Air Force One turns Boeing’s accounts red, here’s why
Boeing closed the third quarter with a loss of over a billion dollars. There are still problems in the Air Force One program, the next generation of the presidential plane
Air Force One continues to weigh on Boeing's accounts.
Yesterday the American defense and aerospace giant published the results of the third quarter which closed with a turnover of 18.1 billion dollars (+13% compared to the same period last year) but with a red of 1.6 billion dollars .
Another $482 million weighs on the Air Force One contract for the modernization of two 747 jets for the next generation of the presidential plane. Boeing has now lost more than $1 billion on each of the two aircraft. Technically the program is known as VC-25B, since the famous “Air Force One” designation is reserved for when the president is actually on any U.S. Air Force aircraft, not when it is on the ground, much less under construction, the statement said. CNN .
The company has been reporting losses on the planes for years , so much so that even CEO Dave Calhoun admitted last year that the company should never have signed the contract with the Air Force to produce the jets for $3.9 billion in 2018. Since then, supplier costs have increased dramatically and delivery dates have continuously slipped.
All the details.
THE THIRD QUARTER ACCOUNTS
Boeing closed the third quarter of the year with an adjusted loss of 3.26 dollars per share, higher than the 2.96 dollars expected by experts, but on revenues of 18.10 billion, higher than the 18.01 billion consensus and in 13% increase compared to a year earlier. The net loss was nearly $1.64 billion, or $2.70 per share — an improvement from the $3.31 billion, or $5.49 per share, lost in the same period in 2022.
WHAT HAPPENS TO THE BOEING DEFENSE, SPACE AND SECURITY UNIT
Specifically, Boeing's defense unit weighs heavily, recording a loss of $924 million in the third quarter of 2023, mainly penalized by the increase in costs of its VC-25B Air Force One program.
More than half of Boeing Defense, Space and Security's losses stem from a $482 million loss on the company's work building two new VC-25B aircraft for the U.S. Air Force, Defense News reports. The company attributed the higher costs to technical changes and labor instability, as well as the termination of supplier negotiations last quarter regarding the Air Force One program.
“Very often the higher costs of defense contracts can be passed on to US taxpayers, but under pressure from then-President Donald Trump, who was threatening to cancel the contract for the planes, Boeing agreed to a fixed-price contract for the two new jets” comments CNN .
THE TORMENTED AIR FORCE ONE PROGRAM
It was July 2018, under the Trump administration, Boeing had received a $3.9 billion contract to build two 747-8 aircraft for use as Air Force One, scheduled for delivery by December 2024.
As early as 2021, Boeing told the US Air Force that the price of the next-generation presidential plane could increase . Not only that, the plane maker was also trying to get more time to deliver it, citing difficulties due to the pandemic and a subcontractor.
In April 2022 CEO Dave Calhoun stated that the company would no longer bid close to estimated costs as it has done over the past decade to secure high-profile contracts, (such as for the Air Force One program) since they now have to face increasing expenses. And Boeing's number one reiterated that the company made a mistake in accepting the aggressive terms requested by former US president Donald Trump on Air Force One, as Bloomberg reported last year.
Boeing suffered losses of $1.45 billion on planes last year and $318 million in 2021. Meanwhile the company also appointed troubleshooter Steve Parker to help turn around loss-making programs in its unit of defense.
BOEING'S POSITION
“These are disappointing results for the quarter and year to date,” admitted CFO Brian West. “This performance falls short of our expectations and we recognize that we are not as far along in this recovery as we expected at this stage.”
CEO Calhoun also expressed dissatisfaction with the pace at which Boeing's defense unit has improved, but said the industry is on track to see improvements over the next two to three years. Additionally, he added that Boeing is working to stabilize its defense operations, while also looking for ways to operate more efficiently, invest in engineering and approach procurement in a more “disciplined” way.
Finally, as Defense News reports, West and Calhoun said that Boeing is addressing the challenges of building the new Air Force Ones and that major steps to power up the new planes and fly them for the first time will be largely completed before period 2025/2026.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/smartcity/ecco-come-air-force-one-tinge-di-rosso-i-conti-di-boeing/ on Fri, 27 Oct 2023 06:06:30 +0000.