Boeing to report losses from Air Force tanker deal

Boeing Co. said Friday it will report a $275 million loss incurred over the past two years stemming from an expected $23.5 billion contract to provide the Air Force aerial refueling tankers.

Until now, Boeing accountants had not written off expenses incurred to modify its 767 commercial jetliner to meet the Air Force's aerial refueling needs, even though the company has yet to secure the lucrative deal.

Observers say Boeing could have expensed the tanker costs as they occurred, but instead opted to defer those expenses until it could match them with revenue from the pending contract.

"This is the first real expression from Boeing that they have doubts at the possibility of being awarded the contract," a congressional aide said.

But industry sources said it is too early to jump to conclusions.

"To interpret this as a sign they're going to lose the contract is really taking a leap of faith," one industry source said, adding it would be safer to assume the company recognizes the tanker contract award might take longer than expected. The company said in a statement that it "remains firmly committed" to the tanker program. Boeing says the charge related to initial production of Air Force tankers stems from the company's regular quarterly and year-end reviews, reflecting Boeing's updated assessment of securing the 767 contract "given the continued delay and now likely re-competition of the contract."

Last year lawmakers derailed an Air Force lease-and-buy plan for 100 Boeing tankers after Darleen Druyun, a former Air Force acquisition official, said she improperly agreed to inflated prices associated with Boeing contracts before joining the company in 2003. Several internal Pentagon reviews questioned how the deal was structured.

The Pentagon recently decided it would hold a competition for the contract. Boeing's European rival, Airbus, is expected to bid.

Boeing said it is ready to provide the new tanker fleet and stressed that it used its own money and received no government funding to develop the modified 767 tanker. No decision has been made to phase out the 767 line, according to the company's statement.