WASHINGTON — Boeing reported lower sales and profit in its defense unit in the most recent quarter, as charges on several key programs dragged it down.

Boeing Defense, Space and Security reported revenues of $6.2 billion in its most recent quarter, down 10% from the nearly $6.9 billion it reported in the same three-month period last year.

Boeing’s defense unit also reported $71 million in profit for the quarter, which represented a margin of 1.1% and a significant decline from the $958 million in earnings is reported in the second quarter of 2021.

In its announcement, the company attributed its profit decline to charges on fixed-price development programs. Boeing Chief Financial Officer Brian West said during the company’s earnings call that lower volume and operational performance also contributed. The availability of labor remains a challenge, he said.

West said Boeing recorded about $400 million in charges, including a $147 million charge on the Navy’s MQ-25 Navy refueling drone program stemming from higher costs to meet technical requirements.

Boeing reported a $93 million charge on the commercial crew space capsules it’s making for NASA due to launch manifest updates.

West said the T-7A Red Hawk trainer, VC-25B Air Force One and KC-46 tanker programs also recorded charges, mostly as a result of supply chain and inflation problems.

In its Securities and Exchange Commission filings, Boeing said it took a $51 million charge on the T-7 related to production options and another $36 million charge on the T-7′s engineering and manufacturing development. Boeing also said its KC-46 program faced a $44 million charge, while the VC-25B suffered a $26 million charge.

Boeing already reported a charge of $660 million charge on the VC-25B last quarter; the company’s filings attributed the issue to higher supplier costs, higher costs to finish some technical requirements and schedule delays.

The contractor warned in its SEC filings that there could be more losses ahead for its Air Force One and KC-46 programs.

“While this performance was disappointing, we’re making progress narrowing our development risk profile and remain confident over the long term,” West said.

He noted the company sees support for increased military spending in both the U.S. Congress and among NATO allies.

Boeing received a boost in the quarter from Germany’s selection of the CH-47F Chinook Block II as its military’s next heavy-lift helicopter. Germany will buy 60 Chinooks in a deal worth more than $4 billion, the nation’s defense ministry announced in June.

Boeing CEO Dave Calhoun said he is increasingly “bullish” on opportunities for international sales of defense equipment, such as the KC-46 and MQ-25. But he said it will take a few years for emerging global threats, including Russia’s invasion of Ukraine and aggressive stance toward the West, to translate into actual orders and commitments.

An exception, Calhoun said, was Germany’s selection of the Chinook, which he said “came faster than maybe we would imagine.”

But supply chains continue to present Boeing with “real constraints,” West noted. He pointed to steps the company is taking to try to ease the crunch and stabilize production, particularly in crucial areas such as engines, raw materials and semiconductors.

West said Boeing is keeping more of its people on-site with suppliers, and has put together teams of experts to figure out how to solve supply shortages affecting the entire industry. Boeing is also fabricating some parts in-house to allow it to weather supply chain issues, and maintaining safety stocks of key components, or keeping extra parts on hand in case of a supply chain crunch.

Stephen Losey is the air warfare reporter for Defense News. He previously covered leadership and personnel issues at Air Force Times, and the Pentagon, special operations and air warfare at Military.com. He has traveled to the Middle East to cover U.S. Air Force operations.

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