Boeing Wins $37M Air Force Deal For Supporting KC-46 Aircraft

The Boeing Company (NYSE:BA) recently won a $36.7-million modification contract for providing engineering and development support to the KC-46 aircraft. The contract was awarded by the Air Force Life Cycle Management Center, KC-46 Program Office, Wright-Patterson Air Force Base, OH.

Details of the Deal

Per the deal, Boeing will develop a hardware system integration lab for conducting lab verification and ground test verification for the boom telescope actuator redesign. Work related to the deal will be performed in Seattle, WA, and is expected to be completed by February 2023.

How Will the Contract Benefit Boeing?

Last year, Boeing's KC-46 program came under intense criticism as the U.S. Air Force was not satisfied with the performance of its remote vision system, which is a series of sensors that KC-46 boom operators use to guide the boom into a receiving aircraft for refueling. This required Boeing to implement the necessary hardware and software changes for the KC-46 program. Despite such criticisms, the company predicted the KC-46 Pegasus aerial refueling tanker program to meet its key performance goals in the near term, per a report by National Defense.

In fact, the program continues to win contracts amid the headwinds it is currently facing. Notably, in August 2019, the U.S. Air Force granted the company a $55.5-million contract to modify the boom telescope actuator.

Per a report by the Times of Israel, the U.S. Department of Defense recently announced its approval to allow Boeing to sell new KC-46 Pegasus aerial refueling aircraft to Israel. The deal enables Israel to buy up to eight KC-46 aircraft worth roughly $2.4 billion.

These deals, including the latest one, are expected to provide a solid impetus for Boeing’s defense business segment.

Our View

Per a report by Mordor Intelligence, the market for aerial tanker aircraft is expected to reach $26 billion by 2025, fueled by the demand arising in the Middle East, the Asia Pacific, Africa, and South America. Additionally, increasing military aircraft upgrades and the development of advanced military aircraft platforms are expected to result in a demand surge for aerial tankers.

To reap the benefits of the growing market for combat-proven aerial tankers, defense contractors, other than Boeing, are also enhancing the performance of their products that are similar to KC-46. Such projections seem beneficial for aerial tanker manufacturers like Lockheed Martin (NYSE:LMT) , which manufactures the C-130J Super Hercules; Airbus SE (OTC:EADSY) , which manufactures A330 MRTT; and Embraer S.A. (NYSE:ERJ) , which manufactures the C-390 Millennium aircraft.

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