A KC-46A Pegasus tanker takes off March 17, 2022, from McConnell Air Force Base, Kansas. (U.S. Air Force photo by Amn. William Lunn)
WASHINGTON — Boeing’s defense business will log a loss in the third quarter of 2023, Chief Financial Officer Brian West said today.
The company’s defense sector margins “will be negative in the quarter and also similar to what they were last quarter,” West said during the Jefferies Industrials conference hosted in New York City. The aerospace titan recorded a $527 million loss for its defense business in the second quarter of 2023.
Losses for Boeing’s Defense, Space & Security sector have been a familiar story in recent quarters as the company strives to resolve issues on a string of programs. Boeing is experiencing “persistent supply chain and labor stability issues,” West said today, adding that the defense sector’s problems are largely concentrated in two main areas.
Approximately 25% of Boeing’s defense sector portfolio is struggling due to “a few legacy programs that we know how to make that we just got to get back on track. That’s proving to take longer,” West said. (He did not elaborate on what those particular problem programs are.)
An additional 15% is accounted for in Boeing’s fixed-price development contracts — programs like the KC-46A tanker, T-7A training jet, MQ-25 refueling drone, NASA Starliner and the Air Force One replacement VC-25B — that have collectively logged billions in losses, according to West. The KC-46A alone has topped an eye watering $7 billion in charges.
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Those contracts have “new pressure,” West said without elaborating, adding that “we need to address it, account for it in our closing position. And we will.”
The remaining 60% of Boeing’s defense portfolio “are products that have strong demand, are performing well in the field and there’s good margin behind it,” West noted. However, he cautioned that the company needs to see progress in the next few quarters on its legacy programs and hit upcoming milestones for its fixed-price development efforts.
West, who has previously warned that the defense sector may not be profitable until the 2025-2026 timeframe, reiterated that guidance today, as well as the company’s expectation of hitting a free cash flow goal of $3-5 billion by the end of 2023.
Still, the company will need to work through some woes on its commercial side as well: a recently-discovered issue with the company’s 737 MAX jet will require rework on about 75% of the 220 737s in Boeing’s inventory, West said, though he emphasized the company can still meet the “low end” of a previous projection of 400-450 737 deliveries this year. Boeing’s commercial business will be “negative” in the upcoming quarter, West said.
Boeing will report its third quarter results in October.
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