Oct 26 (Reuters) – Boeing Co ( BA.N ) unexpectedly reported deeper third-quarter losses on Wednesday as cost overruns led to heavy losses in its ailing defense business, underscoring the challenge the company faces in turning around its abilities.
The Virginia-based plane maker is struggling to recover from overlapping crises after the pandemic and fatal crashes of its best-selling model left it piled high in debt.
However, rising costs in Boeing’s defense contracts, persistent supply chain constraints and regulatory hurdles have made it harder to maintain its fortunes.
In the quarter through September, the company reported a $2.8 billion charge for its Air Force One and refueling tanker program, among others.
The latest post comes a day after Reuters reported that Boeing had appointed Steve Parker, a senior troubleshooter, to help turn around its defense division’s damaging programs.
Rising cost pressures have hampered fixed-price contracts for US aerospace and defense companies in the past few months, prompting the industry body to appeal to the US Congress to moderate inflation.
Because these contracts have fixed prices, Boeing is obligated to absorb the cost increases. Agency Partners estimates that the firm’s various fixed-price defense contracts have already resulted in $8.8 billion in charges.
“Every quarter people hope that the particular bad news of the program is over, but then we get another installment. maybe this is it? Probably not,” Agency Partners analysts said.
Boeing shares were down 1.7% at $144.55 in morning trading.
The company further cut estimates for 737 MAX deliveries this year. It now expects to deliver 375 aircraft this year, down from the “low 400s” it had previously forecast.
CEO Dave Calhoun said he was confident the planemaker would meet the key deadline for MAX 7 and MAX 10 certification from the US Congress.
The company says that while demand for commercial aircraft remains strong, supply chain constraints continue to challenge the industry.
It singled out jet engine supply delays as a major obstacle to stabilizing production and ramping up production of the 737 jetliner. It called the supply chain a “pivotal watch” for the production and supply of 787 jets in the near future as well.
Boeing expects the supply chain to remain challenged in 2023. To boost production, the company said it has added more than 10,000 employees this year and is investing in training and development to improve productivity.
It maintained its forecast for cash generation this year after reporting free cash flow of $2.9 billion in the September quarter, beating the $1.02 billion analysts had expected in a Refinitiv survey.
Adjusted loss per share widened to $6.18 in the third quarter from $0.60 a year ago. Quarterly revenue rose 4% to $15.96 billion.
Demand in global services, which provides parts and services such as jet conversions, was a bright spot in the quarter to September, with revenue up 5%.
Reporting by Abhijit Ganappavaram in Bengaluru and Rajesh Kumar Singh in Chicago. Editing by Arun Koiyuri, Kirsten Donovan and Nick Zieminski
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