Air Force will release nearly $900 million in withheld payments to Boeing as coronavirus hits industry

Boeing's KC-46 tanker for the U.S. Air Force.

WASHINGTON — The Pentagon will release $882 million in withheld payments to Boeing in an effort to mitigate the financial strain of the coronavirus outbreak on the defense contractor.

The U.S. Air Force and Boeing negotiated the release of payments, which were held back due to outstanding flaws with the KC-46 aerial refueling tanker. 

"When COVID-19 hit obviously things changed for the entire defense industrial base," Will Roper, assistant secretary of the Air Force for acquisition, technology and logistics, told Pentagon reporters Thursday via teleconference.

"Cash flow is everything right now, liquidity is everything, and we've created policies in the Department of the Air Force to get as much cash out of our hands and to industry as possible ... The KC-46 is no exception," he added.

Last January, after a two-year delay, the Air Force received its first two Boeing aerial refueling tankers. And while the Air Force plans to buy 179 tankers, the program has been plagued with a litany of problems, including foreign object debris and issues with the camera system used during the refueling process.

The economic fallout from the coronavirus is the latest blow to Boeing, which along with Airbus dominates commercial aircraft production. 

Boeing temporarily shut down production at its factories in the Seattle area and several employees have tested positive for COVID-19. Boeing in January halted production of the 737 Max, which is made in Renton, Washington, to cut costs associated with the aircraft, which has been grounded worldwide for just over a year after two fatal crashes killed 346 people.

What's more, the aviation industry has been especially hit hard by the coronavirus as airlines race to ground hundreds of planes and defer orders to match the collapse in air travel demand.