Friday, July 17, 2015

Part I: Boeing KC-46 Takes Write-off for stock holders, Fixes found during phase 1.

Boeing has taken a $536 Million after Tax write-off on the KC-46 project as it completes loose ends on the project. It will affect share prices for 77 cents per share on Boeing stocks this quarter. It also directly affects total earnings for the year. Boeing sees the tanker business as an $80 Billion business, and has expected some write- downs on this project from its corralled bidding parameters. The US Defense Department has a stop loss of 4.9 Billion capped on the project. Boeing must take up the slack for anything past the $4.9 Billion it spends. Hence, the $536 Million after Tax Boeing write-off.
Optimism for stock holders comes from the knowledge of project progression. It's approaching the 90% line of completion for all systems for the aircraft. The remaining 10% typically is the testing and successful installation of integrated systems. The important point here includes its main purpose of refueling management and it is nearing completion for a refueling tanker mission. The integration of its fueling system for multi type aircraft and its situational applications for all warfare environments. The 1.2 billion added charge-off is before the tax amount. It also represents a financial recognition of a phase completed, otherwise Boeing would have not written it off at this time.

The write -off is a turning point for the program, as the most complex part of the program is gaining readiness for real operational testing. This check list item is important to the program as it is the integral functionality of the aircraft's mission scope. I would not expect another write-off or additional cost of this stature in the future for the KC-46, unless the military makes an addendum RFP on the project, or Boeing encounters a program altering road block during the last test phases it is about to enter. To put it simply, the write-off represents Boeing as having its ducks in a row for the KC-46 project. Full flight tests is the final phase as its conclusive testing phase begins, using all its integrated systems flying and working while meeting those expectations established during the development's ground phase. 

Boeing Rendering

On time delivery for Boeing is important as it opens more opportunity with other customers, once it delivers the first batch of 18 KC-46 by August 2017.