Boeing (NYSE:BA) Defense, Space and Security reported a significant loss of $924 million in Q3 2023, largely attributed to escalating costs associated with the VC-25B Air Force One program and a satellite contract. The development of two new VC-25B aircraft for the U.S. Air Force, which included engineering changes, labor instability, and supplier negotiations, accounted for $482 million of this loss.
The cumulative charges on the VC-25B program from early 2020 and Q1 2022 have pushed total losses above $1.3 billion. In addition to the VC-25B program, legacy contracts such as the KC-46 tanker program have added to the financial strain, with delays, escalating costs, and quality concerns.
Despite these challenges, Boeing's CFO Brian West outlined a recovery plan involving lean initiatives and factory improvements. He reported that Q3 sales stood at nearly $5.5 billion, remaining flat year over year from Q3 2022.
In March 2022, Ted Colbert was appointed to lead the struggling defense unit. He initiated a restructuring that consolidated the unit's eight divisions into four. However, even after these changes, losses exceeded expectations due to increased Air Force One program costs and a $315 million loss on a satellite contract.
Boeing is now focusing on stabilizing its defense operations by enhancing efficiency, investing in engineering, and adopting a disciplined approach to contracting. The company is also investing in training programs for factory workers and providing resources to suppliers for their recovery.
CEO Dave Calhoun expressed confidence in achieving high single-digit profit margins in the defense sector by 2025 or 2026 despite the slow recovery pace. Notably, Boeing recently delivered its first T-7A Red Hawk trainer aircraft to the Air Force and secured a contract to build 21 Apache helicopters for the Army, marking positive developments amidst the challenges.
Meanwhile, Airbus continues to compete with Boeing in the aerial refueler market with its LMXT tanker, following Lockheed Martin (NYSE:LMT)'s withdrawal from the competition.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.