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Boeing Divestitures To Start This Year, Focused On ‘Pruning’

Kelly Ortberg

Credit: Kristoffer Tripplaar / Alamy Stock Photo

Boeing CEO and President Kelly Ortberg has completed a portfolio review of the embattled aerospace and defense giant’s businesses, and divestitures could begin in six to 12 months, although it will not entail a selloff of the defense and space division.

“This is not going to be a major restructuring of the Boeing Company,” Ortberg said Jan. 28 while discussing fourth-quarter and full-year 2024 financial results. “Think of it as more pruning the portfolio, not cutting down the tree.”

Earlier on CNBC, Ortberg said there were a “few” businesses where Boeing managers are in “advance stages” of “actioning” on this year.

Boeing was widely believed to be interested in getting out of some of its space business for years, with a potential sale of half of United Launch Alliance widely reported. Financial analysts have suggested another key target for selling could be Jeppesen and parts of Boeing’s KLX/Aviall buildup from years ago.

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Ortberg has also discussed the possibility of not moving to later stages of troubled projects, particularly defense and space programs. Hefty cost overruns continue for Boeing’s Defense and Space division as the company on Jan. 23 announced another $1.7 billion in charges for five of its troubled programs that were recognized in the last quarter of 2024.

In the last quarter, Boeing recorded revenue of $15.2 billion and a net loss of $3.9 billion. That compared with $22 billion and $2.2 billion, respectively, the year before. For all of 2024, Boeing reported revenue of $66.5 billion, down 14%, and net loss of $11.83 billion versus just $2.2 billion in 2023.

For the fourth quarter, financial analysts had expected losses and cash burn due to the union strike in the Seattle area last fall, as well as layoffs. But new charges from embattled defense and space programs continue to sew concerns, especially as only a third will be booked in the next few years and the rest over the coming decade.

“The additional charges on fixed-price programs (KC-46, T-7, VC-25, and MQ-25) remain perplexing,” Byron Callan of Capital Alpha Partners said. “Management noted that it did not have ‘supply chains back-to-back in fixed-price production’ for the T-7A trainer, but an open question is why this couldn’t have been quantified earlier in 2024?”

Analysts Scott Mikus and Rob Spingarn of Melius Research noted that Boeing Defense, Space and Security (BDS) is “barely” profitable, even excluding those fixed-price development programs. “What’s concerning is that Boeing booked $11 billion of charges on those defense programs since the start of 2022. Over that same period, BDS has reported $10.7 billion of operating losses,” they wrote.

Ortberg said Boeing is “actively managing” the troubled programs with government customers, including a recent memorandum of agreement on the T-7 trainer, and another on the way. The VC-25B, or so-called Air Force One program deal, also is being reworked.

“While I know it doesn’t show in this past quarter’s performance, we’re making progress in working with our customers to actively manage the contracts to achieve better outcomes for both parties,” he said. “While I said there’s no silver bullet on these fixed-price programs, I do feel better about our ability to better manage the performance in 2025.”

Boeing Chief Financial Officer Brian West told analysts on the teleconference that programs accounting for 60% of BDS revenue are generally performing in the range of mid- to high-single-digit operating margins, and the embattled fixed-price programs make for 15% of revenue. Upon fixing them, managers believe the whole division can get to high-single-digit margins in the “medium to long term.”

The margin for BDS in the fourth quarter was almost negative 42%.

Michael Bruno

Based in Washington, Michael Bruno is Aviation Week Network’s Executive Editor for Business. He oversees coverage of aviation, aerospace and defense businesses, supply chains and related issues.