Boeing CEO Dave Calhoun says the company’s deal with Trump to build Air Force One was a risk the company “probably shouldn’t have taken.” The comment was made Wednesday during a conference call to discuss the company’s first-quarter 2022 results, which show the Air Force One program exceeded its expected budget by $660 million in recent months. In a financial file (PDF), Boeing reports that it has now lost $1.1 billion on the deal.
“What I’m just calling Air Force One is a very unique moment, a very unique negotiation, a very unique set of risks that Boeing probably shouldn’t have taken, but we are where we are and we’re going to deliver great aircraft.” And we will recognize the costs involved,” says Calhoun.
Q1 was a “messy quarter” when it came to Boeing’s defense contracts.
In 2018, Boeing reached an agreement with then-President Trump to design and build two new Air Force One aircraft at a fixed price of $3.9 billion. According to Acquisition.gov, on a fixed-price contract for a project, the contractor (Boeing in this case) gets paid the same, regardless of the costs — and potential losses — they incur.
The new deal came after Trump threatened (via tweet, of course) that he would cancel the government’s previous Air Force One order as a cost-cutting measure in 2016. The original project was valued at between $4 and $5 billion. The new agreement also pushed back the timeline for building the plane — Trump apparently wanted it to be ready by 2021 instead of 2024, according to CNN.
Boeing didn’t stick to that schedule, which isn’t very surprising. Since that deal, the company has been rocked by the 737 Max scandal (which resulted in its CEO Dennis Muilenburg being fired and replaced by Calhoun), not to mention a global pandemic.
“We were just beaten in different areas.”
Calhoun said during Wednesday’s call that COVID-19 has been particularly tough on the company’s work on the new Air Force One. “In the defense world, if a COVID line goes down or a group of workers get off, we don’t have a whole bunch of cleared people to follow in their footsteps,” he said, noting the required “ultra-high” security clearances on the president’s plane work. “We were just beaten in different areas.”
He also noted that he does not want to enter into any additional fixed-price contracts and that he has a “very different philosophy” than the company’s previous CEO.
Calhoun says Boeing had a “messy quarter” in terms of government orders, largely because of the Air Force One project. “You will remember that it was a public hearing that took place some time ago. We took some risks not knowing that COVID would hit and not knowing that an inflationary environment would prevail in the way it is now.”
Politico reports that Boeing now plans to deliver the first Air Force One in 2024 and the second aircraft in the year after. However, CNBC reports it could be further delayed, and Boeing’s financial report says it could continue to lose money on the project.
CNBC’s history also includes a 2018 tweet from Boeing that’s what the project (now back over a billion in the hole) calls “outstanding value for taxpayers.” The tweet also says that “President Trump negotiated a good deal on behalf of the American people.” But here’s a question – if Boeing takes heavy losses on the project and writes them off on its taxes, is the general public really better for the supposed savings?
Boeing is proud to build the next generation of Air Force One and offer America’s Presidents a flying White House at an excellent taxpayer price. President Trump negotiated a good deal on behalf of the American people. pic.twitter.com/m0HtGfXVlv
– The Boeing Company (@Boeing) February 27, 2018
One final note: $2 billion per plane is still a staggering amount of money. You know how famous the F-35 is for being obscenely over budget, with the final price expected to be around $1.6 trillion? According to Lockheed, about 800 of these planes have been made so far, which means each one also currently costs about $2 billion, although that number will drop as more planes are made.
However, as my colleague Andrew Hawkins pointed out, Boeing’s Air Force One(s) will likely be very advanced, capable of missile dodge and surviving nuclear fallout and EMPs – there is a price to, as he put it, “the Most to make Toughest, most hi-tech, out-of-this-world jumbo jet in existence.”