The results of U.S. aircraft maker Boeing have been hobbled by the project to modify the presidential plane, "Air Force One." Civil aircraft production and deliveries showed a recovery, but as the Air Force One program fell four years behind schedule, related expenses have continued to swell.
Boeing posted a net loss of $428 million in the second quarter of this year. According to foreign media including the Financial Times (FT), Boeing reflected an additional expense of $280 million from the Air Force One modification project in its results.
Boeing, during Donald Trump's first term as U.S. president in 2018, signed a $3.9 billion contract with the U.S. government for the next-generation Air Force One. The project modifies two existing Boeing 747-8 passenger jets into presidential aircraft by installing communications and defense equipment.
Trump at the time negotiated directly with Boeing to lower the contract amount. The problem is that the contract was signed on a "fixed price" basis, meaning that even if additional expenses occur, Boeing, not the U.S. government, bears most of them.
FT reported that as parts costs and labor costs rose and the modification work became more complex, the expense far exceeded initial expectations. The delivery timing for the new Air Force One was also delayed by about four years from the plan. Boeing is at risk of shouldering additional expenses amounting to several billion dollars beyond the contract value.
Dave Calhoun, former Boeing chief executive officer (CEO), said in 2022 that the contract "included very unique risks that Boeing probably should not have taken on."
Unlike the Air Force One program, the civil aircraft sector maintained its recovery. Boeing's second-quarter revenue was $24.6 billion, and free cash flow was $631 million. Free cash flow refers to the cash left after a company spends money needed for operations and capital expenditures.
Civil aircraft deliveries increased from 143 in the first quarter this year to 171 in the second quarter. That is the highest quarterly delivery count since 2018. The operating margin of the commercial aircraft sector also improved from minus 5.1% in the same period last year to minus 2.7%. It is still in the red, but the loss has narrowed.
Earlier, Boeing faced tighter regulation and production disruptions after the 737 Max crashes in 2018 and 2019. In 2024, an Alaska Airlines 737 Max passenger plane suffered an in-flight incident in which a door plug blew off.
Kelly Ortberg, Boeing's CEO, said of the additional losses related to Air Force One, "This setback should not obscure the progress we have made to reduce risk in the defense business," adding, "Boeing's situation is much better than it was two years ago."
Ortberg added, "Demand for defense and space products is strong, centered on missiles and munitions and secure communications satellites."
Boeing maintained its outlook that full-year free cash flow will be positive this year. If the outlook holds, it will achieve a full-year free cash flow surplus for the first time since 2023.
Robert Stallard, an analyst at Vertical Research Partners, said, "It is unwelcome news that expenses have emerged again in the defense sector," but added, "Investors will view positively that second-quarter free cash flow returned to the black."