WASHINGTON — Boeing has incurred a $280 million charge on the troubled VC-25B program, the company announced today during its second quarter results, pushing total losses the global aerospace manufacturer has suffered on the planned Air Force One replacement north of $3 billion for the first time.
Boeing attributed the charge to “an investment in additional production and certification resources,” which CEO Kelly Ortberg said would help mitigate potential risks as the aircraft moves into flight testing.
“While the charge is disappointing, we recognize how critical schedule performance is to our customer and we are investing accordingly to maintain our commitment to deliver the airplane in 2028,” Ortberg said. “This shouldn’t overshadow all the meaningful progress we’re making to reduce the risk across our defense portfolio, and we are in much better shape than we were two years ago.”
Boeing is financially responsible for covering all cost overruns on the program as part of the firm, fixed price deal agreed to by President Donald Trump in 2018, which set a $3.9 billion ceiling for the effort. However, the program has been mired in technical and workforce challenges that have set the program back from its original 2024 delivery date.
Operating margins for Boeing’s defense unit were negative in the second quarter as a result of the VC-25B charge, but CFO Jay Malave told investors he remains confident that the unit will return to high single-digit margins by the end of the decade.
The charge is not altogether surprising. Last week, ahead of Farnborough Airshow, Steve Parker, Boeing’s defense CEO, told reporters the company projected future losses on VC-25B to keep the aircraft on track for the 2028 delivery date.
At the time, Parker declined to comment on when Boeing would log those charges, citing the silent period that occurs in the weeks before a company releases its earnings. However, he added that it had begun the process of modifying aircraft, with the intent to begin testing next year on the first VC-25B. Boeing is slated to upgrade and deliver two of the aircraft.
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“Our focus is making sure that we get these aircraft right, safe to operate, [and that] they meet every technical specification,” Parker said. “And we won’t compromise anything.”
The Air Force told Breaking Defense in December that the service had awarded Boeing a $15.5 million contract modification for communications equipment that will be integrated on the presidential airlifters, bringing the cumulative value of the deal to just over $4.3 billion. The new work, the spokesperson said then, would be accomplished “within the current program schedule,” where the first aircraft is projected to arrive “in mid-2028.”
The Air Force One program is one of several fixed-price development efforts where Boeing bid aggressively low to win the contract and has since racked up billions in cost overruns.
Asked during an earnings call about the other oft-challenged fixed price programs — which include the KC-46 tanker, MQ-25 tanker drone, T-7 trainer jet and NASA’s Starliner vehicle — Ortberg said the KC-46 appears to be at a “very low risk” of cost overruns as Boeing comes to the end of its current contract and is able to negotiate new terms with the US Air Force.
MQ-25 and T-7 have “normal risks” but no particular problems that Ortberg identified during the call, with the Boeing CEO pointing to Starliner as the program where the company needs to do more work to lower the risk of future charges.
“We’ve got to work with NASA to align on how the launches are going to be—both the crewed and uncrewed launches going forward,” Ortberg said. “I don’t at this time anticipate that’s going to create a cost problem for us, but we do have some uncertainty here.”
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