.
That is where Boeing sucks, they don’t have any bench, kind of like trying to play in the NBA with 5 players.
Sooner or latter they all get tired or injured (or quit like Mullaly).
“The fourth lot contract is a boost for the KC-46 programme which had been plagued by delays and a corruption scandal over its more than a decade and a half saga.”
Wow! Now the KC-46 program was plagued by a corruption scandal. Who knew!
More lazy reporting.
OK, everyone, let’s tone down the snarkiness, please. It adds nothing to the topic.
Hamilton
They’ve lost $3 billion and they are planning to get it all back and make a reasonable profit on maintainence and support.Therefore, it is only possible to come to one conclusion, they are planning to overcharge. And they will get away with it.