Key Takeaways
- Boeing reported a $565 million loss on the KC-46 Pegasus series amid ongoing production challenges.
- The U.S. Air Force’s recent order of 15 KC-46s helped contribute to $15 billion in Defense Space and Security orders.
- Boeing plans to enhance production quality at its Everett facility, aiming to resolve longstanding issues affecting the program.
Financial Struggles in Production
Boeing’s KC-46 Pegasus refueling tanker program has once again encountered financial difficulties, recording a $565 million loss in the fourth quarter of 2025. This marks the latest in a series of losses that have accumulated to over $8 billion since the program’s inception. During an earnings call, CEO Kelly Ortberg expressed disappointment over the financial results, but noted positive operational progress that could indicate a favorable future for the program.
Ortberg stated that sustained operational performance might enable Boeing to fulfill its delivery commitments to customers and prepare for subsequent tanker orders beyond the current program.
Chief Financial Officer Jay Malave highlighted the Air Force’s recent order for 15 additional KC-46s, which significantly bolstered Boeing Defense Space and Security’s total orders to $15 billion for the quarter. The losses were primarily attributed to escalating supply chain costs and increased production support expenses at Boeing’s Everett, Washington facility.
Although the bulk of these losses can be traced back to elevated 767 airframe costs, Malave mentioned that some of the production support expenditures are expected to yield long-term benefits. The company has committed to enhancing production quality and engineering support at its Everett plant, where the KC-46s are manufactured. Notably, a 20% reduction in the amount of rework required in the latter half of 2025 indicates that these investments are beginning to show signs of progress.
Malave emphasized the necessity of ongoing investments to maintain high standards and productivity, particularly with the Pentagon closely monitoring defense contractors’ delivery timelines. Ortberg acknowledged the difficult decision to absorb the financial charge as a strategic move aimed at ensuring timely deliveries of the KC-46s next year.
The importance of meeting delivery expectations is magnified as the Air Force commits to acquiring more KC-46s on a sole-source basis until a next-generation tanker is available. Ortberg noted that further clarity regarding costs for the next batch of KC-46s is expected later this fall. Given the program’s substantial losses, he stressed that Boeing must be “laser-focused” on understanding the underlying costs associated with the tanker.
Looking to the future, Ortberg characterized the contract as problematic over the past decade. He asserted the need to secure a fair pricing agreement for any upcoming opportunities, ensuring Boeing can achieve profitability while delivering on its commitments.
Stephen Losey, a reporter specializing in air warfare, has covered military issues extensively, including U.S. Air Force operations in the Middle East.
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