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Boeing Finance Chief Says Company Will Take Charges Over A KC-46 Tanker Quality Issue

Boeing Finance Chief Says Company Will Take Charges Over A KC-46 Tanker Quality Issue
According to the company's finance chief, Boeing Co. will incur additional costs for the KC-46 tanker program as a result of a center fuel tank supplier quality issue.
The precise amount of the additional charges, which will be disclosed along with the company's first quarter earnings, was not disclosed by Boeing Chief Financial Officer Brian West, but as a result, margins at Boeing's defense business would be negatively affected.
According to West, who spoke at the Bank of America Global Industrials Conference, deliveries of 767 freighters "will recover in the second quarter," while tanker deliveries "will take longer, but we will recover the year." West also added that the problem would not affect Boeing's annual cash flow target of $3 billion to $5 billion in 2023.
For the Boeing 737 MAX 10, which will "likely" be certified and delivered next year, West also acknowledged a minor schedule slip. Stan Deal, the head of Boeing Commercial Airplanes, had predicted in December that MAX 10 certification might take place in late 2023 or early 2024.
In order to ensure that we can assist Southwest with their fleet management, West said that "we are working very, very closely with them." MAX 7 certification and delivery are still anticipated to take place in 2023.
Boeing acknowledged earlier this month that the KC-46 tanker and Boeing 767 freighter deliveries had been postponed because a supplier had not finished procedures for center fuel tank cleaning and paint adhesion.
Before Boeing can deliver the aircraft, the fuel tank's primer needs to be taken out and painted over.
"We know how to fix this," West said. "But now we have to go implement the fix both on production airplanes and some airplanes that are in the fleet."
Boeing is bound by a fixed-price development contract for tankers, and is liable for all costs in excess of the award's $4.9 billion cost ceiling. Since the U.S. Air Force awarded the company the contract in 2011, the company has incurred charges totaling $6.8 billion.
According to West, Boeing is still confident it can meet its delivery guidance for the year on the commercial side of the business.
West, who supported the company's target of delivering 400-450 737 MAXs this year, predicted that deliveries of the company's most popular aircraft will increase in March compared to the 24 aircraft delivered in February.
The 787 Dreamliner delivery pause was resolved, and Boeing executives "see a path" for the company to achieve its dual objectives of increasing production to five 787s per month and delivering at least 70 Dreamliners this year. On March 16, Boeing made its first 787 delivery since late February.

Christopher J. Mitchell

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