Boeing's Air Force One, tanker programs dent defense unit
Boeing secured a $3.9B Air Force One contract in 2018
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Boeing suffered a $2.8 billion hit in its defense unit during the third quarter of 2022, attributed to certain fixed-price development programs, including its Air Force One program.
Boeing has already recorded a $660 million charge in the first quarter of 2022 related to the Air Force One program's "higher supplier costs, higher costs to finalize certain technical requirements and schedule delays." The first of the two aircraft is expected to be delivered in 2026.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| BA | THE BOEING CO. | 143.41 | -2.67 | -1.83% |
In 2018, Boeing secured a $3.9 billion contract the U.S. to develop and modify two 747-8 commercial aircraft. The deal was made prior to current Boeing CEO Dave Calhoun's appointment in January 2020.
"Air Force One, I'm just going to call a very unique moment, a very unique negotiation, a very unique set of risks that Boeing probably shouldn't have taken," Calhoun said during the company's first-quarter earnings call in April. "But we are where we are, and we're going to deliver great airplanes. And we're going to recognize the costs associated with it."
Boeing CEO David Calhoun, April '22 Remarks
Other fixed-price development programs that contributed to the segment's $2.8 billion loss during the third quarter were the KC-46A, MQ-25, T-7A and Commercial Crew programs.
Air Force One arrives at Los Angeles International airport with President Trump on board on March 13, 2018 in Los Angeles, California.
Air Force One is seen on the tarmac after U.S. President Joe Biden returned from Pittsburgh to Joint Base Andrews, Maryland, U.S. March 31, 2021.
BOEING TAKES $2.8B HIT IN DEFENSE BUSINESS, KEEPS CASH FLOW GOAL
In a statement on Wednesday, Calhoun said he is focused on maturing Boeing's fixed-price development programs, mitigating risks and delivering for customers.
"We remain in a challenging environment and have more work ahead to drive stability, improve our performance and ensure we're consistently delivering on our commitments," he added. "Despite the challenges, I'm proud of our team and the progress we've made to strengthen our company."
Boeing CEO David Calhoun
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Boeing's defense, space and security segment reported $5.3 billion in revenue during the third quarter. The segment's backlog was $55 billion, of which 31% represented orders from customers outside the United States.
The Boeing regional headquarters is seen amid the coronavirus pandemic on April 29, 2020, in Arlington, Virginia. (Olivier Douliery/AFP via Getty Images / Getty Images)
In the third quarter, Boeing secured KC-46A tanker awards from the U.S. Air Force for 15 aircraft and the Israeli Air Force for four aircraft. Poland also selected the AH-64E Apache as its future attack helicopter.
In addition, the company delivered 34 aircraft and two satellites, including the first four MH-139A Grey Wolf helicopters to the U.S. Air Force, and opened its Advanced Composite Fabrication Center in Mesa, Arizona.
Boeing stock has tumbled approximately 30% year to date.