Boeing Lands $35 Billion Tanker Contract -- and a New Lease on Life

Boeing (BA) has won the contract to build a new U.S. military aerial refueling tanker after a review by the Air Force. The government decision ended the efforts of rival European Aeronautic Defence and Space Co. (EADS) to handle the project.

Boeing said in a statement, "The U.S. Air Force announced Thursday that it has selected Boeing's NewGen Tanker to be its new KC-46A air refueling jet.The contract award, which follows a rigorous Air Force review of industry proposals, means Boeing will build the next-generation tanker that will replace 179 of the service's 1950s-era KC-135s."

Boeing will deliver 18 of the planes by 2017. Industry experts believe the value of the first stage of the contract is about $35 billion.

The Air Force awarded a similar contract to Boeing in 2003, but a scandal over the procurement procedure led to the prosecution of a Defense Department official and a Boeing executive. The contract was put out for bid again.

The contract could give Boeing a chance to restore its tarnished reputation. It has announced numerous delays of its 787 Dreamliner due to design and production issues, as well as labor unrest. Boeing still has not delivered the aircraft, although it's scheduled to do so shortly. The delay has angered both investors and large airlines that have orders for the fuel-efficient planes. These carriers have had to make alternative plans, and some have canceled or threatened to cancel their 787 orders.

Now the challenge for Boeing is whether it can deliver the tanker on time.

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