Boeing's Air Force One Delay Confirms Defense Program Execution Risks

What happened

The U.S. Air Force has delayed delivery of the first new Air Force One jet to mid-2028, adding another year to the troubled VC-25B program under Boeing's Defense, Space & Security segment. This comes despite Boeing's recent slight operating profit in BDS, as the DeepValue report highlights persistent reach-forward losses on fixed-price contracts like VC-25B. The delay underscores Boeing's ongoing struggle with program execution and cost overruns, which have historically eroded margins and cash flow. In the context of Boeing's high-risk turnaround—marked by negative equity, volatile free cash flow, and heavy leverage—such slippages threaten to derail fragile progress toward profitability. Investors must view this as a critical reminder that Boeing's defense operations remain a liability, complicating efforts to stabilize the balance sheet and restore investor confidence.

Implication

The Air Force One delay signals that Boeing's defense program execution issues are not resolved, likely leading to additional reach-forward losses that will pressure already weak profitability and hinder free cash flow generation. With Boeing's net debt at ~$54 billion and negative equity, further program slippages could force dilutive capital raises or asset sales, undermining equity value. This news aligns with the DeepValue report's warning that major BDS contracts, including VC-25B, are key risks, and it may delay margin normalization critical for the turnaround thesis. Investors should closely monitor upcoming disclosures for updated guidance on VC-25B and other defense programs to assess the financial impact and potential for more charges. Ultimately, the delay reinforces the report's judgment that Boeing remains a high-uncertainty investment, requiring clearer evidence of durable cash generation and balance-sheet repair before any positive shift in stance.

Thesis delta

The Air Force One delivery delay confirms the DeepValue report's concerns about Boeing's defense program execution risks, particularly on fixed-price contracts like VC-25B. It does not invalidate the core 'WAIT' thesis but strengthens the case for heightened scrutiny, as it suggests ongoing weaknesses that could delay cash flow recovery and increase financial strain.