Boeing reports KC-46A loss, rejects wider concerns

Washington DC
Source: Flightglobal.com
This story is sourced from Flightglobal.com

Boeing blames a wiring redesign on the KC-46A programme for a $272 million forward loss announced on 24 July in a second quarter earnings filing, but dismisses a government estimate predicting more delays and up to another $515 in cost overruns.

Although the KC-46A is based on the 35-year-old airframe of the 767, Boeing was forced to redesign the wiring system late in the development phase, says Greg Smith, Boeing’s chief financial officer.

That change required Boeing to increase spending to keep the programme on track to deliver 18 operational aircraft to the US Air Force by August 2017, as required by the fixed-price contract with a $4.9 billion ceiling, Smith says.

The charge comes three months after a report by the US Government Accountability Office (GAO) disclosed that Boeing was estimating a $271 million cost overrun on the contract, or only $1 million less than charge reported on 24 July.

The same GAO report also disclosed that the air force was estimating a $787 million cost overrun on the programme, for which Boeing would be solely responsible to cover under the terms of the contract.

Although the air force took a more pessimistic view than Boeing, the wiring redesign was not among the most significant risks cited in the GAO report.

The GAO instead cited the programme’s software maturity and “aggressive” flight test schedule as the most likely causes for possible delays of six to 12 months for reaching the initial operational capability milestone in August 2017.

Boeing chief executive and president Jim McNerney says he “disagrees with that assessment”. The KC-46A flight test schedule was planned using commercial practices that, McNerney says, are more efficient than the military’s system.

“Other than the problems that Greg described on the wiring – wiring bundle separation on the detailed design, the rest of the programme is moving along well,” McNerney says, although he added a caveat.

“It doesn’t mean that something can’t crop up in the future,” he says, “but we don’t see it now.“