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 discuss the company Q1 results for 2022, showing that the Air Force One program went $660 million over its projected budget in recent months. In a financial statement (PDF), Boeing reports that it has now lost $1.1 billion on the contract.
“Air Force One, I’m just going to call it a very unique moment, a very unique negotiation, a very unique set of risks that Boeing probably shouldn’t have taken, but we’re where we are and we’re going to deliver great planes.” † And we’re going to recognize the costs that come with it,” Calhoun says.
In 2018, Boeing reached an agreement with then-President Trump to develop and build two new Air Force One aircraft for a fixed price of $3.9 billion. According to acquisition.govA fixed-price contract is one where the contractor (in this case, Boeing) is paid the same for a project, regardless of the costs — and possible losses — it incurs.
The new agreement came after Trump threatened (via tweet, of course) to cancel the government’s previous Air Force One order in 2016 as a cost-cutting measure. The original project was valued at somewhere between $4 and $5 billion. The new agreement also shifted the timeline to build the plane — Trump apparently wanted it ready in 2021, rather than 2024, according to CNN†
Boeing didn’t make it to that timeline, which isn’t very surprising. Since that deal was made, the company has been rocked by the 737 Max scandal (which led to its 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 particularly 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 step out, we don’t have a whole group of approved people to put themselves in their shoes,” he said, pointing to the “ultra-high” security clearances required to get in. the president’s plane. “We’ve just been hit in a couple of different areas.”
He also noted that he didn’t want to take on additional fixed-price contracts and had a “very different philosophy” about it than the company’s previous CEO.
Calhoun says Boeing had a “messy quarter” regarding government contracts, largely because of the Air Force One project. “You’ll remember it was a public negotiation that took place a long time ago. We took some risks, not knowing that COVID was coming, and not knowing that an inflationary environment was going to be created like now.”
Politics is reporting that Boeing now plans to deliver the first Air Force One in 2024, and the second aircraft the following year. CNBC however reports that it could be further delayed, and Boeing’s financial statement says it may continue to lose money on the project.
CNBC’s story also includes a 2018 tweet from Boeing that calls the project (now more than a billion in the hole) an “excellent value for 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 incurs heavy losses on the project and writes them off on its taxes, is the general public really better off for the alleged savings?
Boeing is proud to build the next-generation Air Force One, which will give US presidents a flying White House with outstanding taxpayer value. President Trump has negotiated a good deal on behalf of the American people. pic.twitter.com/m0HtGfXVlv
— The Boeing Company (@Boeing) February 27, 2018
A final note: $2 billion per plane is still an incredible amount of money. You know how the F-35 is known for being obscenely over budget, with the final price tag expected to be: about $1.6 trillion† Until now, lockheed says: about 800 of those planes were made, meaning each plane currently also costs about $2 billion, although that number will drop as more planes are made.
However, as my colleague Andrew Hawkins has pointed out, Boeing’s Air Force One(s) will likely be highly sophisticated and capable of evading missiles and surviving nuclear fallout and EMPs – there is a cost involved in making the , as he put it, “the most resilient, high-tech, tricked-out jumbo jet in existence.”