Boeing has reported $2.4bn in losses in its 2020 second quarter (Q2), with its defence business being its only division not posting losses.
Boeing’s business has continued to take significant hits despite the relative stability of its Defence, Space & Security division as its commercial aircraft component continues to feel the effects of the Covid-19 coronavirus pandemic.
The slowdown in commercials airline production has also led to increased costs for the KC-46 tanker which is derived from the commercial 767 passenger aircraft. Boeing said that it had absorbed $151m in additional costs for KC-46A as a result of lower commercial aeroplane production volume.
Commenting on the results GlobalData Aerospace, Defence and Security analyst Anthony Endresen told Air Force Technology: “Of particular concern at Boeing will be the losses in the KC-46 program, as its emblematic of Boeing having issues in both commercial and defence segments of their industry. Whilst the commercial aviation sector is in crisis, it would have been expected that the defence segment would provide cash and some protection from the fallout.
“The timing of a problematic KC-46 program producing losses couldn’t be worse. With other key programs such as the P-8 and C-40 (both 767 derived) for defence clients, Boeing would have hoped for stronger performance in defence programs to maximise cash flow and justify state support (like Air Force largesse in releasing KC-46 funds in April). The negative PR on top of the 737 issues and 747 production conclusion contribute to a difficult situation and challenging optics for Boeing.”
Boeing’s Defense, Space & Security business currently has a backlog of orders worth $64bn, of which 31% are customers outside of the US.
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During Q2 Boeing was awarded contracts for a further three MQ-25 unmanned refuelling aircraft by the US Navy, as well as an order for Cruise Missile systems. The company also received an order from Morocco for 24 AH-64E Apache helicopters.
In the same period, Boeing’s commercial airline division posted over $2.7bn in losses and its Global Services component posted a loss of $672m.
In a letter to employees, Boeing CEO Dave Calhoun said: “The reality is the pandemic’s impact on the aviation sector continues to be severe. Though some fliers are returning slowly to the air, their numbers remain far lower than 2019, with airline revenues likewise reduced.
“This pressure on our commercial customers means they are delaying jet purchases, slowing deliveries, deferring elective maintenance, retiring older aircraft and reducing spend — all of which affects our business and, ultimately, our bottom line. While there have been some encouraging signs, we estimate it will take around three years to return to 2019 passenger levels.”
In response to the pandemic, Boeing raised $25bn from a debt offering, suspended its dividend and share repurchases, and has cut back on discretionary spending.