Boeing Defense, Space & Security Improves Revenue and Narrows Loss in 2023

Boeing’s headquarters. Photo: Boeing

Revenue for Boeing Defense, Space & Security (BDS) increased 8% in 2023 compared to 2022, and the segment narrowed its net loss as it works to improve operating margin, particularly on satellite programs. 

BDS revenue was about $25 billion in 2023, compared to $23 billion in 2022, according to Boeing’s fourth quarter results released on Wednesday. 

BDS loss from operations in 2023 was $1.8 billion, compared to $3.5 billion in 2022, which Boeing said was primarily due to fewer charges on fixed-price development programs, offset by lower earnings on satellite programs and the F-15 aircraft.  

BDS recorded $1.6 billion in losses on five fixed-price development programs in 2023, which is less than the $4.4 million in charges from 2022. The charges were on programs for various military aircraft and Commercial Crew for NASA. BDS logged $288 in charges for Commercial Crew in 2023, mostly in the second quarter. The Commercial Crew program has pushed back plans for a crewed flight test multiple times, and NASA and Boeing are now targeting mid-April. 

BDS took $139 million in charges to fixed-price development programs in the fourth quarter but did not specify which programs the charges were attributed to. 

The loss from operations in 2023 also includes the $315 million charge on a satellite program disclosed last quarter. Boeing did not name the satellite customer, but Boeing is the manufacturer for SES’s O3b mPOWER Medium-Earth Orbit (MEO) constellation, which has issues with the power modules on the satellites. In October, SES detailed a reworked contract with Boeing to upgrade five of the remaining satellites and add two new satellites to the constellation, sharing risk and CapEx.  

BDS delivered more satellites in 2023 than 2022, reporting five commercial satellite deliveries in 2023, compared to four in 2022. There were no military satellite deliveries in 2023. 

BDS operating margin in 2023 was -7.1%, an improvement over -15.3% in 2022. Boeing leadership is working to get the BDS segment back to high-single digit margins by the 2025/2026 timeframe. 

According to CFO Brian West, fighter aircraft and satellite programs make up about 25% of the portfolio where Boeing needs to improve margins. He told investors on Wednesday that the core business remains solid, representing 60% of BDS revenue and performing in the mid- to high-single digit margin range. Fixed-price development programs make up 15% of the portfolio, where Boeing is focused on maturing the programs and retiring risk. 

“On the 25% of the portfolio, primarily comprised of fighter and satellite programs, operational performance stabilized as we exited the year. As a result, the fourth quarter saw improved margin trends, although still negative,” West said. “We still expect to return to the strong historical performance levels as we roll in new contracts with tighter underwriting disciplines and we move into the 2025/2026 timeframe.”

West said the Defense portfolio is poised to improve. “The strong demand across the customer base, the products that perform in this field, and we’re confident that our efforts to drive execution and stability will return this business to performance levels that our investors recognize,” he said. 

Backlog for BDS is now at $59 billion. 

While Boeing reported full year 2023 financial results on Wednesday, the company’s financial call with investors was dominated by the issue on a Alaska Airlines Flight when a panel on the plane popped off mid-flight. CEO David Calhoun said Boeing is responsible for the issue and described “tough” conversations with customers and regulators in the wake of the incident. 

Boeing reported full-year revenue of  $77.8 billion, up 17% year-over-year with improved commercial volume, primarily higher 787 Dreamliner airplane deliveries. Net loss was $2.2 billion, compared to $5 billion in 2022. 

Boeing delivered 528 commercial airplanes in 2023 and recorded 1,576 net orders. Total company backlog grew to $520 billion, including over 5,600 commercial airplanes. 

“Our full focus is on taking comprehensive actions to strengthen quality at Boeing, including listening to input from our 737 employees that do this work every day,” Calhoun said. “As we move forward, we will support our customers, work transparently with our regulator and ensure we complete all actions to earn the confidence of our stakeholders.”