Boeing chief calls Trump’s Air Force One deal a risk it ‘probably should not have taken’

Boeing CEO Dave Calhoun says the company’s deal with Trump to build Air Force One was a risk the company “probably should not have taken.” The comment was made on Wednesday during a conference call to discuss the company’s first quarter results for 2022, which show that the Air Force One program went $ 660 million over the expected budget in recent months. In a financial filing (PDF), Boeing reports that they have now lost $ 1.1 billion on the contract.

“I just want to call Air Force One a very unique moment, a very unique negotiation, a very unique set of risks that Boeing probably should not have taken, but we are where we are and we will deliver great aircraft. And we will recognize the costs associated with it, says Calhoun.

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 acquisition.gov is a fixed price contract where the contractor (in this case Boeing) gets paid the same for a project no matter what costs – and potential losses – it incurs.

The new deal came after Trump threatened (via tweet, of course) to cancel the government’s previous Air Force One order as a cost-saving measure in 2016. The original project was estimated to come in somewhere between $ 4 and $ 5 billion. The new agreement also changed the timeline for building the plane – Trump apparently wanted it done by 2021, instead of 2024, according to CNN.

Boeing did not reach that timeline, which is not very surprising. Since that deal was signed, the company has been rocked by the 737 Max scandal (which led to the dismissal and replacement of CEO Dennis Muilenburg by Calhoun), not to mention a global pandemic.

Calhoun said during Wednesday’s interview that COVID-19 had been particularly tough on the company’s work on the new Air Force One. “In the world of defense, when a covid line goes down or a group of workers goes out, we do not have a whole bunch of trusted people who can step into their shoes,” he said, noting the “ultra-high” security clearances required to work on the president’s plane. “We were just beaten in a number of different areas.”

He also noted that he did not want to take on further fixed-price contracts, and had a “completely different philosophy” about them compared to the company’s former CEO.

Calhoun says that, in terms of public procurement, Boeing had a “messy quarter” mainly due to the Air Force One project. “You may remember that it was a public debate that took place a while ago. We took some risks without knowing that COVID would come, and without knowing that an inflationary environment would take hold as it has.”

Politico reports that Boeing now plans to deliver the first Air Force One in 2024, and the second aircraft the following year. However, CNBC reports that there may be further delays, and Boeing’s accounts say they may continue to lose money on the project.

CNBC’s story also includes one 2018 tweet from Boeing which calls the project (which in turn is over a billion in the hole) a “unique value for taxpayers.” The tweet also states that “President Trump negotiated a good deal on behalf of the American people.” But here’s a question – if Boeing takes big losses on the project, and writes them off on its taxes, is the general public really any better for the supposed savings?

One last note: $ 2 billion per plane is still an incredible amount of money. You know how the F-35 is known for being indecent over budget, with the final price tag expected to be around $ 1.6 trillion? So far, Lockheed says it has made about 800 of these planes, which means that each one also costs around $ 2 billion, although that number will go down as more planes are made.

As my colleague Andrew Hawkins has pointed out, Boeing’s Air Force One is likely to be very advanced and capable of avoiding missiles and surviving nuclear fallout and EMP – it’s a cost to do, as he put it, “mostly a resilient, high-tech, cheated jumbo jet that exists. “