Boeing Co. said it expects to report a $2.1 billion after-tax accounting loss for the second quarter as it absorbs the costs from programs with well-publicized stumbles: the 787 Dreamliner, the 747-8 jumbo jet and a refueling tanker for the U.S. Air Force.
The largest blow is related to the Dreamliner, Boeing’s carbon-fiber jet, which debuted more than two years late in 2011, according to a company statement Thursday. The U.S. planemaker is writing off two flight-test aircraft, at a cost of $847 million after determining it can’t find any buyers.
Boeing is also absorbing an after-tax charge of $814 million for the 747-8 as it drops plans to double output to 12 jumbos a year in 2019 from the current six-plane rate. The manufacturer expects to take a $393 million loss for the KC-46 aerial tanker, which faces delays due to development challenges.
The losses serve as reminders of the costly delays that stalk commercial aerospace companies as they race complicated technology to market. Boeing has vowed to manage its product development better in the aftermath of the Dreamliner, which had amassed $28.7 billion in production and inventory costs as of March 31.
“These are the right, proactive decisions to strengthen our business going forward,” Boeing Chief Executive Officer Dennis Muilenburg said in the statement.
Shares fell 0.9 percent to $132.30 at 5:43 p.m. in New York after falling as much as 1.9 percent following the company’s announcement of the charge.
Non-Cash Charges
All but the tanker charges will be non-cash and won’t affect the company’s cash and revenue forecast for 2016, the planemaker said. Boeing will update its earnings guidance on July 27, when it reports second-quarter results. On a pretax basis, Boeing’s commercial airplane division will absorb a $2.78 billion loss while Boeing’s military aircraft unit sees a $219 million impact on earnings.
The two Dreamliners were a product of the company’s early struggles with suppliers and design issues that left its earliest aircraft overweight. Built in 2009, the jets have amassed 6,700 flight and ground-testing hours. They were reclassified as a research-and-development expense and removed from 787 program inventory, where they counted toward deferred production costs.
Boeing has said it expects the 787 deferred production costs, which measure funds already poured into inventory and labor against increases in production efficiency, to plateau this year and then fall as it speeds output.
All but the tanker charges will be non-cash and won’t affect the company’s cash and revenue forecast for 2016, the planemaker said. Boeing will update its earnings guidance on July 27, when it reports second-quarter results. On a pretax basis, Boeing’s commercial airplane division will absorb a $2.78 billion loss while Boeing’s military aircraft unit sees a $219 million impact on earnings.
The two Dreamliners were a product of the company’s early struggles with suppliers and design issues that left its earliest aircraft overweight. Built in 2009, the jets have amassed 6,700 flight and ground-testing hours. They were reclassified as a research-and-development expense and removed from 787 program inventory, where they counted toward deferred production costs.
Boeing has said it expects the 787 deferred production costs, which measure funds already poured into inventory and labor against increases in production efficiency, to plateau this year and then fall as it speeds output.
Freight Weakness
The company also lowered the number of 747 freighters it expects to produce to account for weakness in the air cargo market. Boeing has struggled to find buyers for the iconic hump-backed jet as airlines shift flying to more-efficient twin-engine models such as the company’s 777 jetliner. The planemaker recorded a $885 million pretax loss for fourth-quarter earnings as it tapped the brakes on production.
Boeing’s tanker-related charge is the fourth in two years as it struggles to develop the first new U.S. tanker since the 1980s. The company said the cost is related to delays announced earlier this year for the first 18 planes it is building for the Pentagon, as well as to a hardware fix for the plane’s refueling boom that was successfully tested earlier this month.
By: Julie Johnsson (Bloomberg).
Photo: Boeing, India.
Review: Emerging Market Formulations & Research Unit, FLAGSHIP RECORDS.
The company also lowered the number of 747 freighters it expects to produce to account for weakness in the air cargo market. Boeing has struggled to find buyers for the iconic hump-backed jet as airlines shift flying to more-efficient twin-engine models such as the company’s 777 jetliner. The planemaker recorded a $885 million pretax loss for fourth-quarter earnings as it tapped the brakes on production.
Boeing’s tanker-related charge is the fourth in two years as it struggles to develop the first new U.S. tanker since the 1980s. The company said the cost is related to delays announced earlier this year for the first 18 planes it is building for the Pentagon, as well as to a hardware fix for the plane’s refueling boom that was successfully tested earlier this month.
By: Julie Johnsson (Bloomberg).
Photo: Boeing, India.
Review: Emerging Market Formulations & Research Unit, FLAGSHIP RECORDS.
For The #FacebookTeam