Boeing To Take Hit From KC-46 Tanker Charge This Quarter

Boeing will record another charge on its star-crossed KC-46A tanker program for the U.S. Air Force, the company’s chief financial officer (CFO) told an investor conference on March 22.

CFO Brian West told Bank of America analyst Ron Epstein that the charge for the ongoing first quarter will be less than $500 million, but he did not offer more details. Any charge will add to the more than $6.5 billion in pretax charges that Boeing has recognized on the program since 2014, including a $1.1 billion whopper it announced for the third quarter of 2022.

West did not discuss whether future charges are expected, but he did say it will take until the second half of this year for the 767 line—on which the Air Force tanker is based—to recover from its latest challenge.

The 767 issue stems from a surface coating nonconformance on center wing tanks that emanated from the supply chain. During the quarter, Boeing halted all 767 deliveries, including commercial freighters and KC-46 tankers. The OEM has said it has a fix for the issue but must apply it to both new and already produced aircraft.

“We have to deal with it, and it will impact Boeing Defense, Space and Security margins in the quarter. They will be negative,” West said. “This is where we’re at with the program. Most important thing about the tanker is that the product is outperforming its mission, [and has] good customer feedback. We’ve got to keep our eye on the ball of getting predictable and work our way through it.”

West said the new charge and negative Boeing defense margins—which were expected—will not affect Boeing’s ability to meet its free cash flow forecast of generating $3-5 billion by the end of the year, or $10 billion by 2026. Those forecasts were provided in a November 2022 investor briefing and have become key to Boeing’s financial recovery.