Boeing Air Force One Project: In the third quarter of 2023, Boeing encountered substantial losses of nearly half a billion dollars while working on the new Air Force One presidential jets. These financial setbacks are primarily due to fixed-price contracts that have put pressure on the company. Boeing’s Chief Financial Officer, Brian West, explained that the $482 million loss stemmed from “higher estimated manufacturing costs related to engineering changes, labor instability, and the resolution of supplier negotiations.”
The VC-25B program, which encompasses the presidential plane project, has been plagued by issues such as worker shortages and part deficits, resulting in the postponement of the first Air Force One jet delivery until 2027. To date, Boeing has faced a total loss of over $2.4 billion for this program, far exceeding the originally agreed-upon fixed price of $3.9 billion, as acknowledged by CEO Dave Calhoun.
Calhoun reassured that these financial challenges would not impact the performance or capability of the final product. Nevertheless, he emphasized that fixed-price contracts entail risks, as unforeseen obstacles can lead to unrecoverable costs. The VC-25B program contributed significantly to Boeing’s losses in its defense business, totaling $924 million for this quarter.
A satellite program, with losses amounting to $315 million in the third quarter, was the second-largest contributor to the losses in Boeing’s Defense, Space & Security (BDS) business. While the specific program was not disclosed, it was connected to customer considerations and higher estimated costs for delivering an innovative satellite constellation contract that was signed several years ago.
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To improve the performance and recover its defense business, Boeing outlined various steps, including “lean” initiatives, enhanced contracting processes, and factory improvements. Notably, Boeing aims to address legacy contracts that have been challenging. West mentioned that they have not entered into any fixed-price development contracts and have no intention to do so.
One of Boeing’s ongoing challenges is the KC-46 tanker program, which has already incurred losses exceeding $7 billion. Although the program has faced deficiencies, the U.S. Air Force is considering purchasing an additional 75 KC-46 tankers from Boeing, serving as a bridge until the arrival of the service’s next-generation aerial refueler, NGAS.
Regarding Lockheed Martin’s withdrawal from the next tanker competition, Boeing’s CEO, Dave Calhoun, expressed that it’s a positive development for competition. He noted that Boeing is not surprised by Airbus’ continued participation in the competition.
While facing these financial challenges, Boeing did highlight some positive achievements during the quarter, including the delivery of the first T-7A Red Hawk trainer aircraft to the Air Force and securing a contract with the Army to build 21 AH-64E Apache helicopters.
Our Reader’s Queries
Is Boeing building a new Air Force One?
Boeing’s latest earnings report reveals a loss of $482 million in the construction of two new Air Force One planes. The company cites manufacturing costs that exceeded initial estimates, engineering modifications, labor instability, and supplier negotiations as the reasons for the losses.
Why is Boeing losing money on Air Force One?
The organization has attributed the recent setback in the project to a combination of engineering modifications, workforce instability, and the settlement of discussions with one of its vendors. This has resulted in a loss for the company.
Can you see Air Force One on flight radar?
Occasionally, certain flights may have limited or blocked information due to requests from owners or operators through third-party services like the FAA LADD. It’s worth noting that some well-known aircraft, like Air Force One, may not be visible.
How much is the Boeing VC-25?
The VC-25A comes with a hefty price tag of around $325 million. This aircraft is similar to a standard Boeing 747, with two main decks and a cargo area. However, the 4,000 square feet (370 m2) of floor space has been specially designed for presidential duties. The lower level is primarily used for cargo, including luggage and the onboard food supply.