Oct 26 (Reuters) – Boeing Co ( BA.N ) unexpectedly reported a deeper third-quarter loss on Wednesday as cost overruns led to heavy losses in its ailing defense sector, underscoring the challenge the company faces in turning around its fortunes .
The Virginia-based airline is struggling to recover from overlapping crises — the pandemic and the grounding of its best-selling model after deadly crashes that left it with a pile of debt.
But rising costs for Boeing’s defense contracts, along with ongoing supply chain constraints and regulatory hurdles, have made it harder to support its assets.
In the quarter to September, the company reported a $2.8 billion charge for its Air Force One program and tanker refueling, among other things.
The latest write-off came a day after Reuters reported that Boeing had appointed chief troubleshooting adviser Steve Parker to help turn around lossmaking programs at its defense unit.
Rising cost pressures have held back fixed-price contracts for US aerospace and defense firms in recent months, prompting an industry body to ask the US Congress for inflation relief.
Since these contracts tend to have fixed prices, Boeing is required to absorb the cost increase. Agency Partners estimates that the company’s various fixed-price defense contracts have already resulted in $8.8 billion in fees.
“Every quarter one hopes that the bad news specific to that program is over, but then we get another installment — maybe this is the One? Probably not,” analysts at Agency Partners said in a note.
Boeing shares were down 1.7% at $144.55 in morning trading.
The company further lowered estimates for 737 MAX deliveries this year. It now expects to deliver 375 aircraft this year, down from its previous target of “low 400”.
CEO Dave Calhoun said he was confident the plane maker would get an extension from the US Congress on a key deadline to get the MAX 7 and MAX 10 certified.
The company said that while demand for commercial aircraft remains strong, supply chain constraints continue to threaten the industry.
He cited jet engine delivery delays as the main limitation in stabilizing and increasing the production rate of 737 jets. She called the supply chain a “key watch item” for the production and delivery of 787 aircraft in the near future.
Boeing expects the supply chain to remain at risk through 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 boost productivity.
It stuck to its forecast for cash generation this year after reporting free cash flow of $2.9 billion in the September quarter, more than the $1.02 billion analysts were expecting in a survey by Refinitiv.
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 the global services business, which provides spare parts and services such as jet rebuilds, was a bright spot in the quarter to September, with revenues up 5%.
Reporting by Abhijith Ganapavaram in Bengaluru and Rajesh Kumar Singh in Chicago; Editing: Arun Koyyur, Kirsten Donovan and Nick Zieminski
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