Boeing CEO Dave Calhoun says the company’s deal with Trump to build Air Force One was a risk that “maybe the company shouldn’t have taken”. The comment came on Wednesday during group call to discuss the company First Quarter Results for 2022, indicating that the presidential program exceeded $660 million more than its expected budget in the past few months. at money deposit (PDF), Boeing reports that it has now lost $1.1 billion in contract.
Air Force One, I’ll call it a very unique moment, a very unique negotiation, a very unique set of risks that perhaps Boeing shouldn’t have taken, but we’re where we are and we’re going to deliver great planes. We’ll figure out the cost associated with it,” Calhoun says.
In 2018, Boeing reached an agreement with then-President Trump to develop and build two new Air Force One aircraft at a fixed price of $3.9 billion. According to quis.gova fixed-rate contract is where a contractor (in this case, Boeing) pays the same amount for a project regardless of the costs — and possibly losses — that they incur.
The new agreement came after Trump threatened (via tweet, of course) to Repeal of the previous Air Force One order of the government As a cost-cutting measure in 2016. The original project was estimated to come in somewhere between $4 and $5 billion. The new agreement also changed the schedule for building the plane – Trump apparently wanted it to be done by 2021, rather than 2024, According to CNN.
Boeing didn’t stick to that schedule, which isn’t terribly surprising. Since the conclusion of this deal, the company has been shaken by 737 Max scandal (Resulting in the dismissal of its CEO, Dennis Muilenburg, and his replacement with Calhoun), not to mention the outbreak of a global pandemic.
Calhoun said during a call Wednesday that COVID-19 has been particularly tough for the company’s work on Air Force One. “In the defense world when the COVID streak goes down or a group of workers takes off, we don’t have a whole bunch of disinfected people to get into their shoes,” he said, referring to the “very high” security clearances required to work aboard the president’s plane. “We’ve been hit in a number of different areas.”
He also indicated that he does not want to take out any additional contracts at a fixed price, and has a “very different philosophy” about them compared to the company’s previous CEO.
In terms of government contracts, Calhoun says, Boeing has had a “chaotic quarter” largely due to the Air Force One project. “You will remember that it was a public negotiation that happened some time ago. We took some risks without knowing that the Corona virus would arrive, and we did not know that the inflationary environment would take hold as it did.”
Politico Reporting Boeing now plans to deliver the first Air Force One in 2024, and the second the following year. CNBC, however, Reports It may be delayed further, and Boeing’s financial statement says it may continue to lose money on the project.
The CNBC story also includes a 2018 tweet from Boeing which describes the project (which, again, is now over a billion in the hole) “an outstanding value to taxpayers.” The tweet also reads, “President Trump negotiated a good deal on behalf of the American people.” But there is a question – if Boeing is incurring huge losses on the project, and writes them off from its taxes, is the general public really better 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 a great value for taxpayers. President Trump negotiated a good deal on behalf of the American people. pic.twitter.com/m0HtGfXVlv
– Boeing Corporation February 27, 2018
One final note: $2 billion per plane is still an incredible amount of money. You know how the F-35 is notorious for being obscene over budget, with its final price expected About 1.6 trillion dollars? To this limit, Lockheed says It built about 800 of these planes, which means that each one currently costs about $2 billion, although that number will drop as more planes are built.
As my colleague Andrew Hawkins have indicatedBoeing, though, is likely to be a highly advanced Air Force One capable of evading missiles and surviving nuclear fallout and EMPs — there is a cost to making, as he put it, “the most flexible, high-tech, deception-jumbo-jet in the existence “.