President Trump Expresses Frustration over Hold-ups in Air Force One Project, Potentially Posing Additional Challenges for Boeing
The potential rift between Trump and Boeing could pose significant challenges for the aerospace giant, especially with a presidential administration pushing for spending cuts, lawsuits, and Congressional oversight. Boeing generates 42% of its revenue from US government contracts, a fact that became even more evident when it moved its headquarters to Arlington, Virginia, near the Pentagon, in 2022.
Trump's frustration with the delay in delivering the next generation of Boeing 747 jets for Air Force One dates back years. The jets, intended to replace the ones from the George H.W. Bush era, were originally scheduled for delivery in 2024 but are still years away, according to estimates. This delay has led Trump to contemplate purchasing used aircraft from elsewhere and refurbishing them.
The defense sector could be particularly affected by Trump's anger, according to Richard Aboulafia, a managing director at AeroDynamic Advisory. While Boeing has been a significant supplier of military drones in the past, its absence from recent Pentagon drone contracts is a cause for concern. Additionally, the Trump administration's recent memo ordering the military to cut 8% from its budget each year for the next five years leaves Boeing vulnerable, given its reliance on military procurement for its balance sheet.
Boeing's space business also faces challenges, especially with SpaceX as a formidable competitor. SpaceX has been delivering astronauts and supplies to space for NASA, leaving Boeing's Starliner rocket significantly behind in its mission to take astronauts to the International Space Station. This delay, coupled with issues with the spacecraft, resulted in NASA having to send the astronauts back to Earth without anyone on board.
The problem with Air Force One isn't the basic jet but rather the extensive modifications needed to transform a Boeing 747 into a communicating and commanding center fit for the President of the United States. Trump, who negotiated a $4 billion deal for two new jets with Boeing in 2018, has been vocal about his dissatisfaction, leading Boeing CEO Kelly Ortberg to praise suggestions made by Elon Musk to speed up the delivery.
The Air Force One project has incurred significant losses for Boeing, which reported $2.5 billion in losses on the contract by the end of 2021. Agreeing to a steep discount on the contract may have been easy for Boeing back in 2018, given the company's record revenue then. However, supply chain problems, a shortage of workers with the necessary security clearance, and Trump's threats to cancel the contract have led to further complications.
In conclusion, Trump's discontent with the delays in delivering the new Air Force One jets could have significant repercussions for Boeing's defense and space business. These could include financial losses, reputational damage, potential shifts in market share, and challenges in meeting future defense and space program requirements.
Boeing might face potential risks in its business relations with the government, given Trump's contemplation of purchasing used aircraft and repurposing them. The supposed filing of lawsuits and the push for budget cuts from the presidential administration could further impact Boeing's business, especially considering that 42% of its revenue comes from US government contracts. The 2024 delivery schedule for the next generation of Boeing 747 jets for Air Force One remains uncertain, adding to the company's challenges.
