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Boeing to take $2 billion hit for three jet programs
Shares of Boeing Co. fell more than 1% in late trading Thursday after the aircraft maker warned second-quarter charges will reach $2.05 billion, stemming from setbacks and difficulties in three separate programs and including problems related to weaker air-cargo market trends.
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Boeing cited “current and anticipated weakness in the air cargo market” for the decision, explaining that the $814 million charge “reflects a lower estimated total of 747-8 freighter aircraft to be produced in the program, accounting quantity and lower estimated revenues on future aircraft sales”.
A company spokesman said the company’s closely watched revenue and cash guidance for 2016 are unchanged.
It will also take a hit on its tanker program for the Air Force. Total after-tax charges during the quarter will amount to $2.1 billion.
Boeing said its quarterly earnings release on July 27 will recognize US$393 million in costs associated with the KC-46 tanker program, a next-generation military refueling aircraft.
The charges related to Dreamliner program involve a pair of aircraft it used to flight test its advanced 787 Dreamliner, which entered service in 2011.
The charge is only the second that Boeing has recorded for the 787 programme, which had US$28.7 billion in deferred production and inventory costs as of March 31.
“These are the right, proactive decisions to strengthen our business going forward”, Chief Executive Dennis Muilenburg said in a statement. The two 787s have accumulated more than 6,700 hours of flight and ground testing and Boeing has decided not to invest the money necessary to refurbish and sell the aircraft.
Delays and production break-downs during the development phase of the 787 programme has cost Boeing dearly.
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That could prove beneficial as Boeing works to reduce the drag from its marquee jetliner. At the time, it said it expected the market to improve by 2019, allowing it to lift output to 12 a year. Boeing Defense, Space and Security also will report a $221 million pre-tax charge. The company said the cost is related to delays announced earlier this year for the first 18 planes it is building for the Pentagon, as well as to a hardware fix for the plane’s refuelling boom that was successfully tested earlier this month. For that same period a year ago, Boeing reported a $1.11 billion profit.