Logo atop Boeing headquarters. Photo: Boeing.

Boeing’s Defense, Space & Security (BDS) segment posted a 3% revenue increase in the third quarter of 2023 compared to the same time last year. However, losses on a satellite contract poorly impacted the segment’s operating margin, which CFO Brian West called “disappointing.” 

BDS reported $5.5 billion in revenue in Q3. However, the segment’s operating margin was -16.9% after the company previously expected margins around -9%. Boeing posted losses on the Air Force One VC-25B program, and a satellite contract. The satellite contract contributed $315 million of losses due to estimated customer considerations and increased costs to enhance the constellation to meet lifecycle commitments. Boeing did not name the satellite customer. 

“We have additional work to do to make this constellation very robust with new technology,” West said. “It’s very innovative, and we have to work our way through, and we will in short order. This is not going to be one that’s going to be dragged out for a long period of time.” 

West said specific fighter jet and satellite programs have negatively impacted margins the past several quarters. He said Boeing has not signed any new fixed-price development contracts in this segment and it does not intend to. 

In these fighter jet and satellite programs, Boeing “took on fixed-price production contracts in a pre-pandemic environment with real technical innovation that we’re working our way through,” West said. “We fully expect to see recovery in these areas as we improve execution, deliver next generation capabilities, and roll into new contracts with stronger underwriting disciplines that more accurately reflect the prevailing economic conditions.”

West called the third quarter results disappointing and below expectations. BDS is not as far along in recovery as Boeing expected, but the company is working to return the BDS segment to the high-single digit margins by the 2025/2026 time frame.

CEO Dave Calhoun spoke to the work on improving BDS operating performance. “More broadly across BDS, we’re stabilizing operations and taking comprehensive actions to improve performance, including lean initiatives, contracting disciplines, factory improvements, engineering investments and more. We’re seeing some early signs of progress, but financial improvement at BDS’ lower volumes takes time.”

Backlog at Defense, Space & Security was $58 billion, with 29% representing orders from customers outside the U.S.

Company-wide, Boeing reported a 13% year-over-year revenue increase in Q3 to $18 billion in revenue. Boeing narrowed the net loss from $3.3 billion in Q3 2022 to $1.6 billion this quarter. However, Boeing lowered its guidance for 737 airplane deliveries, and now expects to deliver between 375 and 400 this year, down from a previous estimate of 400 to 450.