(Adds detail on deal Iran)
By Alwyn Scott
NEW YORK, June 2 (Reuters) - Boeing Co expects to hit its target of $10 billion in operating cash flow this year and to return all free cash flow to shareholders, Chief Executive Officer Dennis Muilenburg said on Thursday.
Muilenburg's remarks came after a delay emerged last week with the KC-46 aerial refueling tanker program, which raised worries about additional costs.
The company is not seeing any new technical problems during flight tests of the tanker for the U.S. Air Force, and has not slowed production of the first 18 aircraft, Muilenburg said at an investor conference in New York organized by Sanford C Bernstein.
He did not comment on whether Boeing's earnings would be affected by the tanker delay. The company said last week any potential costs would be accounted for in the second quarter.
But investors are focused on Boeing's ability to generate cash amid spending to increase jetliner production and develop three new products: the tanker, the 737 MAX and the 777X. Boeing also is cutting costs to lift profits on its flagship 787 Dreamliner, which has nearly $30 billion in deferred costs.
Boeing faces tough competition from European rival Airbus and increasing encroachment from Canada's Bombardier Inc, which in April sold up to 125 of its CSeries aircraft to Delta Air Lines, a deal worth $5.6 billion at list prices.
"While it's a competitive environment, it's not one where we have to make bad financial decisions for market share's sake because of the strength of the backlog that we have," Muilenburg said when asked if Boeing was cutting prices to win orders.
Boeing has 5,720 jetliner orders in its backlog.
With aircraft sales slowing, Muilenburg said the prospect of a major order with Iran was moving closer.
After talking with Iranian airlines, he said, "we can see the market demand is real," and covers narrowbody and widebody planes. Airbus' announcement of 118 sales is a good indicator of the potential, Muilenburg added.
"We see market space that's measured in that category," he said. "You can anticipate that that's potentially a 50-50 kind of marketplace for Boeing and Airbus and we're going to battle it out competitively." (Reporting by Alwyn Scott; Editing by David Gregorio and Dan Grebler)