Good news/bad news from Boeing

First, the good news: The US-based manufacturer reported strong second-quarter results, with revenue up 1% to $22.05 billion and net income up 52% to $1.65 billion.

The gains were driven by the company’s Commercial Airplanes division, as the Defense and Space division saw revenue fall. The Commercial Airplanes division delivered 181 airplanes in the quarter, and took 264 net orders valued at $17 billion, leaving Boeing with a record backlog of $377 billion.

The bad news was a $425 million pre-tax charge against the company’s fixed-price US Air Force tanker refleeting program.

In discussing the charge during a call with financial analysts, Boeing CEO Jim McNerney said the charge, which will have an after-tax impact of $272 million, “was driven by higher spending needed to complete systems installation on the tanker to test that aircraft and maintain the schedule for delivering this vital capability to the war fighter.”

CFO Greg Smith added that the charge “largely relates to additional engineering and manufacturing labor associated with challenges we encouraged in the wire installation as we move into the systems integration stage of final assembly on the initial test aircraft.”

Both men were adamant that the problem was not related to new technology, and that “the issues at hand are well defined and understood,” and that there would be no impact on the overall schedule.