Boeing’s fixed-price tanker contract may not mean short-term profit

Boeing likely won’t see a profit in the early phase of a program to build aerial refueling tankers for the U.S. Air Force, Reuters said.

And Boeing’s target cost to develop the tanker and deliver an initial 18 by the end of 2017 may run above its target of $3.9 billion.

“For every dollar the program costs above target cost of $3.9B, the government pays $0.60 and the contractor pays $0.40, until the total amount paid to Boeing reaches $4.9 billion,” at which point Boeing assumes all further costs, the Air Force told Reuters.

“Under this formula, taxpayers would pick up $600 million up to the $4.9 billion ceiling. Boeing would cover the other $400 million plus any ceiling overrun,” Reuters said.

Boeing predicted it would have cost overruns above the ceiling of $300 million for the development phase, a congressional source said last week, the report said.