Cobham said Feb. 19 it has accepted about $206 million in new charges from Boeing [BA] to end an ongoing dispute related to the Air Force’s new KC-46A Pegasus aerial refueler.

Over $112 million of that sum will settle the dispute between the two companies, where Boeing has been withholding payments to the British contractor due to delays in the Wing Aerial Refueling Pod (WARP) system development.

A KC-46A tanker takes off from Boeing Field outside Seattle en route to McConnell Air Force Base, Kansas, Jan. 31, 2019. Photo: Boeing

The companies have signed an agreement that settles all disputed matters up to Tuesday’s date, resolves Boeing’s damages assertions, and resets the schedule for WARP qualification, as well as production of the pods and the centerline drogue system, Cobham said in a press statement Tuesday.

The company plans to offset amounts relating to its hose and drogue invoices that have until now been withheld by Boeing, and pay the resulting balance of about $64 million by mid-2019. Boeing has now ended its payment withholding against Cobham invoices.

The new charges also include over $96 million “to reflect the best estimate of the retained KC-46 contract risks … as well as the costs of the revised schedule in the light of today’s agreement,” Cobham said. This is separate from a $52 million non-underlying charge announced back in July.

The WARP qualification program is now anticipated to complete by mid-2020, Air Force Secretary Heather Wilson told reporters in January and Cobham confirmed Tuesday (Defense Daily, Jan.25). Flight tests are expected to begin in the first half of 2019, Cobham said. The new schedule has led to “a reassessment of the aggregate risks including supply chain, resource and concurrency ahead of final WARP certification and production,” the company said.

Jefferies analysts saw this development as “a significant step forward” for the British subcontractor, which has been hit with financial problems over the past two years. They forecast that Cobham will end fiscal year 2020 “in an overtly strong financial position.”