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Boeing Tumbles on Fuel Tank Concerns

Boeing (NYSE:BA) declined on news that Boeing will take additional charges to its KC-46 tanker program due to a supplier quality issue with the center fuel tank, chief financial officer Brian West said Wednesday. Although the charges were not disclosed, West said Boeing’s margins at its defense business would be negative for the first quarter.

The aircraft maker’ suppliers for the Apache AH-64E combat helicopter are poised to benefit from the aircraft maker’s $1.95-billion contract award, analysts at Bank of America said in a March 20 report.

The U.S. Department of Defense last week awarded Boeing with a contract to build 184 Apaches, including 115 for the U.S. Army and the remainder for Australia and Egypt.

“The increased demand for profitable legacy programs should help Boeing offset the headwinds of ramping new unprofitable programs at the Defense business units,” according to BofA, which maintained its Neutral rating on Boeing.

BofA also warned that a negative side effect of the Apache contract may be less need for the Future Attack Reconnaissance Aircraft (FARA), a U.S. Army initiative to develop a successor to the Bell OH-58 Kiowa scout helicopter that was retired in 2014 and taken out of service in 2017.

BA shares opened Wednesday down $4.10, or 2%, to $200.60.