Boeing Defense, Space, and Security Dips 20% in Third Quarter
Boeing’s Defense, Space, and Security segment saw a 20% decline in the third quarter of 2022 compared to the same time period of 2021 due to losses on military aircraft programs and the Commercial Crew program.
It was a tough quarter for the segment, and Boeing logged $2.8 billion of losses on certain fixed-price development programs, citing higher estimated manufacturing and supply chain costs, as well as technical challenges. Losses were recorded on the KC-46A, VC-25B, MQ-25, T-7A and Commercial Crew programs. The results were also impacted by “unfavorable performance on other programs,” Boeing said.
In the full financial report, Boeing said it increased its reach-forward loss during the quarter by $195 million for the Commercial Crew program for NASA. This reflects increases to estimated costs for completing the crewed flight tests and revised schedules for both the crewed flight test and three post certification missions.
Boeing said it previously assumed that post certification missions would be completed by 2024, but NASA’s revised launch plans assume they will be completed by 2026. This increased the reach-forward loss for the quarter. Boeing successfully completed the uncrewed Orbital Flight Test for the Starliner crew capsule in the second quarter.
The Defense, Space, and Security segment reported $5.3 billion in revenue in Q3, down from $6.6 billion in the same time last year. The operating margin also decreased to -52.7%, compared to 6.6% percent in the same time last year.
A bright spot was two satellite deliveries during the quarter — SES-20 and SES-21 — the first satellites Boeing delivered since early 2020.
Backlog at Defense, Space & Security stands at $55 billion, with 31% from customers outside of the U.S.
Overall, the company logged a 4% increase in income during the quarter, reporting about $15.96 billion in revenue. Dave Calhoun, Boeing president and CEO said revenue and earnings were significantly impacted by losses on fixed-price defense development programs.
“We believe that the charges we took are meant to complete these contracts, ultimately to deliver them to satisfied customers in the Air Force and Armed Forces,” Calhoun said on a Wednesday call with investors. “We’re not embarrassed by them, they are what they are. We intend to deliver against these contracts and satisfy our customers.”
Boeing is dealing with the same supply chain, inflation, labor shortage challenges that other companies are also facing and these challenges are reflected in the fixed price charges, Calhoun said. He expects the supply chain challenges to continue in 2023, but emphasized demand is strong.