Boeing’s KC-46 Cost Overruns Surpass $5 Billion

Boeing on Jan. 27 reported another $275 million charge to its KC-46 program, pushing the total cost overruns it is responsible for to more than $5 billion in the past six years—more than the initial contract award for the tanker.

The fourth quarter total means 2020 saw more than $1.3 billion in overruns for the program, a cost the company said in its earnings report was “primarily due to production inefficiencies, including impacts of COVID-19 disruption.” The 2020 total is more than any previous year, according to a review of the company’s prior year earnings reports.

Because of the nature of the contract, the company is responsible for all costs above the $4.9 billion award.

The year wasn’t all bad news for the KC-46, however. The company delivered 14 of the new tankers in 2020 and is finalizing fixes to the KC-46’s long-troubled remote vision system, set to be installed in about three years. This month alone, the company has received $3.8 billion for production lots five and six.

Boeing Defense and Space in 2020 reported $26.26 billion in total revenue, an increase from the previous year. In the report, the company touted an airborne early warning and control upgrade contract for South Korea, along with an engineering design review for Wideband Global SATCOM-11+ and the critical design review for the Space Launch System Exploration Upper State for NASA.

Overall, however, 2020 saw a record downturn for the company. Boeing reported $11.9 billion in total losses, driven by reduced demand for air travel due to the COVID-19 pandemic, continued problems with the 737 Max, and a charge related to a delay in the deliveries of its 777X.

“Our balanced portfolio of diverse defense, space, and services programs continues to provide important stability as we lay the foundation for our recovery,” Boeing CEO David L. Calhoun said in a release. “While the impact of COVID-19 presents continued challenges for commercial aerospace into 2021, we remain confident in our future, squarely focused on safety, quality, and transparency as we rebuild trust and transform our business.”