The Boeing Co. could end up losing as much as $310 million if the 767 tanker deal is not approved, the company warned Friday.
In documents filed with the Securities and Exchange Commission, Boeing also warned that days could be numbered for the slow-selling 717, saying that the failure to win a key order from Air Canada in late 2003 has increased "the possibility of program termination."
An analyst said the filings should be viewed as early warnings of potential risks to Boeing investors rather than signals of moves the company plans to make.
"Disclosure’s in vogue," said Richard Aboulafia with the Teal Group in Virginia.
Boeing still expects the 100-jet 767 order with the U.S. Air Force to be approved this year, according to the regulatory filing.
But if it’s not, Boeing said it will have to write off money it already has spent on the program, plus pay penalties for terminating supplier contracts.
As of the end of December, that potential loss was $261 million, the company said. By the end of this month, the total could reach $310 million.
Not getting the Air Force deal would also affect Boeing’s profit margins on the tankers it is building for the Italian and Japanese air forces. Italy has ordered four KC-767 tankers, while Japan has ordered the first of what is expected to be four.
The tanker deal remains on hold until the conclusion of a series of federal probes into dealings between Boeing and Darlyeen Druyan, a former Pentagon official who was hired by Boeing after helping negotiate the tanker deal. Those probes are expected to be finished by May.
In the meantime, Boeing has slowed development work on the tanker program, laying off 100 contract workers in Wichita and moving to lay off up to 50 of the 767 workers in Everett. Another 450 Everett workers who had been working on the tanker are being reassigned.
The tanker deal is key to the future of Boeing’s 767 program. Forty percent of Boeing’s projected future deliveries of 767s are tied to it, according to the regulatory filing.
It would cost $400 million to shut down the 717 line in Long Beach, Calif., Boeing said in Friday’s filing.
Boeing has taken only 161 orders for the 110-seat jets, and had only 35 left to build as of January. The program will continue only if the company is successful with sales campaigns now under way, according to the regulatory filing.
Boeing has been talking with Lufthansa and other European airlines about a stretched version of the 717.
Boeing considered shutting down the 717 program immediately following the Sept. 11, 2001, terror attacks, but decided to keep it going.
The 717 "has been on borrowed time for years," Aboulafia said, and Boeing will pull the plug on it eventually. "It might be three months, it might be three years."
But Friday’s announcement isn’t an imminent warning, he added.
"Disclosure is the name of the game," he said. "Otherwise, they’ll get investors suing them."
Reporter Bryan Corliss: 425-339-3454 or corliss@heraldnet.com.
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