Boeing reported a brand new $565M loss on the KC-46 program, whereas trying to a reprice due to provide chain prices, manufacturing help, and ongoing RVS 2.0 upgrades.
Boeing has as soon as once more reported a major monetary cost on its KC-46A Pegasus tanker program, following the long-running challenges related to what has turn out to be one of many U.S. Air Pressure’s most troubled main acquisition efforts. In reality, in its fourth quarter 2025 earnings launch, Boeing disclosed a $565 million loss tied to the KC-46.
Based on the corporate’s statements, the loss is pushed primarily by increased provide chain prices and elevated manufacturing help bills on the Everett, Washington, facility, the place the plane is assembled. The corporate acknowledged that the cost displays persistent value pressures linked to the 767 airframe, upon which the tanker is predicated.
The loss was additional detailed throughout an investor name, the place Boeing Chief Govt Officer Kelly Ortberg described the result as “disappointing” however emphasised that current operational efficiency tendencies level towards bettering stability in this system. Ortberg additional stated Boeing’s elevated funding in high quality and engineering help is meant to make sure the corporate can meet supply commitments and put together for the following section of tanker procurement.
“This has been a nasty contract for the final decade,” Ortberg stated. “As we enter into a brand new alternative the place we get to reprice, we wish to guarantee that we … underwrite that contract, to make sure it’s a good contract, and we are able to earn money on that.”
Billions in Losses
Boeing has already accrued greater than $7 billion in losses due to the brand new tanker since contract award. This makes the KC-46 Pegasus one of many costliest fixed-price packages within the firm’s protection portfolio.
Beneath the phrases of the unique fixed-price contract, Boeing is chargeable for protecting all prices that exceed the agreed ceiling, thus absorbing all monetary threat rather than the Air Pressure. Boeing’s yearly outcomes present that its Protection, House & Safety enterprise closed 2025 with destructive working margins at -0.5%, but it represented a notable enchancment in comparison with the -22.6% margin recorded in 2024.
Firm executives careworn that the KC-46 loss doesn’t point out systemic issues throughout the protection enterprise, however slightly displays concentrated points fueled by the bottom airframe’s manufacturing and help prices. “The predominance of the cost is elevated value on the precise 767 industrial airplane manufacturing,” Ortberg defined.
Chief Monetary Officer Jay Malave additional added that Boeing deliberately maintained elevated staffing ranges for high quality assurance and engineering at Everett, in an effort to scale back rework and guarantee supply schedules could possibly be met. Malave defined these measures are costly however they seem like serving to.
“For instance, as in comparison with the primary half of the yr, we noticed common manufacturing facility rework ranges lower by 20 p.c within the fourth quarter,” Malave stated. “Whereas these investments are beginning to proof progress, we have to maintain them for longer than beforehand deliberate to advertise stability.”
Boeing acknowledged it delivered 14 KC-46s in 2025 and is now focusing on a rise to 19 deliveries in 2026. The corporate is presently underneath contract to offer 183 tankers for U.S. and worldwide prospects, however the quantity would possibly quickly improve because the Air Pressure is planning to acquire 75 further plane to recapitalize the growing older KC-135 Stratotanker fleet.
Technical Deficiencies
The KC-46’s value overruns are additionally as a result of its lengthy historical past of technical challenges, which included points with the plane itself and the refueling tools. These issues notably led to a brief halt to the deliveries in 2024.
Among the many most severe and enduring points has been the Distant Imaginative and prescient System (RVS), which replaces the traditional increase operator’s rear-facing window and controls with a brand new console outfitted with a digicam system. Nonetheless, the system has suffered from many points, main the Air Pressure to categorise it as a Class 1 deficiency, which represents issues that would end in lack of life or harm to plane.
The tanker has additionally skilled issues with its refueling increase actuator, which affected the stiffness and controllability of the increase throughout refueling operations. These points restricted the KC-46’s means to refuel sure receiver plane, with a notable occasion being the A-10 Thunderbolt II, and required new modifications to fulfill Air Pressure necessities.
Product high quality points concerned three separate elements of the plane: drain masts for its auxiliary energy unit (APU), a seal for its gas manifold and a drain line that runs close to the cockpit. Particularly, the APU’s drain masts confirmed an inclination to crack, solved with further reinforcements.
The gas manifold, which runs 555 toes all through the aircraft, is fitted with flex couplings all through in order that it could possibly bend in flight. Nonetheless, an incorrect positioning of the coupling’s seals enabled gas to seep out of the interior tube into the outer one, so Boeing applied a brand new flex seal.
The final one was associated to the AAR receptacle on high of the cockpit, particularly the receptacle drain line, which empties liquid out however is prone to cracking and will trigger gas to leak into the cockpit. A repair has been discovered and is being applied.
Structural issues have additionally interrupted manufacturing. In 2024, Boeing was compelled to quickly halt KC-46 deliveries for about three months after cracks had been found within the plane’s wing construction, requiring inspections and repairs throughout a number of plane. The pause highlighted the continuing manufacturing challenges, complicating as soon as once more supply schedules.
Progress on Distant Imaginative and prescient System 2.0 Testing
Boeing is continuous work to handle the Distant Imaginative and prescient System (RVS). As we beforehand reported right here at The Aviationist, Boeing achieved a key milestone in November 2025 following the primary flight of a KC-46 outfitted with the upgraded Distant Imaginative and prescient System 2.0 (RVS 2.0).
Boeing Protection, House & Safety CEO Steve Parker described the occasion as “an enormous milestone for this system,” noting that the flight came about within the Seattle space underneath difficult climate circumstances and could be adopted by an prolonged check marketing campaign via 2026. The Air Pressure additionally lately printed a brief video on social media saying the 418th Flight Check Squadron (FLTS) supported Boeing for the RVS testing throughout quickly altering lighting circumstances over the Mugu Sea Check Vary.
A Flight Check #Engineer mantra.. come for the #knowledge… keep for the views. #USAF crews with our 418th FLTS lately supported @BoeingDefense groups with KC-46 Distant Imaginative and prescient System testing throughout quickly altering lighting circumstances throughout the Mugu Sea Check Vary. @HQ_AFMC pic.twitter.com/M3kkZi1Jv9
— Edwards Air Pressure Base (@EdwardsAFB) January 24, 2026
RVS 2.0 is meant to resolve persistent issues affecting the present system, together with picture distortion, depth notion errors, and degraded efficiency underneath variable lighting circumstances. These points have been notably problematic throughout night time operations and in eventualities the place daylight and shadow intrude with the cameras’ means to offer dependable visible cues to increase operators.
RVS 2.0 is meant to resolve the issues with the incorporation of upgraded long-wave infrared and visible-spectrum cameras, growing the whole variety of sensors from 4 to 6. The improve, nonetheless, was affected by delays.
Whereas testing is in progress, Boeing has continued to ship plane with the interim RVS 1.5 configuration, with full fielding of RVS 2.0 not anticipated till 2027. Parker described RVS 1.5 as “distinctive,” with out including particulars.
Balancing Threat and Getting ready for Repricing
Boeing’s executives argued that the most recent cost displays a deliberate resolution to prioritize execution and supply reliability over short-term monetary efficiency. In reality, with the Pentagon more and more scrutinizing contractor supply schedules in current weeks because it appears to alter navy procurement, the corporate stated the funding was important to the KC-46’s program long-term restoration.
“We took that call – albeit, an enormous gulp – to must take a cost right here on the tanker program,” Ortberg stated. “I believe it would repay in dividends with us, by way of permitting us to ensure we meet the 19 deliveries subsequent yr.”
Boeing is now targeted on not repeating the identical “errors” of the unique fixed-price improvement deal, particularly with negotiations for the brand new Air Pressure procurement now approaching. The corporate seems decided to keep away from absorbing new losses.
