A VC-25A Air Force One aircraft sits on a ramp at Offutt Air Force Base, Nebraska during a brief stop Jan. 22. The aircraft is one of two modified Boeing 747 Airliners that serve as a transport aircraft for the President of the United States. (U.S. Air Force Photo by Josh Plueger/Released)
LONDON — Continued challenges on major fixed-price development programs will “significantly” hamper upcoming second quarter financial results for Boeing’s defense unit , the CEO of Boeing Defense, Space & Security said today.
“We had a good start to the year, but this quarter you’ll see to be significantly challenged. It’ll look like it looked the third quarter of last year,” Ted Colbert told reporters ahead of Farnborough Airshow, which starts Monday.
In the company’s most recent third quarter, margins at Boeing’s defense unit were negative as the company took $553 million in losses on the Air Force One replacement program and MQ-25 tanker drone program, as well as a $315 million loss from operations due to customer considerations on an unspecified space program. Margins for the defense and space unit were positive in the first quarter.
Colbert declined to identify specifically which programs could be driving charges this time around, stating that they would be derived from “a mix of big fixed-price development programs” and operational challenges.
One potential culprit is the VC-25B program to build two new Air Force One jets, which made up the overwhelming bulk of charges in the third quarter of 2023 and has netted more than $2.4 billion in overruns so far. However, observers will also be keeping a close eye on other fixed-price programs with a bumpy history such as the KC-46 tanker, MQ-25, T-7A trainer and NASA’s Starliner.
The Air Force confirmed to Breaking Defense in June that first flight for the inaugural VC-25B has been delayed a further 16 months to March 2025, and further delays are anticipated later this summer when the service projects it will issue a new schedule.
On VC-25B, Colbert said Boeing had made “a ton of investment” in training for its workforce as well as other efforts to improve production efficiency on the factory floor, but acknowledged that the company is still struggling with supply chain and workforce problems, as well as inflation.
“We are still fighting through the challenges of discovery that happened a while ago,” he said, referencing previous issues that included the bankruptcy of a key supplier and errors installing wiring on the jet.
“We just have to slog through,” Colbert said.
