WASHINGTON — Boeing reported a $245 million charge on the KC-46A Pegasus tanker in the primary quarter of 2023, as a result of a supplier’s quality issues.
The penalty means the KC-46 has now racked up greater than $7 billion in charges, and follow a $1.2 billion hit the corporate took on the Air Force tanker within the third quarter of 2022.
The KC-46′s charge brought Boeing Defense, Space and Security into the red for the quarter, with the unit reporting a lack of $212 million, the corporate said Wednesday. Boeing said ongoing labor and provide chain disruptions also hindered the corporate’s results.
Nonetheless, the outlook for Boeing’s defense unit showed signs of improvement from the primary quarter of 2022, when it reported a $929 million loss. Boeing defense also brought in $6.5 billion in revenues on this yr’s first quarter, a greater than $1 billion increase over 2022′s first quarter.
Boeing also trimmed its overall losses within the quarter by about $1 billion from the identical period in 2022, while overall revenues grew to almost $18 billion in the primary three months of this yr.
Boeing said the charge was largely driven by a previously disclosed quality issue as a result of a supplier, but didn’t offer further details in a call with analysts. The aviation news website the Air Current reported in March a subcontractor had not followed proper painting and priming procedures on the middle fuel tanks of some KC-46s and 767s, on which the KC-46 is predicated, which has held up deliveries. That quality issue could risk contamination of the aircrafts’ fuel systems, Air Current reported.
Brian West, Boeing’s chief financial officer, confirmed the standard issue with the 767 center fuel tanks later that month at a Bank of America conference.
David Calhoun, Boeing’s chief executive, said on Wednesday’s call work is progressing on fixing that problem. But the corporate warned investors more losses on the KC-46 could come through the remainder of the yr.
Calhoun said the corporate is seeing brilliant spots in its defense business, with the Air Force possibly buying additional, modified KC-46s as an interim step until it might probably bring on a next-generation tanker. He also pointed to the as much as $1.2 billion contract the Air Force awarded Boeing in February to begin constructing the E-7A battle management aircraft, to exchange the aging E-3 Sentry airborne warning and control system, or AWACS, aircraft.
Awards in the primary quarter for 15 more KC-46s and 184 Apache helicopters for the Army also reflected strong demand, Calhoun said.
Stephen Losey is the air warfare reporter for Defense News. He previously covered leadership and personnel issues at Air Force Times, and the Pentagon, special operations and air warfare at Military.com. He has traveled to the Middle East to cover U.S. Air Force operations.