Boeing Loses Billions Due to Contracts Without Inflation Adjustment

Boeing plunged deep into the red last quarter due to setbacks in its defence branch. This is because, partly due to the high inflation, Boeing had to incur many more costs for various military contracts than it was reimbursed.

In addition, no inflation adjustment had been agreed upon in those contracts.

Defence losses totalled $2.8 billion, while Boeing was short of $3.3 billion across the board. The group has now appointed a problem solver who must put things in order and stop the losses on projects.

The problems with fixed-price contracts have been an issue at Boeing for some time. However, CEO Dave Calhoun acknowledged earlier this year that the company should never have complied with the demands of former US President Donald Trump to lower prices for the latest Air Force One fleet. There, the company is now also dealing with major cost overruns.

The net loss was still $132 million in the same period last year. At the time, the aviation world was still very much weighed down by the severe corona restrictions that applied everywhere. As a result, fewer flights were made at the time, and there was less demand for new aircraft.

In the meantime, the demand for aircraft has improved again. But Boeing struggled to ramp up production for commercial aviation last quarter properly. This was due to shortages of parts and a lack of manpower.

Ultimately, revenues were 4 percent higher than a year ago at nearly $16 billion. However, there are also bright spots in Boeing’s new figures. For example, free cash flow was significantly boosted by the resumption of deliveries of the 787 Dreamliner. That means more money became available to invest in the company or pay off debt.

It is only the second time Boeing has reported positive cash flow since Calhoun took over in early 2020. “The turnaround takes time,” says Calhoun. “We have more work to do. But I have confidence in our team and our actions for the future.” He emphasizes that much effort is also being put into training and hiring new employees.

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