Despite contending with recurrent safety concerns over its best-selling 737 MAX jetliner, Boeing’s defense business managed to log its smallest loss for the year in the final quarter of 2023. Announced in its 2023 year-end earnings report, the Boeing Defense, Space & Security sector saw a $101 million loss in the fourth quarter, which was the smallest recorded for the year. In contrast, the highest loss was $924 million.
Despite this improvement from the previous quarter, Chief Financial Officer Brian West acknowledged that the defense business’s performance over the year was “worse” than initially expected. The sector has not turned a profit since the final quarter of 2022.
Boeing’s defense portfolio, as West has noted before, consists of three key areas. Firstly, there are well-performing programs like the AH-64 Apache helicopter and munitions which make up 60 percent; secondly, fighters and satellites which contribute 25 percent, and finally, fixed-price development programs such as the KC-46A tanker and VC-25B Air Force One replacement, which form the remaining 15 percent.
These fixed-price development contracts have been viewed as a burden on the portfolio. West pointed out that defense margins as a whole should achieve double-digits when taking into account revenue from the company’s well-performing Global Services division.
Nevertheless, most of the earnings call was consumed by the repercussions of Boeing’s most recent MAX safety crisis triggered by a door plug falling off an Alaska Airlines 737 MAX-9 mid-flight earlier this month. As a consequence, the plane maker’s quality control has come under increased scrutiny. This has led to a freeze in the 737 MAX’s production rate and Boeing withdrawing a waiver to begin service for its 737 MAX-7.
Boeing did not provide a financial forecast for 2024, citing a focus on safety in light of the MAX issues. Chief Executive Officer Dave Calhoun welcomed the extra oversight, contending that “this increased scrutiny, whether it comes from us, from our regulator or from third parties will make us better.”
Their priority remains the safety and quality standards as reflected in Calhoun’s statement, stating “an event like this simply must not happen with an airplane that leaves one of our factories. We simply must be better. Our customers deserve better.”
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