Boeing disclosed $402 million pre-tax in charges for the troubled KC-46A Pegasus tanker in 2021. While less costly than in 2020, the program had a significant impact on Boeing’s Defense, Space and Security division finances.
“Defense, Space & Security fourth-quarter revenue decreased to $5.9 billion, and fourth-quarter operating margin decreased to 4.4 percent, primarily due to lower volume and less favorable performance across the portfolio, including a $402 million pre-tax charge on the KC-46A Tanker program,” a Boeing press release states.
The fixed-price contract means that Boeing must pay any cost overruns, with the United States Air Force contributing no more than an already agreed price of $4.9 billion for the program.
In 2020, Boeing paid $1.32 billion in charges for the tanker, and the overruns reached $5 billion, exceeding the initial cost of the program.
With the new charges, the overruns have reached $5.439 billion.
According to Boeing CFO Brian West, who spoke at a company conference call with investors, most of the charges in 2021 stemmed from problems with the KC-46’s remote vision system (RVS). It was the first major deficiency found by the USAF upon delivery of the aircraft on January 10, 2019, leading Boeing to completely redesign the system. However, in May 2021, USAF refused to approve the system before Boeing addresses some other, intertwined issues with the aircraft’s panoramic display.
According to West, supply problems, partially caused by the COVID-19 pandemic, also contributed to the charges.