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Cost overruns lead to an unexpected deep loss for Boeing | Business and Economy News

The plane maker is trying to emerge from the overlapping crises of COVID-19 and the underpinnings of its best-selling model.

Boeing Co unexpectedly reported a deeper loss in the third quarter of 2022 as cost overruns led to heavy losses in its ailing defense business, underscoring the challenge the company faces in managing turn of fortune.

The aircraft manufacturing company, based in Virginia, USA, is trying to emerge from the overlapping crises: the COVID-19 pandemic and the foundation of its best-selling model after deadly collisions, left it with a pile of debt.

However, rising costs in Boeing’s defense contracts coupled with persistent supply chain constraints and regulatory hurdles have made it harder to consolidate its fortunes.

For the quarter through September, the company reported on Wednesday a $2.8 billion charge for its Air Force One and refueling program, among others.

The latest text comes a day after Reuters reported Boeing had appointed senior troubleshooting expert Steve Parker to help turn around loss-making programs in its defense unit.

Rising cost pressures over the past few months have hampered fixed-price contracts for US aerospace and defense companies, prompting an industry body to ask Congress for an inflation relief.

Since these contracts tend to have fixed prices, Boeing is forced to accept the increase in costs. Agency Partners estimates the company’s various fixed-price defense contracts resulted in the $8.8 billion charge.

“Every quarter, one person hopes that the show’s specific bad news is over, but then we get another installment – maybe this is It? Probably not,” analysts at Agency Partners said in a note.

Shares of Boeing fell 1.7% to $144.55 in morning trading.

Supply chain delays

The company further slashed its 737 MAX delivery estimates for this year. The airline now expects to deliver 375 aircraft this year, down from its previous target of “400 low-flying aircraft”.

CEO Dave Calhoun said he was confident the plane maker would get a key deadline extension by the US Congress for MAX 7 and MAX 10 certification.

The company said that while demand for commercial aircraft remains strong, supply chain constraints continue to challenge the industry.

It points to delays in jet engine deliveries as the main constraint on stabilizing and increasing production rates for the 737 jets. It calls the supply chain “a key watch item” in the near term to the production and delivery of 787 jets.

Boeing expects its supply chain to remain challenging throughout 2023. To ramp up production, the company said it has added more than 10,000 employees this year and is investing in training and developed to increase productivity.

It kept its cash generation forecast for this year after reporting free cash flow of $2.9 billion in the September quarter, well above the $1.02 billion expected by analysts. in a survey by Refinitiv.

Adjusted loss per share for the third quarter increased to $6.18 from $0.60 a year ago. Quarterly revenue grew 4% to $15.96 billion.

Demand at the global services business that provides parts and services such as jet conversions was a bright spot in the quarter through September, with revenue up 5%.



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