U.S. Air Force keeping close watch on Boeing tanker

WASHINGTON (Reuters) - Boeing Co's program to develop a new refueling tanker is proceeding well, but an aggressive test schedule and Boeing's plan to close the Wichita, Kansas, plant still pose some risks, said the Air Force general in charge of the program.

Major General Christopher Bogdan, who runs the $51.7 billion program for the Air Force, said on Thursday he was cautiously optimistic after the program passed a first critical milestone earlier this month, but that there is more hard work ahead.

"The program is on a good path, but we still have lots of work to do and there are still risks in the program that we have to work to mitigate," Bogdan told Reuters in a telephone interview. "The onus is truly on Boeing to continue to perform as well as they have so far."

U.S. defense officials and lawmakers are watching developments on the tanker program carefully after two earlier bungled attempts over the last decade to start replacing the Air Force's aging fleet of tankers, which refuel fighter jets and other warplanes in mid-flight.

Boeing beat out Europe's EADS to win the contract in February 2011, capping a decade of failed Air Force attempts to start replacing its aging fleet of KC-135 refueling planes, which are now 49 years old, on average.

Bogdan said the program got passing grades on all 89 entrance criteria to get to the preliminary design review, 17 mini-reviews conducted as part of the broader review; and a larger integrated review of the overall airplane program.

He said Boeing had done "an excellent job" with designing and building the new 767-based airplane's core capabilities, including the refueling boom and re-designed fuel-carrying wing pods, which was not unexpected given the fact that the plane is based on a commercial product.

But he said the company needed to rework its designs for some secondary items, including a screen between passengers and cargo, and the crew rest areas, by next summer.

"There are a few things ... that we are going to refine in terms of the design as we move to the (critical design review)," Bogdan said. Those issues, however, were "nothing earth-shattering" and not significant enough to jeopardize approval of the preliminary design review, he added.

Newly redesigned wing refueling pods promise to avoid the issues that plagued the tankers Boeing built for Italy, but the Air Force would be fully convinced only when it saw the actual pods, Bogdan said.

AIR FORCE SURPRISED BY WICHITA CLOSURE

Bogdan, who will swap jobs this summer with the deputy program executive officer of Lockheed Martin Corp's F-35 warplane, said top Air Force officials were surprised by Boeing's decision to move some manufacturing and finishing work on the tanker from Kansas to its Everett, Washington plant.

He said he learned about Boeing's plan to close its Wichita facility, eliminating over 2,100 jobs, the day before it was announced publicly, and had warned Boeing not to let the move affect the program or drive up costs.

He said there was no indication during the source selection process that Boeing planned to close the plant, and Air Force leaders were monitoring the move closely since there are other Pentagon contracts that the company works on there.

"The minute they told us they were going to do that, I got on the phone with the senior leaders of Boeing and ... I told them - you have now injected significant risk into my program and I expect Boeing to deal with that risk and never have it affect me or the taxpayer," he said.

Bogdan said Boeing had agreed, and was taking "very aggressive" steps to ensure the transition did not slow down work on the tanker program or increase its cost.

He said the Air Force was protected due to its fixed-price contract, which meant that any additional cost resulting from the move would have to be absorbed by the company.

Bogdan said the Air Force had learned from past attempts to replace the tanker fleet, and problems on other acquisition programs, including Lockheed's F-22 and F-35 fighter programs, in setting up its contract with Boeing.

He said the testing schedule was aggressive to get to a milestone decision in August 2015 that would allow the start of production, but unlike other programs -- about 60 percent of the testing would have been completed by that point.

The program also had a special clause that required Boeing to develop fixes for any problems that arose during testing, and retrofit any planes already built at that point.

He said the Government Accountability Office, a congressional watchdog agency, would visit the Boeing facility with him next week, and planned to keep close tabs on the program. GAO recently reported that the program faced "significant schedule risks" and technical challenges, and was already $900 million over budget.

(Reporting By Andrea Shalal-Esa; editing Gunna Dickson)

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