WASHINGTON – The KC-46A Pegasus tanker has been cleared for production, a major step forward for the Boeing-led design.

Frank Kendall, the Pentagon's acquisition head, declared the program has successfully cleared Milestone C review late Friday.

The Air Force expects to award the first two Low Rate Initial Production lots within the next 30 days. Those contracts will cover 19 and associated spare parts, for a pre-negotiated $2.8 billion combined value.

"The KC-46 is ready to take the next step," Gen. Dave Goldfein, Air Force Chief of Staff, said in a service release. "Our Air Force and Boeing team stepped up to meet the recent challenges. I'm especially proud of the employees on the floor of the Boeing plant, and employees of all our industry partners, who work every day to deliver game-changing capability to the warfighter. My hat's off to them and our program leads."

As part of the Milestone C requirements, the KC-46 had to prove it could refuel an F-16, C-17, and A-10 off of its boom, as well as use the hose and drogue systems on an AV-8 and F/A-18. The KC-46 also had to take in fuel from a KC-10.

Those tests were delayed, however, after the discovery that the KC-46 boom struggled to deliver fuel to heavier aircraft such as the C-17. While Boeing was able to design a bypass to help better regulate the fuel flow, that problem contributed to a delay that pushed a Milestone C decision from June to August, and the delivery of the first 18 certified tankers to the Air Force from August 2017 to January 2018.

Boeing is operating under a development contract that caps taxpayer costs at $4.9 billion, and the company has already taken $1.9 billion in pre-tax charges due to cost overruns. Entering the production stage is the first step towards recouping some of those losses.

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The Air Force plans to procure 179 KC-46A models over the life of the program. The service has long-term plans for KC-Y and KC-Z programs, which Boeing hopes to secure as additional buys of the KC-46.