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Boeing hit by US$2.1b in tanker, production costs

Friday, July 22, 2016 - 07:43
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Boeing warned Thursday that second-quarter earnings will be hit by US$2.1 billion in unexpected after tax costs, including its third charge in a year on a large Air Force tanker contract.

[NEW YORK] Boeing warned Thursday that second-quarter earnings will be hit by US$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 US$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 US$156 million in April and US$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 US$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 US$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 per cent to US$132.00 in after-hours trade.

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

AFP