UPDATE 1-US Air Force says vigilant on Boeing tanker program

Tue Sep 18, 2012 11:30pm EDT

* Critical design review set for late fiscal 2013

* Singapore expressed interest in KC-46 tanker

* Boeing says dealing with risk on program

WASHINGTON, Sept 18 (Reuters) - The U.S. Air Force said on Tuesday it was optimistic about Boeing Co's work on the new $51.7 billion KC-46 refueling tanker program but remained vigilant about possible problems, even as officials examined an initial possible export request.

"I think we're in a good place right now," Major General John Thompson, who oversees the Boeing tanker program as well the older KC-135 and KC-10 tanker programs, told reporters at the Air Force Association annual conference.

Thompson, who started his job five weeks ago, said the financial and schedule risks were all normal for this stage of a development program, and both Boeing and the Air Force had good people on it.

But he said there was more hard work to do to ensure the program was able to reach a critical design review by the end of fiscal year 2013. He said his attitude was "to be optimistic, but vigilant."

Thompson said Singapore had requested information about the possible export of the KC-46 tanker earlier this summer. That request was now being addressed.

He said he was concerned that a 9.4 percent across-the-board budget cut slated to take effect on Jan. 2 could force him to renegotiate the fixed-price contract, raising the possibility that he would get less attractive terms from Boeing.

"If I have to break my fixed-price contract I stand the potential to lose out," Thompson said, describing the current terms of the contract as "a really good deal."

Major General Wayne Schatz, director of strategic plans, requirements and programs, said Air Force Mobility Command was beginning early work on the next phase of replacing the Air Force's aging fleet of tankers, and would have to make some initial decisions in about two years.

One possible option, he said, might be to buy more of the KC-46 tankers that Boeing is now designing. The last of the 179 tankers now planned for purchase from Boeing is due to be delivered in 2028, he said.

That may be disappointing news for Europe's EADS, which is hoping to compete for future tanker orders after losing the tanker contract to Boeing in February 2011. The order capped a decade of failed Air Force attempts to start replacing its KC-135 tankers, which are about 49 years old on average.

One Air Force official familiar with the tanker program said the Pentagon might have to increase its projected cost for the program at completion because Boeing had been burning through its management reserve at an accelerated rate over the past six months. That issue was still being assessed and studied.

Boeing spokesman Jerry Drelling said the company had sped up its use of management reserve largely to deal with risk on the program, including the system integration laboratories. But he said the "the overall management reserve plan for the program remains unchanged."

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