WASHINGTON — Boeing said it recorded a $280 million charge on the VC-25B program, marking another setback for the Air Force One replacement and pushing the company’s cumulative losses on the effort beyond $3 billion for the first time.
The company attributed the latest charge to an investment in additional production and certification resources. Chief Executive Officer Kelly Ortberg said the spending is intended to reduce risk as the aircraft heads into flight testing.
Air Force One replacement program challenges
“While the charge is disappointing, we recognize how critical schedule performance is to our customer and we are investing accordingly to maintain our commitment to deliver the airplane in 2028,” Ortberg said. He added that the company has made progress in reducing risk across its defense portfolio compared with two years ago.
Boeing remains responsible for cost overruns under a firm, fixed price agreement set in 2018 during President Donald Trump’s administration. That deal capped the program at $3.9 billion, but technical issues and workforce challenges have delayed the original 2024 delivery timeline.
The VC-25B charge weighed on Boeing’s defense segment, which posted negative operating margins in the second quarter. Chief Financial Officer Jay Malave told investors he expects the defense unit to return to high single-digit margins by the end of the decade.
The additional hit had been telegraphed. Ahead of the Farnborough Airshow, Boeing’s defense chief Steve Parker said the company anticipated further losses on VC-25B to keep the program aligned with the 2028 delivery goal.
Parker, citing the pre-earnings quiet period at the time, declined to say when the charges would be booked. He said modification work on the aircraft had begun, with plans to start testing next year on the first VC-25B. Boeing is under contract to upgrade and deliver two aircraft.
“Our focus is making sure that we get these aircraft right, safe to operate, and that they meet every technical specification,” Parker said.
According to the Air Force, the service in December awarded Boeing a $15.5 million contract modification for communications equipment to be integrated on the presidential airlifters. That brought the total contract value to just over $4.3 billion. The work is to be completed within the current schedule, with the first aircraft expected to arrive in mid-2028.
The Air Force One replacement is one of several fixed-price development efforts where Boeing initially bid aggressively and later absorbed significant overruns.
Asked about other fixed-price programs, which include the KC-46 tanker, MQ-25 tanker drone, T-7 trainer jet, and NASA’s Starliner vehicle, Ortberg said the KC-46 is at “very low risk” for additional overruns as the current contract concludes and new terms can be negotiated with the U.S. Air Force.
Ortberg characterized MQ-25 and T-7 risks as normal with no specific new issues. He identified Starliner as an area where Boeing must continue working with NASA to align on future crewed and uncrewed launches to reduce the risk of further charges. Ortberg said he does not currently expect that to create a cost problem, while acknowledging remaining uncertainties.
The Air Force One replacement is unfolding as broader Pentagon acquisition priorities evolve, including initiatives covered in the recent House-passed 2027 NDAA.