Boeing’s latest financial update highlights a dramatic increase in its quarterly losses, primarily driven by ongoing difficulties within its defense and space sector. This financial strain is compounded by Boeing’s recent decision to reduce its commercial aircraft production in response to continuing quality control challenges.

The company’s second-quarter net loss surged to $1.44 billion, a stark contrast to the $149 million loss reported in the same period last year.

The Defense, Space, and Security division, which is one of Boeing’s key business segments, has experienced severe financial setbacks, accumulating billions in losses throughout 2023 and 2022. These losses are mainly due to cost overruns on fixed-price contracts. Although these contracts have the potential for high profit margins, they also make defense contractors susceptible to inflationary pressures, which have been weighing heavily on U.S. corporate earnings recently.

Boeing had been aggressively pursuing fixed-price contracts prior to the pandemic, but it is now shifting its strategy to mitigate further financial losses. The division recorded $1.76 billion in losses last year alone. Ahead of the Farnborough Air Show, which took place last week, the head of the Defense, Space, and Security unit admitted that the sector faced substantial challenges during the quarter.