Boeing Co said on Friday it had recorded reach-forward losses of $2.31 billion related to the U.S. Air Force KC-46A aerial refueling tanker over 2016, 2017 and 2018, bringing the total pre-tax cost of the program to $3.6 billion.
The world’s largest planemaker said in a filing that in 2018, it had recorded reach-forward losses of $736 million on the contract, reflecting higher estimated costs related to certification, flight testing and change incorporation on aircraft, among other things.
The losses bring the total pre-tax cost of the program to $3.6 billion, or $2.4 billion after taxes, Boeing said. (end of excerpt)
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(EDITOR’S NOTE: Specifically, this is the excerpt from Boeing’s annual report filing to the SEC concerning the KC-46A program:
In 2011, we were awarded a contract from the U.S. Air Force (USAF) to design, develop, manufacture and deliver four next-generation aerial refueling tankers. The KC-46A Tanker is a derivative of our 767 commercial aircraft.
This Engineering, Manufacturing and Development (EMD) contract is a fixed-price incentive fee contract valued at $4.9 billion and involves highly complex designs and systems integration.
In 2016, following our achievement of key flight-testing milestones, the USAF authorized two LRIP lots for 7 and 12 aircraft valued at $2.8 billion, and in 2017, the USAF authorized an additional LRIP lot for 15 aircraft valued at $2.1 billion.
On September 10, 2018, the USAF authorized an additional LRIP lot for 18 aircraft valued at $2.9 billion.
The contract contains production options for both LRIP aircraft and 23 full rate production aircraft. If all options under the contract are exercised, we expect to deliver 179 aircraft for a total expected contract value of approximately $30 billion.
In January 2019, we delivered the first KC-46A Tanker to the USAF.
During 2016, we recorded reach-forward losses of $1,127 million related to the EMD contract and LRIP aircraft.
During 2017, we recorded reach-forward losses of $445 million related to this program, primarily reflecting higher estimated costs associated with certification and incorporating changes into LRIP aircraft.
During 2018, we recorded additional reach-forward losses of $736 million primarily reflecting higher estimated costs associated with certification, flight testing and change incorporation on aircraft, as well as higher than expected effort to meet customer requirements in order to support delivery of the initial aircraft.
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.)