Based in Washington, Boeing disclosed a $280 million expense related to the VC‑25B program, the company announced in its second‑quarter results, elevating total losses on the planned Air Force One replacement to over $3 billion.
Boeing cited the expense as an investment in expanded production and certification resources, a move intended to mitigate potential risks as the aircraft progresses toward flight testing, according to CEO Kelly Ortberg.
“While the charge presents challenges, schedule performance remains critical to our customer, and we are allocating resources to preserve our commitment to a 2028 delivery,” Ortberg said. “This should not obscure the notable progress we are making to reduce risk across our defense portfolio, and we are in a markedly stronger position than two years ago.”
Under a fixed‑price agreement negotiated with President Donald Trump in 2018, Boeing is obligated to absorb all cost overruns on the program, which had originally been capped at $3.9 billion. However, technical and workforce hurdles have pushed the delivery timeline beyond its 2024 target.
Consequently, operating margins for Boeing’s defense unit turned negative in the quarter as a result of the VC‑25B expense. Nevertheless, CFO Jay Malave expressed confidence that the unit will achieve high single‑digit margins by the end of the decade.
The expense was unsurprising; earlier, during the Farnborough Airshow, Boeing’s defense chief Steve Parker had indicated that the company anticipated additional losses to keep the aircraft on track for a 2028 entry into service. Parker declined to specify timing for those charges, citing a customary quiet period before earnings releases, but noted that work on modifying the aircraft had commenced, with testing of the first VC‑25B slated to begin next year. Boeing plans to upgrade and deliver two such aircraft.
“Our priority is to deliver aircraft that are fully safe, operate flawlessly, and satisfy every technical specification,” Parker added.
The Air Force informed Breaking Defense in December that it had awarded Boeing a $15.5 million contract modification for communications equipment to be installed on the presidential airlifters, raising the cumulative contract value to just over $4.3 billion. The agency confirmed that the work would occur within the existing schedule, with the first aircraft projected to arrive in mid‑2028.
The Air Force One program is among several fixed‑price development initiatives in which Boeing submitted aggressive low bids, only to encounter billions of dollars in overruns.
During the earnings call, Ortberg indicated that the KC‑46 program appears to be at very low risk of further overruns as Boeing approaches the end of its current contract and prepares to negotiate new terms with the U.S. Air Force. He described the MQ‑25 and T‑7 programs as carrying typical risks, while noting that the Starliner effort requires additional work to reduce future charge exposure.
“Collaborating with NASA to align launch cadence for both crewed and uncrewed missions will be essential,” Ortberg said. “At present, I do not foresee a cost issue arising, though some uncertainty remains.”
