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Boeing losses in KC-46A programme continue to rise

Boeing recorded a $736 million reach-forward loss in 2018 on its KC-46A Pegasus tanker, bringing the programme’s total losses to nearly $3.6 billion.

The programme’s losses in 2018 primarily reflected higher estimated costs associated with “certification, testing and change incorporation on aircraft,” as well as a greater than expected effort to meet the US Air Force’s requirements in order for initial aircraft to be accepted, Boeing said in its 2018 financial filing with the Securities and Exchange Commission. The vast majority of the reach-forwarded losses occurred in the first three quarters of the year, with the total climbing $50 million in the fourth quarter.

The USAF formally accepted the first KC-46A from Boeing on 10 January after more than a year-and-a-half delay. Under the service's original development contract, Boeing was supposed to deliver 18 operational aircraft, nine wing aerial refuelling pod sets and two spare Pratt & Whitney PW4062 engines by August 2017, but that milestone is now unlikely to be reached until 2020. Instead, the USAF is accepting incomplete tankers which are able to operate in most situations.

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Boeing KC-46A Pegasus tanker refuels Fairchild Republic A-10 Thunderbolt II

Boeing

The KC-46A has problems with its remote vision system; a combination of stereoscopic and infrared cameras that provide a 185° field of view behind the tanker and help an onboard operator steer the refuelling boom into contact with a receiver aircraft. In addition, Cobham refueling pods are held up mostly due to issues with the US Federal Aviation Administration (FAA) certification process and are expected to be delivered in 2020, says Boeing.

Boeing is on contract for 52 tankers, worth $7.8 billion. If all options under the contract are exercised, the company expects to deliver 179 aircraft for a total value of about $30 billion.

The manufacturer hopes that it will be able to make up its losses with the award of those options as well as by international sales.

Still, the company warns that despite making deliveries to the USAF it may face more losses ahead.

“As with any development program, this program remains subject to additional reach-forward losses and/or delivery delays if we experience further production, technical or quality issues, and delays in flight testing, certification and/or delivery,” Boeing says in its financial filing.

For its part, Boeing argues that the programme has turned a corner and points to the up-tempo delivery of five tankers within the last 30 days. The firm most recently transferred an aircraft to Altus Air Force Base in Oklahoma and plans to settle into a delivery pace of three tankers of month later this year.

Updated with additional information on tanker deliveries and fourth quarter financial results

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