Boeing hit by $2.1 bn in tanker, production costs

Boeing’s second KC-46 tanker (EMD-4) takes off from Paine Field in Everett on its first flight. The tanker landed later at Boeing Field in Seattle and will initially be used to test mission system avionics and exterior lighting. Photo credit: Gail Hanusa, Boeing.

Boeing warned Thursday that second-quarter earnings will be hit by $2.1 billion in unexpected after tax costs, including its third charge in a year on a large Air Force tanker contract.

Boeing said its quarterly earnings release on July 27 will recognize $393 million in costs associated with the KC-46 tanker program, a next-generation military refueling aircraft.

The latest costs are to address a load issue identified during test flights, the company said.

These expenses follows earlier tanker charges of $156 million in April and $536 million in July 2015.

“This additional investment in the KC-46 supports the delivery timeline for the initial production aircraft and our transition to full-rate production,” said Boeing chief executive Dennis Muilenburg.

“We remain confident in the long-term value of the KC-46 for our customers and our shareholders.”

Boeing also booked $847 million in costs after deciding not to upgrade two Boeing 787s that been used in flight and ground testing. Boeing will now account for the planes as an expense rather than inventory.

Finally, the aerospace giant also allotted for $814 million in costs due to a lower production schedule for its 747-8 cargo plane. The charge reflects lower estimated revenue on future sales.

The announcement of the unanticipated charges to earnings sent Boeing shares down 1.2 percent to $132.00 in after-hours trade.

“These are the right, proactive decisions to strengthen our business going forward,” Muilenburg said.

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