Boeing released its third-quarter results on Wednesday, and there were promising numbers showing increasing revenues and narrowing losses as the multinational corporation continues its economic recovery.
However, amid these improving results, Boeing’s financials continued to be dragged down by its Defense, Space & Security division. This division, which includes missile production for the military and space activities such as satellites and the Starliner spacecraft, lost $1.7 billion during the first three quarters of this year.
In a conference call with analysts on Wednesday, Boeing’s chief executive, David Calhoun, and chief financial officer, Brian West, expressed disappointment in these results from the defense and space division. They reiterated their goal of returning the company’s defense and space businesses to profitability by the 2025 to 2026 period.
Notably, the pair pinned the blame for performance by its defense and space division, referred to internally as BDS, on fixed-price contracts. As the BDS division seeks a return to profitability, West said Boeing will not be using fixed-price contracts anymore.
Blaming fixed-price contracts
“Perhaps most importantly, we instituted much tighter underwriting standards,” he said. “As you know, part of the challenge we’re dealing with are legacy contracts that we need to get out from under. Rest assured, we haven’t signed any fixed-price development contracts, nor intend to. These moves are all fundamental to accelerating recovery by the 25-26 time frame.”
Boeing has several lines of business within the BDS division. West said Boeing’s missile programs are doing well, especially with the state of conflict in the world. However, the company has lost hundreds of millions of dollars on satellite-building programs.
“In these areas we took on fixed-price production contracts in a pre-pandemic environment with real technical innovation that we’re working our way through,” West said.
The company has both commercial and government satellite-building businesses. For example, it is building 11 satellites for the O3b satellite constellation in medium-Earth orbit, as well as working on other commercial satellites. In 2019, the company also received a $605 million fixed-price contract from the US Air Force to build a Wideband Global Satellite Communication satellite.