Boeing will end production of the 717 jet next year, and plans to charge $615 million against earnings before taxes related to that plane and the loss of a $23 billion deal...
CHICAGO — Boeing will end production of the 717 jet next year, and plans to charge $615 million against earnings before taxes related to that plane and the loss of a $23 billion deal to supply refueling tankers to the U.S. Air Force.
The airplane manufacturer said Friday the charge will work out to 48 cents a share for the fourth-quarter and full-year 2004 results, scheduled to be released on Feb. 2, 2005.
Boeing shares were down 20 cents at $50.43 in early trading on the New York Stock Exchange.
The company will take a charge amounting to about $340 million, or 27 cents per share, before taxes due to the end of the production of the 717 sometime in 2006. The 717 is Boeing’s smallest passenger plane.
An additional $45 million of expenses associated with the shutdown are expected for 2005 through 2007, according to Boeing.
“Unfortunately, the overall market for the airplane does not support continuing 717 production beyond delivering on our current commitments,” said Boeing Commercial Airplanes President and Chief Executive Officer Alan Mulally.
Boeing said the charge related to the initial production of aerial refueling tankers for the U.S. Air Force was approximately $275 million, or 21 cents per share, before taxes.
The Pentagon decided in November to reopen the Air Force’s deal with Boeing to convert 767s into refueling tankers amid a corruption scandal involving former Air Force official Darleen Druyun.
That action was in response to a growing scandal centering on Druyun, who admitted giving special treatment to Boeing on the tanker deal and other contracts. Druyun later joined Boeing as a top executive. She has pleaded guilty on felony charges and was sentenced to nine months in prison. Boeing’s former chief financial officer, Michael Sears, has also pleaded guilty for his role in hiring Druyun.
“Boeing remains firmly committed to the USAF 767 Tanker program and is ready to support its customer in whatever decision is made regarding the recapitalization of the nation’s current aerial refueling fleet,” Boeing said in a statement.