WASHINGTON — Boeing did not need an extra day of February to know the month was showing it no love. But the leap year’s supplement delivered the cruelest news: the loss of a $35 billion Air Force contract.
Before that stomach punch connected, Boeing Co. had heard this from Washington in February: Three of its military contracts had cost $3 billion more than projected, and its work on a virtual fence along the U.S.-Mexico border had failed to meet expectations.
Boeing’s sheer size enables it to withstand a month of high-profile setbacks, but Wall Street and industry analysts say the nation’s largest aerospace company is paying for its decision to move beyond aircraft making.
In 2003, Boeing established itself as a player in the government-technology arena when it teamed with SAIC Inc. and won a multibillion-dollar contract to overhaul the Army’s combat and communications systems, said Ray Bjorklund, chief knowledge officer at market-research firm Federal Sources Inc. The Future Combat Systems modernization deal, which involves revamping the Army’s command-control communications, computers, intelligence, surveillance and reconnaissance — or C4ISR — capabilities, also has had its share of delays and cost concerns but appears to be doing better lately.
Boeing, which last year reported an 8 percent jump in revenue to $66.4 billion, can handle the financial hit of losing the Air Force deal, but “the bigger loss is to prestige and the hit to ego,” said Scott Hamilton, an aviation-industry consultant based outside of Seattle.
Stockholders are still smarting from Friday’s loss of a $35 billion Air Force contract, which went to Northrop Grumman and European Aeronautic Defence and Space, the maker of Airbus planes, to build airborne refueling planes.
The selection surprised industry analysts and dropped jaws in Congress and statehouses, where constituents were counting on plane-building jobs. Chicago-based Boeing had been supplying refueling tankers to the Air Force for nearly 50 years and did not expect to lose that monopoly to EADS, its top foreign rival in the commercial-aircraft market.
Boeing spokesman Dan Beck countered that the company’s defense business will remain part of its core.
“There is no need for doom and gloom with regards to Boeing’s defense business,” Beck said. “We have a very extensive and very diverse portfolio.”
