This past Wednesday, Boeing (NYSE: BA) Chief Executive Officer Dave Calhoun revealed that the aerospace company lost about $1.1 billion from their deal with the Trump administration regarding two 747 jumbo jets working together as an Air Force One. According to Calhoun, they most likely should not have made the deal to begin with.
"Air Force One I'm just going to call a very unique moment, a very unique negotiation, a very unique set of risks that Boeing probably shouldn't have taken," Calhoun remarked on a conference call with analysts post earnings.
Back in 2018, Boeing reached an agreement with former President Donald Trump, which entailed that they would develop two new Air Force One airplanes for a fixed price of $3.9 billion. According to acquisition.gov, firm-fixed-price contracts entail that contractors put out the same amount of money for projects, no matter what they cost, even if that means that money is lost in the process. This also means that the company is forced to take responsibility for the expenses rather than the government.
Initially, Boeing believed wholeheartedly in Trump's deal. In a tweet shortly after the contract was officially made, the company wrote, "President Trump negotiated a good deal on behalf of the American people."
According to a Boeing spokesperson, Calhoun's comments were mainly directed toward potential issues with fixed-price contracts, Politico reports. When this spokesperson was asked to answer whether he was laying the blame on Trump regarding the loss of money from the contract, he refrained from directly answering, implying that the remarks are self-explanatory and don't require any further comment.
The way that the contract came about was that in 2016, Trump made threats via Twitter (NYSE: TWTR) to put an end to the government's prior Air Force One order as a method of reducing costs. Originally, the project was anticipated to cost anywhere between $4 billion and $5 billion. Initially, the project was supposed to be completed by 2021, but the deal changed the deadline to 2024 instead, according to CNN.
Overall, however, Boeing can recover from any losses in the end. "But we are where we are, and we're going to deliver great airplanes and we're going to recognize the costs associated with it," Calhoun said.