Boeing's defense unit faces $1.7 billion loss in 2023
Boeing's defense division is grappling to bounce back, as supplier mistakes and soaring production expenses have led to a $1.7 billion loss this year. Despite a $4.4 billion loss in 2022, executives' hopes for reducing future cost overruns haven't translated into significant improvements in 2023. Excluding the losses from the previous year, the losses on Boeing's defense programs in 2023 surpass the cumulative losses from all years since 2014, as determined by a Reuters analysis of Boeing's regulatory filings.
Losses primarily stem from $933 million in charges
This year, Boeing's defense unit lost $933 million in the third quarter of this year, mostly due to cost overruns on two Air Force One planes and an unidentified satellite program. The company is taking steps to improve profitability, including training employees and deploying resources to suppliers. Executives expect the unit to turn a profit by 2025-2026, once its most troubled programs are past flight testing.
Fixed-price contracts add to Boeing's financial burden
Experts believe that Boeing has limited options to alleviate the financial strain caused by its fixed-price development agreements with clients like NASA and the US Defense Department. These contracts, which account for 15% of Boeing's defense program revenue, were established before the MAX crisis and before the pandemic and high inflation led to cost surges for materials and labor.
Boeing's current fixed-price development efforts run over budget
This year, all of Boeing's ongoing fixed-price development projects, such as the US Air Force's KC-46 refueling tanker and T-7 training jet, new Air Force One aircraft, the Navy's MQ-25 tanker drone, and NASA's Starliner, have consistently exceeded their budgets. The most recent charge for Air Force One raised total losses to $2.4 billion on a $3.9 billion contract to create two planes. The program's current timeline anticipates the first jet to be delivered by September 2027.
