- Boeing has lost a total of $1.1 billion so far on costs associated with a deal to modify two 747 jumbo jets to serve as Air Force One.
- CEO Dave Calhoun said Boeing “probably shouldn’t have taken” risks from the deal for the planes, which was negotiated with then-President Donald Trump in 2018.
- Boeing reported a net loss of $1.2 billion for the first quarter of 2022, with a charge of $660 million associated with delays and higher costs for the Air Force One program.
- Boeing’s deal for Air Force One, which was cut by then-CEO Dennis Muilenburg requires the company, not the federal government, to eat the costs of any overruns on the contract.
Boeing disclosed Wednesday that it has lost a whopping $1.1 billion in costs related to its deal with the Trump administration to modify two 747 jumbo jets to serve as Air Force One — and CEO Dave Calhoun admitted the aviation giant “probably” should not have cut the deal in the first place.
Even more losses on the Air Force One contract could be coming in future quarters, Boeing warned in a regulatory filing.
Air Force One is the official designation for any plane carrying the president of the United States.
“Air Force One I’m just going to call a very unique moment, a very unique negotiation, a very unique set of risks that Boeing probably shouldn’t have taken,” Calhoun said on a call with analysts.
“But we are where we are, and we’re going to deliver great airplanes,” Calhoun said, shortly after Boeing reported a loss for the first quarter of 2022.
“And we’re going to recognize the costs associated with it.”
Boeing on Wednesday disclosed a net loss of $1.2 billion for the first quarter, with a charge of $660 million associated with delays and higher costs for the Air Force One program.
The company said the first-quarter charge on the Air Force One program brings the total loss tied to it to more than $1.1 billion.
“Risk remains that we may be required to record additional losses in future periods,” Boeing said in a securities filing.
Boeing’s deal for the Air Force One jets was cut by then-CEO Dennis Muilenburg and then-President Donald Trump in February 2018.
It requires Boeing, not the federal government, to eat any overruns in the cost of modifying the two Boeing 747 jets.
Under that fixed-price contract, Boeing is being paid about $4 billion for the work. The first of the two planes was set to be delivered in 2024, but an Air Force budget proposal from earlier this month doesn’t expect that until 2026.
Trump in 2018 bragged that “Boeing gave us a good deal. And we were able to take that.”
Four years ago, Boeing spoke favorably about the move.
“Boeing is proud to build the next generation of Air Force One, providing American Presidents with a flying White House at outstanding value to taxpayers,” it tweeted in February 2018. “President Trump negotiated a good deal on behalf of the American people.”
Trump also told CBS News that the planes would get rid of Air Force One’s traditional baby blue color scheme in favor of “red, white and blue, which I think is appropriate.”
“Air Force One is going to be incredible,” Trump said at the time. “It’s going to be top of the line, the top of the world.”
A month after being elected president in November 2016, Trump had griped on Twitter about the “out of control” costs of Boeing’s then deal to build a new Air Force One.
“Cancel order!” Trump tweeted at the time.
He later boasted that his negotiations with Muilenburg saved $1.5 billion for taxpayers.
Boeing fired Muilenburg as CEO in December 2019 for how he handled two crashes of the company’s 737 Max jets that killed 346 people.
He was denied a severance package, but received $60 million in pension benefits and company stock, Boeing said a month after he was ousted.
Source: Business - cnbc.com
