It’s usually no surprise when major projects fall behind schedule and over budget. However, the “new” modified Boeing 747-8i Air Force One (designated VC-25B) takes this trend to another level. Responsible for completing the project for the United States Air Force (USAF), Boeing recently reported additional losses on this fixed cost contract.
A loss of $1 billion for each plane
As highlighted by CNN in late October, Boeing reported additional losses on work to secure the future flagship aircraft of the US president. The American aircraft manufacturer reported additional costs of $482 million under the contract. In fact, the deal to modify two 747-8i planes (originally built for commercial airlines) has already cost Boeing a total of $2 billion in losses — or $1 billion for each plane. According to Boeing’s boss, the latest loss was a result of engineering changes, workforce instability, as well as the resolution of negotiations with a supplier.
You may recall that in 2018, Boeing agreed to provide $3.9 billion worth of Air Force One aircraft. Facing pressure from then-President Donald Trump, Boeing agreed to lower its price for the contract. Speaking to CNN, a White House spokesman said at the time: “President Trump has reached an informal deal with Boeing on a fixed-price contract for the new Air Force One program … Thanks to the president’s negotiations, the contract will save taxpayers more than $1.4 billion.”
The danger of a fixed price contract
In 2022, CEO Dave Calhoun expressed regret that his company had agreed to a fixed-price contract. Since the deal was made in 2018, most will know that the pandemic and its far-reaching impact on supply chains made a lot of things more expensive. Even before the global health crisis (but after the Trump deal), Boeing found itself investing heavily in recertifying the 737 MAX with regulators around the world.
On Oct. 25 of this year, during the earnings call with investors, Calhoun emphasized that the current fixed-price environment has led to “unplanned headwinds” that have translated into “sunk costs.”
Early reports on the VC-25B program expected delivery of the first of the two jumbo jets to take place in 2024. The biggest questions early on revolved around the aircraft’s livery and whether the current US president would even get to know the the new aircraft due to the fact that its mandate ends at the end of 2024.
Over time, both questions received some answers:
Regarding the livery, we know that President Biden has chosen a paint scheme that is much closer to the VC-25A than the one proposed by President Trump.
As for timelines, the March 2023 updates from the US Air Force now put the arrival of the first aircraft in 2027. The second is expected to be delivered in 2028. Thus, President Biden will certainly not be flying the new aircraft in this mandate.
With this project already several years behind schedule and billions over budget, Boeing surely wants to do everything it can to ensure the planes aren’t further delayed or incur additional unexpected costs. However, none of these things are guaranteed…
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