Ted Colbert, CEO of Boeing Defense, Space and Security, in a 2019 file phot. (KARIM SAHIB/AFP via Getty Images)
PARIS AIRSHOW — Boeing’s defense sector is preparing for a likely loss in the second quarter of 2023, the company’s division chief told reporters today.
“We’re still assessing how the numbers are going to fall,” Ted Colbert, president and chief executive officer of Boeing’s Defense, Space & Security sector, said during a briefing with reporters in Paris. “But the profile will look similar to the last quarter. We’ve got work to do across the programs to figure out kind of where we are,” he added.
In this year’s first quarter earnings, Boeing disclosed a nearly quarter-billion dollar loss for its defense division, a shortfall primarily driven by charges on the KC-46A tanker stemming from a supplier quality issue with the 767’s center fuel tanks.
Saddled by fixed-price contracts, Boeing’s Defense, Space and Security business has consistently logged losses in recent quarters, reaching as high as a whopping $2.8 billion in the third quarter of 2022.
Colbert today would not comment on what programs in particular could create fresh losses for the company, nor on a precise timeline for resuming the still-paused KC-46A deliveries. “We will resume delivering, notwithstanding any other issue we find, in the second half [of the year] if we have to, and we’ve kept our commitment to the customer.
“So we’re working through the products that are in the factory today with an intent to get to our commitment this year,” he added. Boeing’s commitment for 2023 is 15 Pegasus deliveries, according to a report in Aviation Week.
Asked whether the delayed deliveries could themselves drive further charges, Colbert replied, “A contract is a contract. We’ll follow the contract with our customer,” adding that “I can’t speak to it until I know when I’m going to deliver and how that will play out.”
As the Air Force weighs whether to proceed with an additional buy of 75 of the tankers to continue recapitalizing the aging KC-135 Stratotanker, Colbert noted that such a decision creates an “opportunity to make the program even more healthy from a financial perspective is in front of us.”
Industry leaders have recently been pushing back against fixed-price development contracts, with L3Harris chief executive officer Chris Kubasik throwing down the gauntlet that the company will not bid on them at all.
Asked whether he expected the Pentagon to ditch the bemoaned contracting model, Colbert said “in general, there is recognition that doing big fixed-price development programs on very complex capabilities, or capabilities that require a lot of maturity from either an engineering or manufacturing perspective, can be very challenging. So I think we are working very hard with the acquisition community and the Pentagon to be smart about every next program that we have together.”
There will be some programs in the future that will be fixed-price, he observed, though he did anticipate some changes.
“I think we’ve all learned some lessons, and smarter heads are going to prevail going forward,” he said.
