Oct 26 (Reuters) – Boeing Co (BA.N)’s beleaguered defense unit recorded a $2.8 billion charge on Wednesday, but the U.S. planemaker stuck to its forecast to generate cash this year despite labor and labor costs. Supply shortages make it difficult to ramp up commercial aircraft production.
Boeing shares fell 4% after the results as cost overruns in Boeing’s defense, space and security units hampered the company’s attempt to recover from a streak of crises with growing demand for air travel.
Both Boeing and its European rival Airbus (AIR.PA) have ramped up production of narrow-body jets, with Boeing delivering 112 of the jets in the third quarter, compared with 85 last year.
That helped it generate $2.9 billion in free cash flow in the quarter. In the same period last year, it recorded a cash burn of $507 million.
However, rising cost pressures over the past few months have hampered fixed-price contracts for U.S. aerospace and defense companies, prompting an industry body to ask the U.S. Congress to ease inflationary pressures.
The planemaker said it charged for its VC-25B program, commonly known as Air Force One, and its KC-46A tanker program, among others.
In a message to employees, Boeing CEO Dave Calhoun said: “Our revenue and earnings were significantly impacted by the loss of fixed-price development programs in the Defense business, driven by higher estimated manufacturing and supply chain costs. of.”
The company has appointed a senior troubleshooter, Steve Parker, to help turn around a loss-making plan for its defense division, Reuters reported on Tuesday.
On the commercial side, Boeing delivered 86 MAX jets during the quarter, or about 29 per month, according to company data. It needs to deliver about 44 jets a month in the fourth quarter to meet its “low 400” 737 MAX delivery target this year.
“We also added more than 10,000 employees this year and are investing in their training and development to accelerate the experience curve and increase productivity,” Calhoun said.
“In our production facility, we don’t push the system too quickly,” he said, underscoring the challenging environment facing the aerospace industry.
The industry is facing persistent supply shortages, particularly for workers and castings, though General Electric Co (GE.N) said on Tuesday it saw some early signs of easing supply challenges.
Third-quarter revenue rose 4% to $15.96 billion, but the adjusted loss per share widened to $6.18 from $0.60 a year earlier.
Demand in the global services business, which provides spare parts and services such as jet conversions, was a bright spot, with revenue up 5% in the quarter ended September.
Reporting by Abhijith Ganapavaram in Bengaluru and Rajesh Kumar Singh in Chicago; Editing by Arun Koyyur
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