Oct 26 (Reuters) – Boeing Co ( BA.N ) on Wednesday unexpectedly reported a deeper third-quarter loss as cost overruns led to heavy losses at its ailing aerospace business, underscoring the challenges it faces the company in recovering its wealth.
The Virginia-based aircraft manufacturer is trying to emerge from a conflicting crisis – the pandemic and the construction of its most expensive model after a fatal crash, which has left it in debt.
However, rising costs of Boeing’s defense contracts along with ever-increasing supply chain constraints and regulatory hurdles have made it tougher to maintain its fortunes.
In the quarter through September, the company reported a $2.8 billion charge on Air Force One and the fuel tank program, among others.
The latest write-off comes a day after Reuters reported that Boeing had appointed senior exec Steve Parker to help overhaul its defense group’s losing programs.
Rising costs in recent months have hampered fixed-price contracts for U.S. aerospace and defense companies, prompting one company to petition the U.S. Congress for cost relief. life.
Because these contracts have a fixed price, Boeing is required to cover price increases. Agency Partners estimates that the firm’s various fixed-price security contracts have already generated $8.8 billion in charges.
“Each quarter we expect the end of bad news about the program, but then we get another part – maybe this? Maybe not,” said analysts at Agency Partners in a note.
Boeing shares were down 1.7% at $144.55 in morning trading.
The company has cut estimates for 737 MAX deliveries this year. It expects to deliver 375 aircraft this year, below its previous target of “low 400s”.
Chief Executive Officer Dave Calhoun said he is confident the planemaker will get an extension from the US Congress to get the MAX 7 and MAX 10 certified.
The company said that while demand for commercial aircraft remains strong, supply constraints continue to weigh on the industry.
He identified delays in jet engine deliveries as the number one obstacle to stabilizing and increasing production rates for the 737. He called the supply chain a “critical area of concern” in the near term. also for the production and delivery of 787 aircraft.
Boeing expects supply challenges to continue through 2023. To increase production, the company said it has added more than 10,000 workers this year and is investing in training and development to improve productivity. .
It maintained its earnings forecast for this year after reporting free cash flow of $2.9 billion in the September quarter, higher than the $1.02 billion expected by analysts in a survey. Refinitiv.
Adjusted loss per share in the third quarter widened to $6.18 from $0.60 a year ago. Quarterly revenue rose 4% to $15.96 billion.
Demand from global service companies that provide parts and services such as aircraft changes was a bright spot in the quarter to September, rising 5%.
Reporting by Abhijith Ganapavaram in Bengaluru and Rajesh Kumar Singh in Chicago; Editing by Arun Koyyur, Kirsten Donovan and Nick Zieminski
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