Boeing revealed on Wednesday that it has lost $1.1 billion in costs connected to its deal with the Trump administration to convert two 747 jumbo planes to serve as Air Force One — and CEO Dave Calhoun said the aviation giant “probably” should not have cut the deal in the first place.
Boeing cautioned in a regulatory filing that more losses on the Air Force One deal could occur in future quarters.
The official designation for any plane transporting the President of the United States is Air Force One.
“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 reported a net loss of $1.2 billion for the first quarter, including a $660 million charge related to delays and higher costs for the Air Force One programme.
The first-quarter charge on the Air Force One programme raises the overall loss associated with it to more than $1.1 billion, according to the business.
“Risk remains that we may be required to record additional losses in future periods,” Boeing said in a securities filing.
Boeing’s contract for the Air Force One planes was signed in February 2018 by then-CEO Dennis Muilenburg and then-President Donald Trump.
Any cost overruns in the modification of the two Boeing 747 jets must be borne by Boeing, not the federal government.
Boeing will be paid approximately $4 billion for the work under that fixed-price contract. The first of the two planes was supposed to be delivered in 2024, but according to an Air Force budget request released earlier this month, that won’t happen until 2026.
Boeing spoke positively about the move four years ago.
“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 jets would ditch the typical baby blue colour scheme of Air Force One in favour of “red, white, and blue, which I think is fitting.”
“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.”
Trump complained on Twitter a month after being elected president in November 2016 about the “out of control” price of Boeing’s then-deal to build a new Air Force One.
“Cancel order!” Trump tweeted at the time.
He then boasted that his discussions with Muilenburg saved taxpayers $1.5 billion.
Muilenburg was sacked as CEO of Boeing in December 2019 for his handling of two 737 Max plane crashes that killed 346 people.
He was not given a severance package, but received $60 million in pension benefits and company stock, according to a statement released by Boeing a month after he was fired.
(Adapted from Forbes.com)
Categories: Economy & Finance, Geopolitics, Strategy, Sustainability, Uncategorized
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