Storm clouds gather behind the logo of Boeing at the 2023 Paris Air Show. (Aaron Mehta/Breaking Defense)
WASHINGTON — Boeing’s numerous fixed-price contracts with the Pentagon continue to drag on its defense sector, which recorded a loss of $527 million in the second quarter of 2023, the company disclosed in its earnings call today.
Similar to previous quarters, Boeing’s overall portfolio continued to lose money, but it wasn’t all bad news for investors. The company’s core loss per share of 82 cents beat some analyst’s expectations, and deliveries of the KC-46A tanker that were paused over a supplier quality issue have now resumed, according to Chief Executive Officer Dave Calhoun.
Still, the industry titan continues to struggle with its fixed-price defense contracts that have hemorrhaged losses, blamed in part on inflation and supply chain constraints that have pushed costs higher. And developmental woes for some programs continue as well.
The largest loss from Boeing’s Defense, Space & Security (BDS) business disclosed this quarter, at $257 million, came from the troubled Starliner program for NASA. The Starliner’s original launch with humans on board set for earlier this month has been indefinitely postponed due to safety issues announced in June.
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“We’re in lockstep with our customer. We prioritize safety and we’re taking whatever time is required,” Calhoun said of the Starliner program.
The second largest loss of $189 million stemmed from supply chain and production cost issues with the T-7A trainer aircraft, which Calhoun said “was not due to any performance challenge within the quarter.” Boeing has begun ordering long-lead parts in lieu of a production contract for the training jet to combat a series of delays and rising losses. The plane celebrated its first flight with the Air Force last month.
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Finally, the company’s MQ-25 Stingray air refueling drone recorded a charge of $68 million due to “schedule pressure,” Calhoun said, adding that the company is about 25 percent of the way through the build of the first MQ-25. The Navy recently pushed back the drone’s initial operational capability date by nearly a year to mid-2026.
The losses for the company’s defense sector were expected after the division’s chief, Ted Colbert, previously warned reporters they would be coming ahead of the Paris Air Show. And though charges have come down from some previous whopping highs, Chief Financial Officer Brian West said it may be several more years until the sector turns a profit.
“Looking at BDS in aggregate, it will take time to return to normalized levels of performance. We’re confident and we’re focused on the path to high single digit margins in 2025-2026,” he said.
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Boeing defense unit logs over $500M in losses for Q2, though KC-46 deliveries resume - Breaking Defense
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