Boeing Expects More Defense Losses, Addressing Fixed-Price Program Issues

LE BOURGET—Boeing’s defense unit expects to report additional losses for the second quarter of this fiscal year as it works through continued struggles on major firm-fixed-price development contracts and looks ahead to growth in Europe and increased space business.

Boeing Defense and Space CEO Ted Colbert told reporters ahead of the Paris Air Show here June 18 that the second quarter will look like the earnings of the first, which included a $212 million operational loss on $6.54 billion in revenue, in part due to another $245 million charge on the KC-46 tanker program.

“We’ve got work to do across our programs, compared to where we are,” Colbert said.

Overhauling Boeing’s defense programs has been a major task for Colbert, who took over the unit in spring 2022. Last fall, he trimmed its eight business divisions down to four as a way to streamline operations and oversight.

For the major developmental programs, Colbert says Boeing is focused on addressing deficiencies and improving performance where needed. For example, KC-46 tanker deliveries are still on hold as Boeing and supplier Daher address an issue with a surface coating nonconformance on center-wing fuel tanks. Colbert did not provide a date for when deliveries would resume, though flight testing has restarted. Boeing still is committed to delivering a full slate of 15 aircraft this year, though just one has been sent to the U.S. Air Force so far.

The company’s T-7 trainer, also for the U.S. Air Force, has faced issues with its egress system that have delayed the start of engineering and manufacturing development tests. The Air Force and Boeing have received a waiver to start flights with military pilots, expected to begin soon.

Colbert said the company broadly has slowed the churn in its workforce, with attrition down. “All the indications of a more sort of stable workforce are beginning to come to fruition, which helps us with performance,” he says. Supply chain kinks are working out as well, which Colbert said will help with stability.

“The performance will look like the first quarter. There’s a ton of activity going on to improve our performance over the next couple of quarters in the next year or so,” he said. “So it just takes time. We can’t do it fast enough for ourselves, and obviously for our customers. I believe we’ve got all the right actions in progress.”

While the top fixed-price contracts—KC-46, T-7, the uncrewed MQ-25 refueling tanker for the U.S. Navy and the Starliner crewed space capsule—are all in the red, Colbert said Boeing is still investing in improving their performance because they are significant to the company. But going forward, the company has said it wants to avoid these types of contracts to not have a repeat of the losses.

“There was recognition that doing big, fixed-price development programs on very, very complex capabilities or capabilities that require a lot of maturity from either an engineering or manufacturing perspective can be very, very challenging, and so we are working very hard with the acquisition community and the Pentagon to be smart about every next program that we have together,” Colbert said.

The ongoing war in Ukraine is driving investment in Europe, and Boeing is responding by ensuring it has strong supply chains and workforce to have the capacity to respond to new requirements, Colbert said. A growth area here is in autonomy, as Boeing works to mature systems such as the MQ-28 Ghost Bat uncrewed aircraft it developed in Australia and the MQ-25. While in the early stages, these could build the base for international programs as requirements emerge, he said.

“The world is interested in autonomy right now, and I think that the sort of future operational approach to flight includes some degree of autonomy,” he said. “Over time, as we work together better around the world, whether its export, bidirectional or [intellectual property] opportunities … I think we’re still in development, and we’ve got a lot to see and a lot to prove, and we’ll see where it goes.”