Boeing Co. (BA) is facing another setback as the U.S. Air Force has delayed by four years a decision on whether its $44 billion KC-46 tanker program should be approved for full-rate production.
According to a Bloomberg report, the U.S. Air Force will announce a decision in July to September of 2024. It was previously planned for this September.
The decision comes as Boeing, who is the contractor of the program since 2011, is trying to show it has fixed the flawed camera system used for the plane’s midair refueling mission.
The Pentagon’s testing office seeks to postpone completion of ongoing combat testing and a final evaluation report until Boeing produces an improved, production-ready version of the “Remote Vision System”.
At the same time, the Air Force said the delayed decision won’t affect orders to Chicago-based Boeing, which has already delivered the first 33 KC-46 tankers with the flawed system. The planemaker is set to produce 179 KC-46s under the program contract.
Declaring a full-rate production is supposed to be a Pentagon stamp of approval that the system has demonstrated its combat effectiveness and that it can be efficiently produced and maintained.
The news comes as Boeing reported this week that aircraft deliveries continued to decline in May, while order cancellations increased due to the travel restrictions tied to the coronavirus pandemic, which have throttled commercial jet demand.
The travel demand freeze resulted in a deep cut in the number of commercial jets and services Boeing customers need over the next few years. As such, global airlines suffering billions of dollars in losses have been seeking to cancel or delay some of the orders they have with Boeing.
COVID-19 has hit the planemaker very hard, with shares still down almost 40% since the beginning of the year. The stock is down 7.5% to $188.07 in today’s pre-market trading after dropping 6% on Wednesday.
Wall Street analysts are cautiously optimistic on the stock. Nine Buys, 11 Holds, and 1 Sell rating give Boeing a Moderate Buy analyst consensus, with the $177.89 average analyst price target reflecting 13% downside potential in the shares over the coming year. (See Boeing stock analysis on TipRanks).
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