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.
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