New York (AFP) – More unexpected costs in its huge refueling tanker program for the US Air Force and slower commercial aircraft deliveries dented Boeing’s first-quarter earnings, the company reported Wednesday.
Boeing took a $156 million charge for unanticipated costs in the KC-46 program, pushing earnings for the quarter ending March 31 down 8.8 percent from a year ago to $1.2 billion. That translated into $1.74 per share, nine cents below analyst expectations.
Revenues were $22.6 billion, up 2.2 percent from the year-ago period.
Shares in Boeing initially fell, but were up 2.2 percent at $136.11 at midday after the aerospace giant told analysts it found other cost cuts to offset the extra tanker expenses and offered a generally upbeat outlook on the commercial and military markets.
The latest unexpected costs on the KC-46, a next-generation military refueling aircraft, adds to a $536 million charge taken on the same program in the second quarter of 2015.
Boeing chief executive Dennis Muilenburg said the newest added expenses arose to pay for engineering improvements into already-built aircraft and those under construction following testing.
Boeing said all four of the planned KC-46 test aircraft are now flying and that refueling tests have been successful with several types of aircraft. First deliveries of the KC-46, called “Pegasus,” are on track to arrive on schedule in August 2017, Muilenburg said.
Operating profits from Boeing’s commercial airplane business dived 36.1 percent to $1.0 billion as Boeing delivered eight fewer aircraft compared with the first quarter of 2015.
In January, Boeing said it expected commercial aircraft deliveries to fall in 2016, marking the first annual decline since 2010.
Operating profits in military aircraft rose 10.6 percent to $822 million behind increased deliveries of the F-15 fighter aircraft and the G-17 transport.
Muilenburg said the commercial aircraft outlook remains “generally healthy” with transport data showing passenger traffic growing eight percent in early 2016, its highest level in eight years. Order cancellations and deferrals are running below historic norms, another sign of strength, he said.
– Foreign military sales –
Muilenburg also expressed confidence at future sales to foreign governments of more military aircraft. He declined to directly comment on reports that Boeing jets could soon be sold to Kuwait and Qatar, while calling both “very important customers.” Such transactions are negotiated between the US government and foreign governments, he said.
“Internationally, there are a number of opportunities, including opportunities in the Middle East,” Muilenburg said.
Boeing projected 2016 revenues of $93 to $95 billion and core earnings per share of $8.15 to $8.35. These are the same forecasts the aerospace giant released in January.
Boeing executives said they planned to step up cost-cutting efforts to offset the hit from the higher tanker costs. In March the company announced plans to cut 4,000 jobs in its commercial aircraft division.
Some of the additional cost savings are also to come from streamlined operations, executives said. But employment levels will be “down moderately” for the year, they said.
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