Boeing reports unexpected loss after being hit by Air Force One and Starliner programs

New York
CNN Business
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Boeing announced an unexpected third-quarter loss on Wednesday after taking a massive $2.8 billion charge related to its high-profile defense and space businesses, including the completion of new versions of Air Force One and its much-delayed Starliner space capsule.

The company also continued to report losses from its core business jet unit, even with increased deliveries boosting the company’s revenue in an otherwise disappointing red ink quarter.

The charges in the defense and space sectors were for contracts where Boeing collects a fixed amount of revenue from its government customers and is unable to pass on cost increases.

These programs include the refurbishment of two 747 jets that will become the next generation of Air Force One. Delivery of these aircraft was again delayed during the quarter and will not be completed for at least four years.

The company is paid $3.9 billion for the jets and has already covered $660 million for aircraft losses in the first quarter of this year. CEO Dave Calhoun said at the time that the contract was a mistake for the company.

Another source of funding came from the Starliner program to build capsules to transport astronauts to the International Space Station. In August, Boeing pushed back the long-delayed project’s first crewed flight to early next year. The load also included a training jet for Air Force pilots as well as tanker planes and drones used to refuel planes mid-flight.

The charge resulted in an operating loss of $2.8 billion for the defense and space unit, compared with a profit of $436 million last year. Boeing did not specify how much of the latter charge was tied to each program.

The commercial aircraft business delivered 112 planes in the quarter, down from 85 a year ago, including the resumption of 787 Dreamliner deliveries, which were halted by the Federal Aviation Administration due to quality control issues . These increased deliveries helped lift revenue 4% to $16 billion, helping Boeing be cash flow positive in the quarter. But the commercial aircraft unit reported an operating loss of $643 million.

“While our cash generation was strong, our revenues and earnings were significantly impacted by losses on fixed price development programs in our defense business, due to estimated manufacturing and supply chain costs. higher, as well as technical challenges, » Calhoun said in a statement. to employees.

Boeing announced a net loss of $3.3 billion, much worse than the $132 million hit a year ago. The company had returned to profitability in the second quarter, with net profit of $160 million, and analysts polled by Refinitiv had forecast another net profit of $347 million.

The company posted a base operating loss of $3.1 billion, compared with narrow operating profit of $59 million a year earlier and profit of $490 million on that basis in the second quarter of this year. Analysts had expected a core operating profit of $648 million rather than a massive loss.

The company said it should still be cash flow positive for the year despite all the issues, which likely kept the stock from plunging on the report. Shares of Boeing (BA), a component of the Dow Jones Industrial Average, were mostly flat in early trading on Wednesday.