Boeing takes charge

Boeing announced today that it will recognise charges related to delays on an international airborne surveillance program and a previously disclosed tentative legal settlement with the US government.

Boeing expects to record a charge of between $300 million and $500 million pre-tax due to delays related to its Airborne Early Warning & Control (AEW&C) program for Australia and Turkey. Additionally, the company expects to recognise a $615 million charge to reflect a tentative settlement with the US Justice Department related to the hiring of a former Air Force official and handling of a competitor’s proprietary information.

The expected charge for AEW&C program delays will be finalised after ongoing reviews and will be recorded in the Precision Engagement & Mobility Systems segment of Boeing’s Integrated Defense Systems business. The actual amount of the charge will be determined over the course of the next few weeks as the recovery plan is better understood and will be disclosed when Boeing issues its second quarter financial results.

This international airborne surveillance program, known as Wedgetail in Australia and Peace Eagle in Turkey, consists of the 737-700 aircraft outfitted with highly complex, integrated command and control and advanced radar systems.

Australia has purchased six AEW&C aircraft and Turkey has purchased four. Delivery of the first two Wedgetail aircraft and that effort’s flight test schedule have been delayed up to 18 months because of development and integration issues with certain hardware and software components. Boeing now plans to deliver all six Wedgetail aircraft by the end of 2008 and is developing the Peace Eagle schedule with its Turkish customer.

“We regret the impact that these program delays are having on our customers,” said Boeing Chairman, President and Chief Executive Officer Jim McNerney. “However, we are fully committed to a recovery plan that will deliver systems that meet their operational requirements.”

Separately, the tentative agreement with US Justice Department announced on May 15, 2006, resolves all potential civil and criminal claims and includes a monetary penalty. While the agreement is still being finalised, the charge will be recorded in the second quarter.