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 on Wednesday during a conference call to talk about the company First Quarter 2022 Results, showing that the Air Force One program ran $660 million over its expected budget in recent months. In a financial presentation (PDF), Boeing reports that it has now lost $1.1 billion on the contract.
“I’m going to call Air Force One 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 planes.” . And we’re going to recognize the cost associated with it,” says Calhoun.
In 2018, Boeing reached an agreement with then-President Trump to develop and build two new Air Force One planes for a fixed price of $3.9 billion. According to acquisition.govA firm fixed-price contract is where the contractor (in this case, Boeing) is paid the same for a project regardless of the costs, and potentially, the losses, they incur.
The new deal came after Trump threatened (via tweet, of course) to cancel previous government Air Force One order as a cost-cutting measure in 2016. The original project was estimated to cost between $4 and $5 billion. The new deal also changed the timetable for building the plane: Trump apparently wanted it done by 2021, rather than 2024. according to CNN.
Boeing missed that timeline, which isn’t terribly surprising. Since that deal was made, the company has been rocked by Scandal 737 Max (leading to CEO Dennis Muilenburg being fired and replaced by Calhoun), not to mention a global pandemic.
Calhoun said during Wednesday’s call that COVID-19 had been especially hard on the company’s work on the new Air Force One. “In the defense world, when a COVID line goes down or a group of workers walks out , we don’t have a bunch of people cleared to put themselves in their shoes,” he said, noting the “ultra-high” security clearances required. to work on the president’s plane. “They just hit us in several different areas.”
He also noted that he did not want to take on any additional fixed-price contracts and that he had a “very different philosophy” on the matter compared to the company’s previous CEO.
Calhoun says that when it comes to government contracts, Boeing had a “messy quarter” in large part because of the Air Force One project. “You’ll remember that was a public deal that happened quite some time ago. We took some risks not knowing that COVID would come and not knowing that an inflationary environment would take hold as it has.”
politician is reporting that Boeing now plans to deliver the first Air Force One in 2024 and the second plane the following year. CNBC, however, reports that could be further delayed, and Boeing’s financial statement says it may continue to lose money on the project.
The CNBC story also includes a Boeing’s 2018 Tweet that calls the project (which, again, now has more than $1 billion in the hole) an “exceptional value to 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 is taking huge losses on the project and writes them off on their taxes, is the general public really better off for the supposed savings?
Boeing is proud to build the next generation of Air Force One, providing American presidents with a flying White House at an exceptional value for taxpayers. 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 an incredible amount of money. You know how the F-35 is famous for being obscenely over budget, and the final price is expected to be about $1.6 trillion? Up to this point, lockheed says About 800 of those planes are made, which means each also currently costs about $2 billion, though that figure will drop as more planes are made.
Like my colleague Andrew Hawkins has pointed outHowever, Boeing’s Air Force Ones are likely to be highly advanced and capable of dodging missiles and surviving radioactive fallout and EMPs; there’s a cost to making it, as he put it, “the most resilient, high-tech, duped.” our jumbo jet in stock.”