Boeing KC-46 is behind schedule | Taking Stock

By Tim Raetzloff | Jun 01, 2016

Hours after the stock market closed on Friday, May 27, and everyone had left for the holiday weekend, Boeing Co. and the U.S. Air Force announced that the Boeing KC-46 refueling tanker will not meet its scheduled delivery of 18 planes by August 2017.

The timing of the announcement assured that there would be no immediate stock market reaction to the news, and, of course, the hope that other news will be more current by the time the stock market reopened on Tuesday.

This is not the first setback in the tanker program, which has been over budget since shortly after the contract was awarded in 2011. The award of the contract was controversial in the first place.

A number of members of Congress, led by Sen. John McCain (R-Ariz.) were unhappy with the choice of Boeing to build the much-needed replacement to the KC-135.

Conditions were written into the budget to require delivery of 18 aircraft by August 2017. That delivery date will not be met. It will be interesting to see if there are any teeth in the contract, or if this will be business as usual in military procurement.

The Air Force was also to have determined by April 2016 whether it would purchase more than the 18 aircraft, up to 179 over 20 years. The Air Force deferred that decision for another four months.

The good news for taxpayers is that cost overruns will be absorbed by Boeing. The bad news for Snohomish County is that the plane is built at the Everett plant, and, if the Air Force does not continue the contract, job losses will be absorbed here.

As of Sunday, national aviation analysts had not yet commented on the situation. They probably were all away enjoying the three-day weekend, and it is possible that some of them are unaware of the situation.

As someone who follows business and the economy, my irritation isn't that this has happened. Several astute analysts at major brokerage firms have been predicting that Boeing could not meet the deadline.

My irritation is that Boeing managed the news so that it would come out at time when most people wouldn't notice it. I realize that is news management of the standard variety in this country.

My irritation is that the tanker is a high priority project for national defense. The taxpayers have an interest in the result of what was a disputed contract.

Important information should be released at a time when it is noticed by all, not at a time when it can be mostly hidden.

It will be interesting to see if either presidential candidate has something to say about the situation.

Tim Raetzloff operates Abarim Business Computers at Harbor Square in Edmonds. What he writes combines his sense of history and his sense of numbers. Neither he nor Abarim have an investment in any of the companies mentioned in this column.

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