Boeing Defense Posts Positive Q3 Results Despite St. Louis Labor Stoppage

Boeing reported about $23.3 billion in third-quarter revenue, including a core loss driven by a $4.9 billion charge tied to the commercial 777X program’s updated certification schedule. Free cash flow was slightly positive, and the FAA cleared a step-up of 737 production to 42 aircraft per month in October. The defense unit posted a positive margin for a third straight quarter even as the St. Louis strike continued.

Boeing Defense, Space & Security delivered 30 aircraft and 2 satellites in Q3 and reported revenue of roughly $6.9 billion, up about 25 percent year on year, delivering a 1.7 percent operating margin. “These results also included immaterial impacts associated with the IAM work stoppage as we continued to execute our contingency plans,” Executive Vice President and Chief Financial Officer Jay Malave told investors. He added that the tanker program and other efforts took “minor cost updates,” during the business booked $9 billion in quarterly orders and expanded backlog to a record $76 billion.

Chief Executive Officer Kelly Ortberg emphasized execution on defense programs in St. Louis despite the walkout. “In St. Louis, we are executing our contingency plan as our IAM-represented workforce remains on strike,” he said on the call. “We are building JDAMs without the IAM workforce at about the same production rate as before the work stoppage, and the team is progressing on our MQ-25 and T-7A development programs.”

Boeing confirmed first 777-9 deliveries moved into 2027, which triggered the non-cash charge and a reset of flow through Everett. The company said costs are better defined after replanning flight test and certification tasks. Analysts on the call focused on the 777X issue, and defense drew few follow-ups.

St. Louis Strike Passes Twelve Weeks

Roughly 3,200 members of the International Association of Machinists and Aerospace Workers District 837 have been out since 4 August after rejecting Boeing’s contract offer. The strike spans facilities in St. Louis and St. Charles, Missouri, and Mascoutah, Illinois. Two successive offers were turned down during the quarter, including one late in October. Industry sources say the dispute centers on wage progression for top-tier workers, healthcare costs, retirement contributions, and lump-sum bonuses versus base pay increases.

The company put a contingency plan in place early in the stoppage, shifting salaried staff and temporary workers into critical roles. In an internal message, BDS President and CEO Steve Parker told employees the business is “accelerating our efforts to hire permanent replacement workers, which will likely result in some striking employees being replaced,” and that it would expand third-party support in St. Louis. Union leaders called the move “misleading and disingenuous” and filed an additional unfair labor practice charge with the National Labor Relations Board.

Union officials argue the contingency workforce cannot mirror the experience levels required to assemble advanced fighters and munitions. IAM International President Brian Bryant said the plan is “failing” because “they cannot replace the skilled, experienced IAM members who have dedicated their careers to this work.” Defense officials confirm schedule pressure on some fighter deliveries as the strike extends into a fourth month, a risk Boeing acknowledged in filings that warn of potential material impact if the stoppage persists for a prolonged period.

A bipartisan group of 17 House Armed Services Committee members urged CEO Kelly Ortberg to return to bargaining. “Boeing Defense plays a vital role in safeguarding our national security and sustaining U.S. leadership on the global stage,” the lawmakers wrote. “These workers are essential to the success of your company, and they deserve compensation that reflects their hard work and sacrifices.” The letter followed reports that Boeing would deepen the replacement-hiring push.

Investors asked few questions about the strike on the earnings call. One reason, according to an industry analyst, is cadence and inventory. Defense production often runs at “one or two per month,” not dozens, and much of the work-in-process on the military side is funded under government profiles, which dulls the inventory carry that hits commercial during a shutdown.

KC-46A Posts $149 Million Reach-Forward Loss

Boeing recorded a new $149 million reach-forward loss on the KC-46A tanker in the quarter. Company filings link the change largely to higher production cost allocations after the decision to slow 777X production plans in Everett. The tanker, a 767 derivative, shares factory resources on commercial programs. Higher Everett overhead flows into the fixed-price defense contract.

On the call, the CFO said the tanker absorbed Everett shared costs from the 777X update but did not cite the quarterly figure. The KC-46A has taken multiple reach-forward adjustments over recent years as Boeing executed redesigns and retrofit campaigns, including Remote Vision System upgrades. Operational milestones continued, including the 100th KC-46A delivery across the U.S. Air Force and international customers in Q3, and the fleet’s on-wing mission hours kept rising.

Costs on the tanker hinge on three items: the burn-down of change incorporation on earlier aircraft, learning on later lots as work content normalizes, and shared factory overhead, especially at Everett. The latest 777X reset pushed that last item up. The $149 million update aligns accordingly and still left BDS offering a positive quarter after absorbing unplanned allocation pressure.

Tanker operations kept expanding. The Air Force continues to certify additional receiver types and adds mission sets as reliability stabilizes. The exposure is on the industrial side, tied to factory-level costs rather than a fresh hardware discovery.

Program Status and MQ-25, T-7A Progress

The strike affects several St. Louis-centered lines and adjacent munitions work. Ortberg said JDAM output is steady, which fits a shop focused on kitting and integration rather than deep structural assembly. The MQ-25 Stingray engineering and manufacturing development effort advanced during Q3, and the T-7A Red Hawk hit milestones under its memorandum of agreement, including starting assembly on the first production-representative test aircraft. According to industry sources, the F-15EX final assembly system has held to a skeleton plan, but the walkout has pushed specific deliveries to the right.

The F/A-18E/F line continues closeout work for international customers and sustainment kits for the U.S. Navy. Boeing’s move to seek permanent replacements acknowledges how long it would take to backfill skills if attrition rises, although the company has not disclosed how many hires it expects or when they would be fully productive.

On the services side, Boeing Global Services delivered double-digit operating margins again and secured Navy component repair awards for the F/A-18. That work helps offset volatility on development programs. Boeing still plans to close the previously announced sale of Jeppesen and other digital assets this quarter during retaining flight-operations and maintenance analytics.

Awards in Q3 included a $2.8 billion Evolved Strategic SATCOM contract and multi-year seeker production deals valued at $2.7 billion. The company continues to retire risk on fixed-price development programs such as T-7A and MQ-25 and says future contracts will carry tighter underwriting standards. Disclosures present a portfolio still carrying legacy losses but trending toward steadier execution.

Political Pressure and Production Risk

Political pressure rose during the quarter. Lawmakers urged a negotiated settlement, and local officials warned of knock-on effects for the regional economy if the dispute drags into winter. Boeing tied any richer offer to competitiveness and cost discipline, during union leaders framed the conflict around whether skilled defense manufacturing can hold wage gains seen elsewhere. Neither side has presented a new framework to break the stalemate. Officials confirm schedules on the F-15EX face the closest scrutiny because squadron fielding plans rely on predictable monthly flow.

Filings warn of potential material impact if the strike persists. It’s standard risk language, not a forecast. The third quarter did not reach that threshold. Management’s “immaterial impacts” line is accurate for the period reported.

The union’s case about irreplaceable skill is strongest in high-tolerance build areas like forward fuselage mate and systems integration, where turnover slows learning curves just as programs need them to steepen. Boeing points to training investments and a disciplined production system as insulation. Once a contract is signed, talks will set the production rate. Boeing Defense, Space & Security still posted a 1.7 percent margin in Q3 during the strike continued.

Our analysis shows that if Q4 closes without a settlement, the fighter backlog conversion risks deeper slips into 2026 slotting, which complicates government acceptance, test resources, and supplier cadence. KC-46A costs depend more on Everett overhead and the pace of retrofit work than any new technical issue. According to industry sources, only a few near-term deliveries are at risk, and the company has prioritized units tied to operational need. Officials confirm temporary workarounds exist for squadron training plans if a batch slips a few weeks.

Boeing Defense Posts Positive Q3 Results Despite St. Louis Labor Stoppage

St. Louis Strike Passes Twelve Weeks

KC-46A Posts $149 Million Reach-Forward Loss

Program Status and MQ-25, T-7A Progress

Political Pressure and Production Risk

REFERENCE SOURCES

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