Boeing Co has unexpectedly reported a deeper loss in the third quarter of 2022 as cost overruns led to heavy losses at its ailing defence business, underscoring the challenge the company faces in turning around its fortunes.
The planemaker, based in Virginia in the United States, is trying to emerge from overlapping crises: the COVID-19 pandemic and the grounding of its best-selling model after fatal crashes, which have left it with a pile of debt.
However, a run-up in costs in Boeing’s defence contracts along with persistent supply-chain constraints and regulatory hurdles have made it tougher to shore up its fortunes.
In the quarter through September, the company reported on Wednesday a $2.8bn charge on its Air Force One and refueling tanker programme, among others.
The latest write-down came a day after Reuters reported Boeing has appointed senior troubleshooter Steve Parker to help turn around loss-making programmes in its defence unit.
Rising cost pressures over the last few months have hampered fixed-price contracts for US aerospace and defence firms, prompting an industry body to ask the US Congress for inflationary relief.
Since these contracts tend to have fixed prices, Boeing is required to absorb cost increases. Agency Partners estimates the company’s various fixed-price defence contracts have already resulted in $8.8bn of charges.
“Every quarter, one hopes that the program specific bad news has come to an end, but then we get another installment – maybe this is It? Probably not,” analysts at Agency Partners said in a note.
Boeing’s shares were down 1.7 percent at $144.55 in morning trading.
The company further cut estimates for 737 MAX deliveries this year. It now expects to deliver 375 planes this year, lower than an earlier target of the “low 400s”.
Chief Executive Dave Calhoun said he is confident the planemaker will get an extension from the US Congress of a key deadline to get the MAX 7 and MAX 10 certified.
The company said while demand for commercial planes remains strong, supply-chain constraints continue to challenge the industry.
It singled out delays in jet engine deliveries as the primary constraint in stabilising and increasing production rates for 737 jets. It called the supply chain “a key watch item” in the near term for the production and deliveries of 787 jets.
Boeing expects its supply chain to remain challenged over the course of 2023. To ramp up 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 retained its forecast of generating cash this year after reporting a free cash flow of $2.9bn in the September quarter, higher than the $1.02bn expected by analysts in a Refinitiv survey.
Adjusted loss per share in the third quarter widened to $6.18 from $0.60 a year ago. Quarterly revenue rose 4 percent to $15.96bn.
Demand at the global services business that provides spare parts and services such as jet conversions was a bright spot in the quarter through September, with revenue rising 5 percent.