Boeing Reports Larger Loss as Defense Sector Struggles to Recover – Reuters

Boeing reported a significant quarterly loss, primarily driven by challenges in its defense and space sector, which further strained the company already dealing with reduced production of commercial aircraft amid a quality crisis.

The company announced a net loss of $1.44 billion for the second quarter, a stark contrast to the $149 million loss recorded in the same period the previous year. Boeing’s Defense, Space and Security division, a key segment of its operations, has incurred substantial losses over the past two years, with executives citing cost overruns associated with fixed-price contracts as a major factor. While these contracts typically offer high margins, they also expose defense contractors to inflationary pressures, which have adversely impacted corporate earnings across the U.S. recently.

Previously, Boeing aggressively pursued fixed-price contracts before the pandemic but has since shifted its strategy to mitigate losses in this area, which amounted to $1.76 billion last year. Ahead of the Farnborough Air Show last week, the head of the division revealed that it faced significant challenges during the quarter.

Boeing’s CFO indicated in May that the company would experience cash burn in 2024, affected by a decline in jet deliveries compared to the previous year. The manufacturer has been navigating a crisis after an incident involving a cabin panel detaching midair from a 737 MAX 9 in January, prompting a production slowdown for its bestselling aircraft and a shakeup in management amid increasing regulatory and legal scrutiny.

The U.S. aviation regulator has imposed a production cap on 737 MAX jets at 38 per month, despite reports suggesting that Boeing has at times produced at an even lower rate. This situation has resulted in diminished deliveries, which has frustrated customers. In the second quarter, Boeing delivered only 92 aircraft, marking a 32% decrease from the previous year.

In addition, the company is in search of a new CEO, as Dave Calhoun has announced plans to step down by the end of the year.