Winning the U.S. Air Force contract for a new aerial refueling tanker was hard, but meeting the program’s requirements may be even harder for Boeing Co. (NYSE: BA). The good news is that U.S. taxpayers are saving about $3.5 billion. Then there is the not-so-good news.
The Government Accountability Office (GAO) released last Friday its congressionally mandated annual review of the program for 2015. The cost to the Air Force has come down 6.7% to $48.2 billion, which the GAO attributes to stable program requirements with fewer engineering change orders. The contract, awarded in 2011, called for 179 KC-46A tankers at a total program cost to the Air Force of $51.7 billion.
While the federal government has saved money, Boeing has not. The company has taken pretax charges on the tanker program totaling $1.2 billion because development costs are fixed by the contract at $4.9 billion and Boeing has to swallow any additional spending.
24/7 Wall St.Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.