1 DEFIANT helicopter. We delivered the first 7 KC-46 Tankers to the US Air Force in the quarter with the 8th delivered just this past Friday. We are committed to continuous improvement in delivering the highest quality products to our customers.","We look forward to working with the Air Force and the Navy during their initial operational test and evaluation of the KC-46, as we further demonstrate the operational capabilities of this next generation aircraft across refueling, mobility and combat weapon systems missions.","Turning to Global Services. BGS reported revenue of $4.6 billion, representing 17% growth year-on-year. Since its operations began in July of 2017, BGS's growth has consistently outpaced the average for the services market. BGS continues to win new business, highlighting the value we bring to our broad range of commercial and government customers and the strength of our One Boeing offerings. During the quarter, BGS won new business totaling approximately $4 billion, which included contracts for V-22 Performance Based Logistics for the US Navy and P-8A training for the UK Royal Air Force, an order for GECAS for 10 737-800 converted freighters and an agreement to optimize crew operations for Royal Air Maroc.","Additionally, BGS expanded its global distribution of hardware and chemical products through a long-term agreement with Dubai-based Joramco. Also in the quarter, to expand its rapidly growing unparalleled digital services portfolio, BGS completed the acquisition of ForeFlight, a leading provider of innovative mobile and web-based aviation applications.","We also achieved a major milestone in our proposed strategic partnership with Embraer. On February 26th, Embraer received its shareholder approval to proceed with the deal with over 97% support. Over the coming months, we'll continue to work with Embraer, global regulators and other stakeholders to complete the transaction and create the most important strategic partnership in the aerospace industry.","In summary, our current first order of business is to -- is the safe return-to-service of the 737 MAX and we've made the adjustments necessary to allow our teams to prioritize additional resources and focus on this effort. At the same time, we are maintaining our focus on keeping the business strong and healthy. As they demonstrated in the first quarter, our team continues to execute on operating performance and capture noteworthy additions to our large and diverse backlog.","With that, let's turn to the business environment on slide three. We continue to see healthy global demand for our offerings in commercial defense, space and services. These are sizable sectors that are growing and backed by strong fundamentals with a combined market opportunity of $8.1 trillion over the next 10 years. As a global company with more than 100 years of history and customers in 150 countries, we value and maintain strong relationships with our customers, suppliers and other stakeholders around the world, reinforcing the mutual economic benefits of a strong and prosperous aerospace industry. Recent events underscore the value and importance of those relationships.","In commercial aviation, global passenger traffic continues to grow faster than GDP and long-term trends. In 2018, we saw the ninth straight year of above trend growth passenger traffic. So far, in 2019, passenger traffic has grown at 5.9% through February.","On the air cargo market, we saw a contraction in the year-to-date traffic. While we expect the cargo traffic headwinds to linger in the near term, we anticipate recovery in the latter part of the year.","Our view of the demand fundamentals remains unchanged. We remain highly confident in our industry outlook, which forecast the demand for nearly 43,000 new airplanes over the next 20 years, which will help double the size of the global fleet. We believe the changing nature of travel has fundamentally expanded traffic patterns and supports sustained growth. At the same time, airlines are maintaining capacity discipline in keeping supply and demand in balance as industry profitability remains near historic highs.","I will also note, as an aside, that there is a demand for nearly 800,000 qualified pilots over the next 20 years and around 750,000 maintenance technicians. And we, at Boeing, are committed to doing more to ensure that that demand is met. You'll hear more from us on this as we work with global partners to develop the way forward.","It is clear that long-term demand fundamentals provide a solid foundation for our commercial business. There also is more balance between airplanes purchased for fleet growth and replacement, leading to more stable purchasing patterns. We believe the evolution in these key market dynamics, in aggregate, continues to drive less cyclicality for our industry.","The narrowbody segment will command the largest share of new deliveries. We expect airlines to need more than 31,000 single-aisle airplanes in the next 20 years. These new airplanes will continue to stimulate growth and provide required replacements for older, less efficient airplanes. Our 737 program has a backlog of more than 4,400 aircraft and a production skyline that is sold out into early next decade.","In the widebody segment, we have seen steady orders for the 787 and the 777 and we have high confidence in a meaningful increase in widebody replacement demand early next decade. The current generation 777 continues its steady sales momentum with two new orders from DHL. These additional orders brought the backlog to 92 aircraft and provide further support for the 777 bridge.","Turning to 777X. We added a new customer in the quarter with 18 new orders plus 24 options from IAG Group, the parent of British Airways. We are honored that British Airways has selected the 777X as part of its fleet for its next century. These orders bring total 777X orders and commitments to 364, a strong foundation that supports our plan for ramping up production and delivery of this new aircraft. We continue to focus on further bolstering the 777X skyline. We continue to expect the delivery rate to be approximately 3.5 aircraft per month in 2019 as we transition to the 777X with a slight increase in 2020 as we continue to assess 777 demand as well as 777X timing.","The 787 Dreamliner extended its status as the fastest selling twin-aisle jet in history with 38 net orders in the quarter, adding to more than 1,400 since the program launched. With approximately 600 aircraft in our 787 backlog, our current production rate of 14 airplanes per month is well supported. In the quarter, we captured 38 new orders for 787, including 20 from Lufthansa and 10 from Bamboo Airways. Also, earlier this month, we delivered the first 787-10 to All Nippon Airways. With this milestone delivery, ANA becomes the first airline in Asia to operate the entire Dreamliner family. The market-leading fuel efficiency of the 787 has enabled ANA and more than 50 other airlines to open more than 230 new non-stop routes around the world.","On our 767 program, we added four new 767 freighter orders in the quarter. And as previously announced, we plan to increase the 767 production rate from 2.5 per month to 3 per month in 2020.","At Defense, Space & Security, we continue to see solid demand for our major platforms and programs. The BDS portfolio is well positioned with mature world-class platforms to address current needs and innovative, capable and affordable new franchise programs to build the future. We continue to see broad support for our products from the Pentagon, NASA and Congress. The President's fiscal year 2020 budget proposal includes the purchase of Boeing F-15, F/A-18 fighter jets, Apache and V-22 Osprey rotorcraft, JDAM weapons, satellite programs and key commercial derivative programs like the KC-46 Tanker and the P-8 among other platforms.","Our fighter line is in one of the healthiest positions since the start of the decade. We continue to see support for the F-18 through the recent multi-year award, which will take deliveries through 2023. We expect to continue delivering Super Hornets off our production and service like modification lines to the US Navy into the 2030s, where they will be at the forefront of naval aviation for decades to come.","At the same time, the President's budget leverages billions of dollars on technology upgrades made by Allied Nations to pursue and purchase the next generation Eagle, the F-15EX, allowing the US Air Force to replace its fleet of F-15Cs with a more capable, survivable and affordable air superiority fighter.","We are also maintaining a clear focus on future franchises, including the ongoing MQ-25 and T-X development programs with flight test scheduled for this year, our NASA Commercial Crew and Space Launch System programs at the leading edge of space exploration and the GBSD competition.","Demand from outside the US for our defense and space offerings also remains high, in particular for rotorcraft, commercial derivatives, fighters and satellites.","Turning to the services sector. We see the $2.8 trillion services market over the next 10 years as a significant growth opportunity for our company. BGS provides agile, cost competitive services to our customers worldwide. We aim to continue growing faster than the average services market growth rate of 3.5% as we further expand our broad portfolio of services' offerings and continue to gain market share.","Strong orders of $4 billion in the quarter reflect our customers' recognition, of our value proposition in helping them optimize the performance of their fleets and reduce operational costs through the life cycle. Our expertise, the global reach of our business and our strong customer partnerships have us well positioned to compete and win in this sector.","In summary, the growing markets and opportunities ahead, our team remains committed to growth, innovation and accelerating productivity improvements to fuel our investments in the future. Our One Boeing strategy and offerings across our three businesses are key differentiators that strengthen our position as the world's leading aerospace company. As we work to safely return the 737 MAX to service, our team is determined to keep improving on safety in partnership with the global aerospace industry and the broader community to ensure air travel remains the safest form of transportation the world has ever known.","With that, Greg over to you for our financial results."]},{"name":"Gregory Smith","speech":["Thanks, Dennis; and good morning, everyone. Before we discuss the first quarter results, let me also touch on the 737 MAX and explain how the grounding has impacted our financials to-date and what we're focused on today and going forward.","Let's move to slide four, please. As a result of the 737 MAX grounding, we delivered over 50 fewer 737 aircraft in the quarter than originally planned. This resulted in lower BCA revenue, operating earnings and cash. In addition, BCA earnings were also reduced by period costs associated with the MCAS software update and development of related training materials.","We also booked approximately $1 billion of additional costs due to the adjustment to the production rate to 42 a month. The additional costs are due to the lower production rate causing fixed costs for the 3,100 aircraft in the block to be amortized over a longer period of time. Costs also included additional labor, escalation and support. This, therefore, reduced the 737 program and overall BCA margins.","As you know, when the program margin is adjusted, it will affect current quarter and booking margin for subsequent periods.","With regards to cash, lower delivery payments due to fewer 737 deliveries combined with building and storing 737 aircraft, adversely impacted operating cash in the quarter.","Now, looking forward, the key drivers of financial impact related to the 737 are return-to-service timeline and conditions, the delivery ramp up, which will depend then on how fast we can deliver the aircraft once the fleet returns to service and how fast our customers can accept the aircraft, and, finally, the 737 production rate profile going forward.","These factors will impact the future delivery rate profile and therefore impact revenue and earnings. It will also influence the cash receipt profile, including both delivery and pre-payment -- pre-delivery payments. This in conjunction with corresponding supply chain arrangements will determine our cash expenditure profile and associated working capital going forward. We expect our financial results to continue to be adversely impacted until we safely return the 737 MAX to service, ramp up production rates and resume deliveries to customers. We will continue to assess our production plans going forward and have established a waypoint milestones along our plan.","This will allow us to make decisions based on information we have at that point on whether to further adjust production rates as required. From day one of the grounding, we've been doing detailed scenario planning around return-to-service and production rates, including analyzing the implications on our supply chain, customer fleet and deliveries to fully understand the range of financial outcomes. At the same time, we've been proactively and prudently managing our operations and liquidity position and working on actions to minimize the impact on our customers and our financials.","As Dennis noted, we're taking steps amid current challenges to preserve the future value and growth of this important franchise for our company and for our customers. Some of these proactive steps include the production rate adjustment to 42 a month and we've initiated comprehensive daily oversight into factory health, such as reduction in jobs behind schedule and also suppliers' progress to getting back to master schedule, customer delivery profile and path to seamless return-to-service.","We've also taken actions to prudently manage liquidity and increase our balance sheet flexibility. These include an even sharper focus on productivity and strategic prioritization of spending. We're diligently reviewing all levers available to minimize the financial impact. Our multi-year focused efforts on disciplined cash management, productivity efforts and growing healthy margin businesses help position us on better footing to navigate the current challenges.","As Dennis mentioned, given the dynamic of 737 MAX return-to-service timeline in activities, we are not in a position today to provide a forecast of the impacts of the 737 MAX grounding on our full year 2019 financials. We will provide you with an update of full year 2019 financial forecast when we have clarity on return-to-service of the MAX fleet, our production plans, delivery ramp up profile and corresponding financial impacts.","Returning the MAX safely to flight has been priority one and a team effort that leverages the best talent from across Boeing. Since day one, we've established a cross-functional team following a disciplined process to organize and manage a broad range of activities involved. We've assigned a leader of our Enterprise Program Management Function to manage this critical effort with senior leaders, established a situation room to facilitate the discussions and track upcoming activities and deliverables. The team meets daily with our Executive Council fully engaged. We have dedicated senior management leads for key elements, such as investigation and return-to-service activities, regulatory process, customer support and training, customer engagement, 737 production, supply chain, government relations, finance, communications and branding.","We've also brought in outside technical and strategic experts to assist in areas such as engineering reviews and strategic communications as we work to restore the confidence across all our stakeholders. We will continue to apply whatever resources are required to return the 737 MAX safely into the fleet and take the time necessary to do so working hand-in-hand with our customers. At the same time, we will also remain focused on our priorities in delivering results with excellence.","So, with that, let me move to slide five and I'll discuss our first quarter results. Revenue for the quarter was $22.9 billion, reflecting lower Commercial Airplane deliveries, partially offset by higher Defense and Services volume. Core earnings per share of $3.16 reflects these along with a lower tax rate and a customer financing impairment.","Now, let's discuss Commercial Airplanes on slide six. Our Commercial Airplane business revenue decreased to $11.8 billion during the quarter, reflecting the more than 50 fewer 737 deliveries I mentioned earlier. That was partially offset by favorable mix in the quarter. BCA operating margins decreased to 9.9%, driven by lower 737 deliveries, partially offset by higher 787 margins. The margins include the 737 MAX impacts I outlined earlier.","In the quarter, BCA captured 91 net new orders but also removed 210 aircraft in backlog related to Jet Airways due to liquidity issues experienced by the airline. The net impact was a $3 billion net order increase. BCA's backlog continues to remain strong at $399 billion and more than 5,600 aircraft equating to more than six years of production.","Let's now turn to Defense, Space & Security results on slide seven. First quarter revenue increased to $6.6 billion, reflecting higher volume across satellites, weapons and surveillance aircraft, which was partially offset by lower C-17 volume. Our continued focus on productivity and execution resulted in margins growing to 12.8%. The margins include solid program performance, a gain on sale of the property partially offset by unfavorable mix. The sale of this excess property is the result of the team's continued market-based affordability efforts to optimize our footprint. During the quarter BDS won key contracts worth $12 billion and our backlog stands $67 billion with 31% from outside the United States.","Let's turn now to Boeing Global Services results on slide eight. In the first quarter, Global Services revenue increased to $4.6 billion, reflecting higher volume across the portfolio and the acquisition of KLX completed in the fourth quarter of last year. Year-over-year growth of 17% for the quarter outpaces the average annual service market growth rate of 3.5%. BGS operating margins of 14.1% reflect ongoing productivity efforts, offset by mix of products and services in the quarter and an unfavorable adjustment on the defense training contract. During the quarter, BGS won key contract awards worth approximately $4 billion and our backlog now stands at $21 billion.","Let's turn now to cash flow on slide nine. Operating cash flow for the first quarter was $2.8 billion, driven by lower 737 deliveries, offset by solid underlying performance and favorable timing of receipts and expenditures. As mentioned earlier, we expect continued working capital pressure to adversely affect cash flow until MAX deliveries resume. Strong operating cash flow from other parts of the business, a strong balance sheet and further balance sheet levers will help provide appropriate liquidity during this period.","In the first quarter, we paid $1.2 billion in dividends and we've repurchased $2.3 billion of Boeing stock in the quarter. And until we have clarity on the 737 MAX return-to-service, we have temporarily paused our share repurchase program. However, our long-term balance cash deployment strategy and commitment remains unchanged.","Let's now move to cash and debt balances on slide 10. We ended the quarter with $7.7 billion of cash and marketable securities, slightly increased debt levels and stable credit ratings. Our credit rating of A and A2 were recently affirmed. Our strategy of maintaining a strong balance sheet provides us with substantial borrowing capacity through capital markets access and unused credit facility of $5.1 billion.","We have ample access to long-term debt in the bond markets and short-term debt in the commercial paper markets. Our long-term goals and strategic objectives remain unchanged. We will continue to use our three business units strategy as a key differentiator in the marketplace, make prudent investments and leverage talent innovation from across the company.","So, in summary, while focusing on the very important priority of safe 737 MAX return-to-service and minimizing the significant impact on our customers and the flying public, our team continues to keep the core operating engine strong, delivering results and meeting customer commitments. We recognize that we have a lot of work and not insignificant challenges in front of us in the weeks and months to come, but we're confident we have the right focus, team and resources to navigate through them. We are committed to providing you with additional updates on the MAX return-to-service progress and production plans as we have more information. We will strive to continue to keep all of our stakeholders informed through our public statements and information posted on our website. Once we have further clarity, we will schedule a follow-up investor and media conference call to discuss the financial impacts and revised 2019 guidance.","So, with that, I'll turn it back over to Dennis for some closing comments."]},{"name":"Dennis Muilenburg","speech":["All right. Thank you, Greg. When I started at this company more than three decades ago, our amazing people inspired me. I see how they dedicate their lives in extraordinary talents to connect, protect, explore and inspire the world safely. And that purpose and mission has only grown stronger over the years. Our team is determined to keep improving on safety in partnership with the global aerospace industry and broader community. It is the shared sense of responsibility for the safety of flight that spans and binds all of us together. Our leadership role is clear. Our commitment is resolute, and our pursuit of excellence is never ending. We own it. In these challenging times, I'm even more confident in our team and our customers. We'll stay true to our values, and we will come through this even stronger.","While we continue to be focused on the very important priority of engaging with our global regulators and customers on the safe return-to-service of the 737 MAX, I'd also like to thank the Boeing team for remaining focused on further driving both growth and productivity. We wouldn't have been able to achieve these first quarter results without the hard work and dedication of our employees and the great partnerships we have with our customers and suppliers.","The long-term fundamentals for our business remains strong and our key priorities are unchanged. We will continue to execute on our long-term strategy of robust organic growth investment and returning value to shareholders, complemented by strategic acquisitions that enhance and accelerate our growth plans. We will leverage our unique One Boeing advantages, continue building strength on strength to deliver and improve on our commitments to our customers and partners around the world.","With that, we will take your questions."]}],"string":"[\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Ladies and gentlemen, thank you for standing by. Welcome to The Boeing Company's First Quarter 2019 Earnings Conference Call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst and media question-and-answer sessions, are being broadcast live over the Internet.\",\n \"At this time, for opening remarks and introductions, I'm turning the call over to Ms. Maurita Sutedja, Vice President of Investor Relations for The Boeing Company. Ms. Sutedja, please go ahead.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"Thank you, and good morning. Welcome to Boeing's first quarter 2019 earnings call. I'm Maurita Sutedja, and with me today is Dennis Muilenburg, Boeing's Chairman, President and Chief Executive Officer; and Greg Smith, Boeing's Chief Financial Officer and Executive Vice President of Enterprise Performance and Strategy. After management comments, we will take your questions. In fairness to others on the call, we ask that you please limit yourself to one question.\",\n \"As always, we have provided detailed financial information in our press release issued earlier today. And as a reminder, you can follow today's broadcast and slide presentation through our website at boeing.com.\",\n \"Before we begin, I need to remind you that any projections and goals we include in our discussions this morning are likely to involve risks, which is detailed in our news release, in our various SEC filings and in the forward-looking statement disclaimer at the end of this web presentation.\",\n \"In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of non-GAAP measures that we use when discussing our results and outlook.\",\n \"Now, I will turn the call over to Dennis Muilenburg.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Thank you, Maurita, and good morning. Let me start by saying that all of us at Boeing have been deeply affected by the accidents in Indonesia and Ethiopia, beyond anything I can recall in my 34 years with this great company. We all feel the loss and the gravity of these events personally and we continue to extend our deepest sympathies to the families and loved ones of the passengers and crews on-board the flights. Nothing is more important to us than the safety of the flight crews and passengers who fly on our airplanes. We know every person who steps aboard one of our airplanes places their trust in us and we are committed to earning and reearning that trust and confidence.\",\n \"Recent events have been a deep reminder of the importance of our enduring values at Boeing; Safety, Quality and Integrity; even more so in the difficult times we face now. Our work demands the utmost excellence, These recent accidents have intensified our commitment to continuous improvement, as we design build and support the safest airplanes in the sky. That's our responsibility to our customers and their passengers. We own it.\",\n \"I know from personal experience that when there is something that we can do to make any of our products better and safer, we will do it. If there is something that we can do to help our customers improve the training and education of their pilots or mechanics, we will bring that forward. If there is something that we can do to make airplane development programs or the certification process better and safer, we will pursue it. Our culture is to go above and beyond to deliver safe airplanes and live by a commitment to continuous improvement.\",\n \"Ever since the Lion Air accident, our top technical experts, engineers and test pilots have been working with regulators from all over the world on a software update that will make the 737 MAX one of the safest airplanes ever to fly. Our test pilots now completed over 135 flights, totaling more than 230 hours of airtime with the software update. We are taking a disciplined approach. completed our technical flight testing last week and look forward to completing near term milestones leading to final certification.\",\n \"As part of our continued collaboration with hundreds of stakeholders, nearly 90% of our 50-plus MAX operators around the world have participated in simulator sessions that include the software update. We are committed to ensuring all who operate the MAX are fully prepared when the grounding is lifted and the fleet returns to service. This includes a comprehensive package in -- of training and educational resources that we're developing and deploying.\",\n \"In light of our commitment to continually improve safety, as we have always done, I've asked the Boeing Board of Directors to establish a committee to review our companywide policies and processes for the design and development of the airplanes we build and to assure the highest level of safety on the 737 MAX program as well as our other airplane programs and to recommend improvements to our policies and procedures.\",\n \"As we continue to work through these steps and, as previously announced, we adjusted the 737 production system temporarily from 52 aircraft per month to 42 per month to accommodate the pause in MAX deliveries, allowing us to prioritize additional resources to focus on safely returning the MAX to service. This decision will also enable us to invest in the broader health and quality of our production system and supply chain. We will continue to assess our production plans and we'll make decisions at various way points as to where the further rate adjustments are needed based on information we have at that time.\",\n \"The timing of return-to-service for the MAX will continue to be paced by ongoing work with global regulators and our customers. Our previously issued 2019 financial guidance does not reflect the MAX impacts. Due to the uncertainty of the timing and conditions surrounding the return-to-service of the 737 MAX fleet, new guidance will be issued at a future date.\",\n \"I want to personally thank the various government agencies, our industry partners and my Boeing teammates for their tireless efforts over the past few weeks and months. This includes the more than 600 737 suppliers, many of whom are small to mid-sized businesses who have stepped up to work with us as we navigate the 737 production plan changes. We could not build our airplanes without them.\",\n \"On behalf of the entire Boeing team, I also want to thank our customers and their passengers for enduring the disruption caused by this issue. We deeply regret the impact this has created.\",\n \"Our company's 100-year plus legacy is built on the foundation of developing, producing and supporting safe products. We are committed to ensuring the 737 MAX achieves the highest standards for safety, performance and reliability.\",\n \"Now let me turn to an overview of our first quarter operating performance, followed by an update on the business environment and our expectations going forward. After that, Greg will walk you through the details of our financial results and how we are maintaining financial discipline and prudently managing liquidity as we work through the safe return-to-service of the MAX.\",\n \"With that, let's move to slide two. Thanks to the dedicated efforts of our teams across the company, during the quarter we've recorded revenue of $22.9 billion and core earnings per share of $3.16, reflecting lower volume of 737 deliveries, partially offset by higher defense and services volume. We generated $2.8 billion of operating cash and paid $1.2 billion in dividends, reflecting a 20% increase in dividends per share from last year.\",\n \"Now, let's look at the first quarter operating performance for our businesses. For the quarter, Commercial Airplanes generated revenue of $11.8 billion, reflecting 149 deliveries. Fewer 737s were delivered in the quarter due to the grounding of the 737 MAX. We saw healthy widebody orders in the quarter and our backlog remains robust at more than 5,600 airplanes worth $399 billion.\",\n \"Key commercial milestones in the quarter included the 787 program's smooth transition to rate 14 per month, while maintaining the highest quality standards. And the first 777X flight test airplane rolled out after passing the factory gauntlet test. 777X flight testing will begin this year with first delivery and entry into service as scheduled for 2020.\",\n \"Now over to Defense, Space & Security. BDS reported first quarter revenue of $6.6 billion and booked $12 billion of new orders, demonstrating the value we bring to our customers across our Defense, Space & Security portfolio. These orders included a multi-year contract for 78 F/A-18 Super Hornets. Contracts for 5 extra large unmanned undersea vehicles for the US Navy, 5 E-7 AEW&C aircraft for the UK Royal Air Force, and 19 P-8 Poseidon aircraft for the US Navy, Royal Norwegian Navy and the UK Royal Navy.\",\n \"Key milestones for BDS included completion of the first ground-based Midcourse Defense Test with two interceptors, demonstrating the robustness of the system, successful environmental testing of the commercial crew spacecraft and the first flight of the SB>1 DEFIANT helicopter. We delivered the first 7 KC-46 Tankers to the US Air Force in the quarter with the 8th delivered just this past Friday. We are committed to continuous improvement in delivering the highest quality products to our customers.\",\n \"We look forward to working with the Air Force and the Navy during their initial operational test and evaluation of the KC-46, as we further demonstrate the operational capabilities of this next generation aircraft across refueling, mobility and combat weapon systems missions.\",\n \"Turning to Global Services. BGS reported revenue of $4.6 billion, representing 17% growth year-on-year. Since its operations began in July of 2017, BGS's growth has consistently outpaced the average for the services market. BGS continues to win new business, highlighting the value we bring to our broad range of commercial and government customers and the strength of our One Boeing offerings. During the quarter, BGS won new business totaling approximately $4 billion, which included contracts for V-22 Performance Based Logistics for the US Navy and P-8A training for the UK Royal Air Force, an order for GECAS for 10 737-800 converted freighters and an agreement to optimize crew operations for Royal Air Maroc.\",\n \"Additionally, BGS expanded its global distribution of hardware and chemical products through a long-term agreement with Dubai-based Joramco. Also in the quarter, to expand its rapidly growing unparalleled digital services portfolio, BGS completed the acquisition of ForeFlight, a leading provider of innovative mobile and web-based aviation applications.\",\n \"We also achieved a major milestone in our proposed strategic partnership with Embraer. On February 26th, Embraer received its shareholder approval to proceed with the deal with over 97% support. Over the coming months, we'll continue to work with Embraer, global regulators and other stakeholders to complete the transaction and create the most important strategic partnership in the aerospace industry.\",\n \"In summary, our current first order of business is to -- is the safe return-to-service of the 737 MAX and we've made the adjustments necessary to allow our teams to prioritize additional resources and focus on this effort. At the same time, we are maintaining our focus on keeping the business strong and healthy. As they demonstrated in the first quarter, our team continues to execute on operating performance and capture noteworthy additions to our large and diverse backlog.\",\n \"With that, let's turn to the business environment on slide three. We continue to see healthy global demand for our offerings in commercial defense, space and services. These are sizable sectors that are growing and backed by strong fundamentals with a combined market opportunity of $8.1 trillion over the next 10 years. As a global company with more than 100 years of history and customers in 150 countries, we value and maintain strong relationships with our customers, suppliers and other stakeholders around the world, reinforcing the mutual economic benefits of a strong and prosperous aerospace industry. Recent events underscore the value and importance of those relationships.\",\n \"In commercial aviation, global passenger traffic continues to grow faster than GDP and long-term trends. In 2018, we saw the ninth straight year of above trend growth passenger traffic. So far, in 2019, passenger traffic has grown at 5.9% through February.\",\n \"On the air cargo market, we saw a contraction in the year-to-date traffic. While we expect the cargo traffic headwinds to linger in the near term, we anticipate recovery in the latter part of the year.\",\n \"Our view of the demand fundamentals remains unchanged. We remain highly confident in our industry outlook, which forecast the demand for nearly 43,000 new airplanes over the next 20 years, which will help double the size of the global fleet. We believe the changing nature of travel has fundamentally expanded traffic patterns and supports sustained growth. At the same time, airlines are maintaining capacity discipline in keeping supply and demand in balance as industry profitability remains near historic highs.\",\n \"I will also note, as an aside, that there is a demand for nearly 800,000 qualified pilots over the next 20 years and around 750,000 maintenance technicians. And we, at Boeing, are committed to doing more to ensure that that demand is met. You'll hear more from us on this as we work with global partners to develop the way forward.\",\n \"It is clear that long-term demand fundamentals provide a solid foundation for our commercial business. There also is more balance between airplanes purchased for fleet growth and replacement, leading to more stable purchasing patterns. We believe the evolution in these key market dynamics, in aggregate, continues to drive less cyclicality for our industry.\",\n \"The narrowbody segment will command the largest share of new deliveries. We expect airlines to need more than 31,000 single-aisle airplanes in the next 20 years. These new airplanes will continue to stimulate growth and provide required replacements for older, less efficient airplanes. Our 737 program has a backlog of more than 4,400 aircraft and a production skyline that is sold out into early next decade.\",\n \"In the widebody segment, we have seen steady orders for the 787 and the 777 and we have high confidence in a meaningful increase in widebody replacement demand early next decade. The current generation 777 continues its steady sales momentum with two new orders from DHL. These additional orders brought the backlog to 92 aircraft and provide further support for the 777 bridge.\",\n \"Turning to 777X. We added a new customer in the quarter with 18 new orders plus 24 options from IAG Group, the parent of British Airways. We are honored that British Airways has selected the 777X as part of its fleet for its next century. These orders bring total 777X orders and commitments to 364, a strong foundation that supports our plan for ramping up production and delivery of this new aircraft. We continue to focus on further bolstering the 777X skyline. We continue to expect the delivery rate to be approximately 3.5 aircraft per month in 2019 as we transition to the 777X with a slight increase in 2020 as we continue to assess 777 demand as well as 777X timing.\",\n \"The 787 Dreamliner extended its status as the fastest selling twin-aisle jet in history with 38 net orders in the quarter, adding to more than 1,400 since the program launched. With approximately 600 aircraft in our 787 backlog, our current production rate of 14 airplanes per month is well supported. In the quarter, we captured 38 new orders for 787, including 20 from Lufthansa and 10 from Bamboo Airways. Also, earlier this month, we delivered the first 787-10 to All Nippon Airways. With this milestone delivery, ANA becomes the first airline in Asia to operate the entire Dreamliner family. The market-leading fuel efficiency of the 787 has enabled ANA and more than 50 other airlines to open more than 230 new non-stop routes around the world.\",\n \"On our 767 program, we added four new 767 freighter orders in the quarter. And as previously announced, we plan to increase the 767 production rate from 2.5 per month to 3 per month in 2020.\",\n \"At Defense, Space & Security, we continue to see solid demand for our major platforms and programs. The BDS portfolio is well positioned with mature world-class platforms to address current needs and innovative, capable and affordable new franchise programs to build the future. We continue to see broad support for our products from the Pentagon, NASA and Congress. The President's fiscal year 2020 budget proposal includes the purchase of Boeing F-15, F/A-18 fighter jets, Apache and V-22 Osprey rotorcraft, JDAM weapons, satellite programs and key commercial derivative programs like the KC-46 Tanker and the P-8 among other platforms.\",\n \"Our fighter line is in one of the healthiest positions since the start of the decade. We continue to see support for the F-18 through the recent multi-year award, which will take deliveries through 2023. We expect to continue delivering Super Hornets off our production and service like modification lines to the US Navy into the 2030s, where they will be at the forefront of naval aviation for decades to come.\",\n \"At the same time, the President's budget leverages billions of dollars on technology upgrades made by Allied Nations to pursue and purchase the next generation Eagle, the F-15EX, allowing the US Air Force to replace its fleet of F-15Cs with a more capable, survivable and affordable air superiority fighter.\",\n \"We are also maintaining a clear focus on future franchises, including the ongoing MQ-25 and T-X development programs with flight test scheduled for this year, our NASA Commercial Crew and Space Launch System programs at the leading edge of space exploration and the GBSD competition.\",\n \"Demand from outside the US for our defense and space offerings also remains high, in particular for rotorcraft, commercial derivatives, fighters and satellites.\",\n \"Turning to the services sector. We see the $2.8 trillion services market over the next 10 years as a significant growth opportunity for our company. BGS provides agile, cost competitive services to our customers worldwide. We aim to continue growing faster than the average services market growth rate of 3.5% as we further expand our broad portfolio of services' offerings and continue to gain market share.\",\n \"Strong orders of $4 billion in the quarter reflect our customers' recognition, of our value proposition in helping them optimize the performance of their fleets and reduce operational costs through the life cycle. Our expertise, the global reach of our business and our strong customer partnerships have us well positioned to compete and win in this sector.\",\n \"In summary, the growing markets and opportunities ahead, our team remains committed to growth, innovation and accelerating productivity improvements to fuel our investments in the future. Our One Boeing strategy and offerings across our three businesses are key differentiators that strengthen our position as the world's leading aerospace company. As we work to safely return the 737 MAX to service, our team is determined to keep improving on safety in partnership with the global aerospace industry and the broader community to ensure air travel remains the safest form of transportation the world has ever known.\",\n \"With that, Greg over to you for our financial results.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Thanks, Dennis; and good morning, everyone. Before we discuss the first quarter results, let me also touch on the 737 MAX and explain how the grounding has impacted our financials to-date and what we're focused on today and going forward.\",\n \"Let's move to slide four, please. As a result of the 737 MAX grounding, we delivered over 50 fewer 737 aircraft in the quarter than originally planned. This resulted in lower BCA revenue, operating earnings and cash. In addition, BCA earnings were also reduced by period costs associated with the MCAS software update and development of related training materials.\",\n \"We also booked approximately $1 billion of additional costs due to the adjustment to the production rate to 42 a month. The additional costs are due to the lower production rate causing fixed costs for the 3,100 aircraft in the block to be amortized over a longer period of time. Costs also included additional labor, escalation and support. This, therefore, reduced the 737 program and overall BCA margins.\",\n \"As you know, when the program margin is adjusted, it will affect current quarter and booking margin for subsequent periods.\",\n \"With regards to cash, lower delivery payments due to fewer 737 deliveries combined with building and storing 737 aircraft, adversely impacted operating cash in the quarter.\",\n \"Now, looking forward, the key drivers of financial impact related to the 737 are return-to-service timeline and conditions, the delivery ramp up, which will depend then on how fast we can deliver the aircraft once the fleet returns to service and how fast our customers can accept the aircraft, and, finally, the 737 production rate profile going forward.\",\n \"These factors will impact the future delivery rate profile and therefore impact revenue and earnings. It will also influence the cash receipt profile, including both delivery and pre-payment -- pre-delivery payments. This in conjunction with corresponding supply chain arrangements will determine our cash expenditure profile and associated working capital going forward. We expect our financial results to continue to be adversely impacted until we safely return the 737 MAX to service, ramp up production rates and resume deliveries to customers. We will continue to assess our production plans going forward and have established a waypoint milestones along our plan.\",\n \"This will allow us to make decisions based on information we have at that point on whether to further adjust production rates as required. From day one of the grounding, we've been doing detailed scenario planning around return-to-service and production rates, including analyzing the implications on our supply chain, customer fleet and deliveries to fully understand the range of financial outcomes. At the same time, we've been proactively and prudently managing our operations and liquidity position and working on actions to minimize the impact on our customers and our financials.\",\n \"As Dennis noted, we're taking steps amid current challenges to preserve the future value and growth of this important franchise for our company and for our customers. Some of these proactive steps include the production rate adjustment to 42 a month and we've initiated comprehensive daily oversight into factory health, such as reduction in jobs behind schedule and also suppliers' progress to getting back to master schedule, customer delivery profile and path to seamless return-to-service.\",\n \"We've also taken actions to prudently manage liquidity and increase our balance sheet flexibility. These include an even sharper focus on productivity and strategic prioritization of spending. We're diligently reviewing all levers available to minimize the financial impact. Our multi-year focused efforts on disciplined cash management, productivity efforts and growing healthy margin businesses help position us on better footing to navigate the current challenges.\",\n \"As Dennis mentioned, given the dynamic of 737 MAX return-to-service timeline in activities, we are not in a position today to provide a forecast of the impacts of the 737 MAX grounding on our full year 2019 financials. We will provide you with an update of full year 2019 financial forecast when we have clarity on return-to-service of the MAX fleet, our production plans, delivery ramp up profile and corresponding financial impacts.\",\n \"Returning the MAX safely to flight has been priority one and a team effort that leverages the best talent from across Boeing. Since day one, we've established a cross-functional team following a disciplined process to organize and manage a broad range of activities involved. We've assigned a leader of our Enterprise Program Management Function to manage this critical effort with senior leaders, established a situation room to facilitate the discussions and track upcoming activities and deliverables. The team meets daily with our Executive Council fully engaged. We have dedicated senior management leads for key elements, such as investigation and return-to-service activities, regulatory process, customer support and training, customer engagement, 737 production, supply chain, government relations, finance, communications and branding.\",\n \"We've also brought in outside technical and strategic experts to assist in areas such as engineering reviews and strategic communications as we work to restore the confidence across all our stakeholders. We will continue to apply whatever resources are required to return the 737 MAX safely into the fleet and take the time necessary to do so working hand-in-hand with our customers. At the same time, we will also remain focused on our priorities in delivering results with excellence.\",\n \"So, with that, let me move to slide five and I'll discuss our first quarter results. Revenue for the quarter was $22.9 billion, reflecting lower Commercial Airplane deliveries, partially offset by higher Defense and Services volume. Core earnings per share of $3.16 reflects these along with a lower tax rate and a customer financing impairment.\",\n \"Now, let's discuss Commercial Airplanes on slide six. Our Commercial Airplane business revenue decreased to $11.8 billion during the quarter, reflecting the more than 50 fewer 737 deliveries I mentioned earlier. That was partially offset by favorable mix in the quarter. BCA operating margins decreased to 9.9%, driven by lower 737 deliveries, partially offset by higher 787 margins. The margins include the 737 MAX impacts I outlined earlier.\",\n \"In the quarter, BCA captured 91 net new orders but also removed 210 aircraft in backlog related to Jet Airways due to liquidity issues experienced by the airline. The net impact was a $3 billion net order increase. BCA's backlog continues to remain strong at $399 billion and more than 5,600 aircraft equating to more than six years of production.\",\n \"Let's now turn to Defense, Space & Security results on slide seven. First quarter revenue increased to $6.6 billion, reflecting higher volume across satellites, weapons and surveillance aircraft, which was partially offset by lower C-17 volume. Our continued focus on productivity and execution resulted in margins growing to 12.8%. The margins include solid program performance, a gain on sale of the property partially offset by unfavorable mix. The sale of this excess property is the result of the team's continued market-based affordability efforts to optimize our footprint. During the quarter BDS won key contracts worth $12 billion and our backlog stands $67 billion with 31% from outside the United States.\",\n \"Let's turn now to Boeing Global Services results on slide eight. In the first quarter, Global Services revenue increased to $4.6 billion, reflecting higher volume across the portfolio and the acquisition of KLX completed in the fourth quarter of last year. Year-over-year growth of 17% for the quarter outpaces the average annual service market growth rate of 3.5%. BGS operating margins of 14.1% reflect ongoing productivity efforts, offset by mix of products and services in the quarter and an unfavorable adjustment on the defense training contract. During the quarter, BGS won key contract awards worth approximately $4 billion and our backlog now stands at $21 billion.\",\n \"Let's turn now to cash flow on slide nine. Operating cash flow for the first quarter was $2.8 billion, driven by lower 737 deliveries, offset by solid underlying performance and favorable timing of receipts and expenditures. As mentioned earlier, we expect continued working capital pressure to adversely affect cash flow until MAX deliveries resume. Strong operating cash flow from other parts of the business, a strong balance sheet and further balance sheet levers will help provide appropriate liquidity during this period.\",\n \"In the first quarter, we paid $1.2 billion in dividends and we've repurchased $2.3 billion of Boeing stock in the quarter. And until we have clarity on the 737 MAX return-to-service, we have temporarily paused our share repurchase program. However, our long-term balance cash deployment strategy and commitment remains unchanged.\",\n \"Let's now move to cash and debt balances on slide 10. We ended the quarter with $7.7 billion of cash and marketable securities, slightly increased debt levels and stable credit ratings. Our credit rating of A and A2 were recently affirmed. Our strategy of maintaining a strong balance sheet provides us with substantial borrowing capacity through capital markets access and unused credit facility of $5.1 billion.\",\n \"We have ample access to long-term debt in the bond markets and short-term debt in the commercial paper markets. Our long-term goals and strategic objectives remain unchanged. We will continue to use our three business units strategy as a key differentiator in the marketplace, make prudent investments and leverage talent innovation from across the company.\",\n \"So, in summary, while focusing on the very important priority of safe 737 MAX return-to-service and minimizing the significant impact on our customers and the flying public, our team continues to keep the core operating engine strong, delivering results and meeting customer commitments. We recognize that we have a lot of work and not insignificant challenges in front of us in the weeks and months to come, but we're confident we have the right focus, team and resources to navigate through them. We are committed to providing you with additional updates on the MAX return-to-service progress and production plans as we have more information. We will strive to continue to keep all of our stakeholders informed through our public statements and information posted on our website. Once we have further clarity, we will schedule a follow-up investor and media conference call to discuss the financial impacts and revised 2019 guidance.\",\n \"So, with that, I'll turn it back over to Dennis for some closing comments.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"All right. Thank you, Greg. When I started at this company more than three decades ago, our amazing people inspired me. I see how they dedicate their lives in extraordinary talents to connect, protect, explore and inspire the world safely. And that purpose and mission has only grown stronger over the years. Our team is determined to keep improving on safety in partnership with the global aerospace industry and broader community. It is the shared sense of responsibility for the safety of flight that spans and binds all of us together. Our leadership role is clear. Our commitment is resolute, and our pursuit of excellence is never ending. We own it. In these challenging times, I'm even more confident in our team and our customers. We'll stay true to our values, and we will come through this even stronger.\",\n \"While we continue to be focused on the very important priority of engaging with our global regulators and customers on the safe return-to-service of the 737 MAX, I'd also like to thank the Boeing team for remaining focused on further driving both growth and productivity. We wouldn't have been able to achieve these first quarter results without the hard work and dedication of our employees and the great partnerships we have with our customers and suppliers.\",\n \"The long-term fundamentals for our business remains strong and our key priorities are unchanged. We will continue to execute on our long-term strategy of robust organic growth investment and returning value to shareholders, complemented by strategic acquisitions that enhance and accelerate our growth plans. We will leverage our unique One Boeing advantages, continue building strength on strength to deliver and improve on our commitments to our customers and partners around the world.\",\n \"With that, we will take your questions.\"\n ]\n }\n]","isConversational":false},"questions_and_answers":{"kind":"list like","value":[{"name":"Operator","speech":["(Operator Instructions) And first in line, we have Myles Walton with UBS. Please go ahead."]},{"name":"Myles Walton","speech":["Thanks. Good morning. Dennis or Greg, how is the 737 return-to-service effort disrupting or influencing both the 777X certification effort ongoing and then your decision on the NMA? Given that this is all hands on deck for the MAX, I imagine there's some cannibalization of resources on the 777X. And then on the NMA, how is your view on that changing given the less clear picture maybe of where the certification is or will be in the future?"]},{"name":"Dennis Muilenburg","speech":["Yeah. Hey, Myles, good question. First of all, again, I want to stress and reiterate the point that we are very, very focused on the safe return-to-service of the MAX, and that remains our top priority. Clear focus, clear resources being applied and daily engagement, hourly engagement by me, Greg and the leadership team. And we're going to continue to focus there and get that airplane back up and flying for our customers.","As part of that process, we are taking a look at our certification processes. We remain confident in the fundamental processes. But as part of our continuous improvement mindset, we always take a look at opportunities to improve. So we're welcoming the government joint authorities' technical review that's been announced and that we'll be supporting that as appropriate. As you've heard earlier, I've also asked Boeing Board to stand up a committee to take a look at our certification processes and identify any potential improvements. And if we find any opportunities to improve, we will certainly adopt those on a go-forward basis.","As far as the ripple impact or potential impact of the 777X, we haven't seen any direct impact. Again, our team has been very strong about continuing to drive 777X development and performance in parallel with our return-to-flight or return-to-service efforts on the MAX. We've deployed our teams accordingly and make sure that we've resourced the high-priority efforts on 777X. As noted earlier, we have rolled two flight test birds out of the factory, number three and number four, are in the final assembly, and we look forward to getting into flight testing here this year and delivering that airplane on schedule in 2020. We do not see any changes to the underlying certification process. But, again, as I said, if we find areas to improve, we will certainly adopt those.","As to your NMA question, we're continuing our work on that in parallel. Certainly, the higher priority -- highest priority for us is the 737 MAX's safe return-to-service. So we have prioritized our resources accordingly, while we continue to work on our NMA effort in parallel. We're still looking at that as a potential opportunity for a 2025 entry into service date. We still have work to do before we get to an authority to offer a decision. We're still working on a pace to try to do that this year, as we previously announced. But I want to be very clear that when it comes to resource questions and application of resources, our top priority is the safe return-to-service of the 737 MAX."]},{"name":"Myles Walton","speech":["Okay. Thanks for the color."]},{"name":"Operator","speech":["Our next question is from Doug Harned with Bernstein. Please go ahead."]},{"name":"Douglas Harned","speech":["Good morning. Thank you."]},{"name":"Gregory Smith","speech":["Good morning."]},{"name":"Dennis Muilenburg","speech":["Hi, Doug."]},{"name":"Douglas Harned","speech":["As you've talked about, you have a technical fix that you're testing now for the 737 MAX, and it sounds as though you have some pretty good confidence in that. If we assume that the technical solution, that, that is what is needed, that works, then I sort of look at this as three important processes here. One, you've got to work with the authorities, the airlines, the flying public to give them the confidence that the solution works. Second, you've got an operational process where you've already taken rate down but you want to be able to take that rate up very quickly as soon as the airplane can return-to-service safely. And then, third, you have a commercial process where customers are awaiting delivery, they've been making progress payments.","And so, what I'm interested in understanding is, as you think of that first task, that first process, which the timeline on it seems somewhat uncertain, how does that drive the way you look at different rates scenarios going forward operationally and the way your work with your customers who put money in and they've -- they're expecting to get delivery of this airplane?"]},{"name":"Dennis Muilenburg","speech":["Yeah. Doug, our plan integrates across all of those dimensions as it should, because they're all interrelated. I will say on that first path, returning the airplane to a service and doing so safely, just to give you a sense of the key steps to go there. As we know from the accident, investigations today have been publicly announced through the preliminary reports. Both accidents were a chain of events. We know there was one common link in that chain of events, and that was the activation of the MCAS system with erroneous angle of attack data. That's been well published. And, as we said, we understand how to address that link. That's our responsibility. We own that, and that's what that software update does. We have great confidence in that software update with the more than 200 flights that have occurred -- or excuse me, 135 flights that have occurred. I personally have the chance to fly on two of those flights, test and demonstration flights, and have seen the confidence in that software solution. We have tested it out and completed our engineering flight test last week.","The next step in that process will be the certification flight under the FAA's authority, and we are working with the FAA right now to prepare for that in the near term. Subsequent steps will include, again, bringing all of the global regulators together with the FAA's leadership to approve the return-to-service. So that path is a well-understood set of steps, things that are being actively worked on a daily and hourly basis, and we're going to continue to pursue that and make sure we take the time to do it right. That's the most important thing here, is to make sure we have a safe return to flight.","Once we accomplish that, then we'll have the opportunity to look at our production profiles, our delivery sequencing for our customers. As you might guess, we are in daily multiple-times-a-day conversations with our customers as well, and we regret the impact this has had to their operations. We know our customers are eager to get the MAX back into service. And we are eager, when we're ready, to get production ramp back up and provide those airplanes. So we'll be working that in a coordinated, integrated fashion. We have teams that are ready, positioned by tail number with the 737 MAXs that are already out in the fleet to get those airplanes ready and back up and flying for our customers, and we also have an integrated introduction plan, including our supply chain that will allow us to pivot and move forward. So these are actions that we are taking daily, again hourly, all in a coordinated fashion. And across those three areas that you mentioned, Doug, I'm very confident that we have an integrated plan. All of this will be paced by the safe return-to-service of the MAX. That is our first focus."]},{"name":"Douglas Harned","speech":["Thank you."]},{"name":"Operator","speech":["And our next question is from Ron Epstein with Bank of America Merrill Lynch. Please go ahead."]},{"name":"Ronald Epstein","speech":["Good morning, Dennis and Greg. To the extent that you can answer this, how does this happen, right? I mean, this sort of seemingly sort of came out of nowhere. I mean, is there any way you can kind of give us a feeling for how did this slip through the engineering organization? How did it slip through the FAA? Can you give us a feel for that? Like, I guess, that's the part that befuddles me most about all this, because it doesn't seem like there was a lot of new science going on here, right? I mean 787 had been a lot of new science, this seem to be applications of existing technology to an existing platform."]},{"name":"Dennis Muilenburg","speech":["Yeah. Ron, there is no technical slip or gap here, right. Again, as I mentioned, we know that both accidents were a series of events, and that is very common to all accidents that we've seen in history. And in -- what we know is that, in this case, there was erroneous angle of attack information that came into the airplane from multiple causes. We know that at some point during the flight, that activated the MCAS control loss and we know that ultimately there were actions or actions not taken that contributed to the final outcome.","I can't really get into the details of that deep accident investigation, because this is all governed by the ICAO Annex 13 process, which I know you know well, and that is a disciplined, rigorous process that examines these accidents from every dimension to ensure that we understand them, and it's ultimately that disciplined process that has made this industry so safe. So we have been very purposeful about supporting that process, very purposeful about supporting the investigation, staying focused on safety and not speculation.","But I can tell you with confidence that we understand our airplane. We understand how the design was accomplished, how the certification was accomplished and remain fully confident in the product that we put in the field. But we also know there are areas where we can improve, and that is the source of the software update here. But there was no surprise or gap or unknown here or something that somehow slipped through a certification process. Quite the opposite. We know exactly how the airplane was designed. We know exactly how it was certified. We have taken the time to understand that. That has led to the software update that we've been implementing and testing, and we're very confident that when the fleet comes back up, the MAX will be one of the safest airplanes ever to fly."]},{"name":"Ronald Epstein","speech":["Okay. Thank you."]},{"name":"Operator","speech":["Next from the line of Peter Arment with Baird. Please go ahead."]},{"name":"Peter Arment","speech":["Yes. Good morning. Dennis and Greg."]},{"name":"Dennis Muilenburg","speech":["Good morning, Peter."]},{"name":"Peter Arment","speech":["Dennis. Thanks for all the color. Just maybe circling back to a piece in Doug's question. When you're thinking about the best way you could describe kind of the regulatory discussions, are they running all at the same pace or should investors expect kind of a different path with each regulatory body? And we're thinking about the FAA or EASA or FINS (ph) in Asia? Thanks."]},{"name":"Dennis Muilenburg","speech":["Yeah. Peter, we are working with the FAA and regulatory authorities around the world. And as you might guess, there are different paces and different processes in each country, but these are all running in parallel. We're working with those authorities to try to align schedules, both from a regulatory government standpoint as well as the customers that are operating in these countries around the world.","As we said, we have more than 50 MAX operators today around the world, and they're all very interested in getting the airplane back up and flying. So we are coordinating across that entire network of global regulators and customers. And we're seeing the schedules, I'll say, beginning to align. There is still clearly a lot of work to go as we get through the certification.","Another pacing item for us will be training and training deployment worldwide, and then alignment of all the regulatory agencies on approval to get the airplane back up into service and back to flying. So we have a support role across all of that.","I want to complement the FAA, in particular, for their leadership and the work that they're doing across the global enterprise. As you might have seen, the FAA leader, Dan Elwell, hosted an international session with the counterparts from other regulatory agencies a couple of weeks ago. We were supportive to that meeting as well. So the FAA has been working hard to coordinate across all of the international regulators, drive alignment, answer questions and ensure that we're all in the same page going forward. It is fundamentally important here that we have an integrated plan and that we understand any questions or concerns that might be out around the world that we address those. And that, again, we focus on a safe return-to-service of the MAX, and I'm confident that that coordination is happening. And I think it's fair to say we still have some work to do, but we're making progress."]},{"name":"Peter Arment","speech":["Appreciate the color. Thank you."]},{"name":"Operator","speech":["Next question is from Hunter Keay with Wolfe Research. Please go ahead."]},{"name":"Hunter Keay","speech":["Thank you, guys. Good morning. Can you talk about the $1 billion of cost that you added to the 737 block? I'm kind of curious to -- for you, Greg, to maybe elaborate a little more what's included in that. But maybe more importantly, what was not included in that? Thank you."]},{"name":"Gregory Smith","speech":["Yeah. So the cost to develop and test the software, its period expense was not in there as well as the related training materials associated with that. They're booked in the quarter but not in program margin. As I said, the period expense. Within the $1 billion, really, what's taken into account there is the lower production rate. That's ultimately what's driving it, and now we'll take a little bit longer than what we originally had in the cost base, so you've got fixed cost that will be associated with that lower production rate, but we also are holding on to headcount.","Remember, we were at 52, going down to 42. We've held that headcount in the factory, and what we've been doing with that is really working the jobs behind schedule and any jobs that are out of position in getting things back into position in the factory. At the same time, been working with the supply chain. So those that weren't on master schedule at 52, we are -- even though we came down, we have some of those suppliers staying at 52 in order to get healthy, get back on schedule. So when we do come back up and ramp, we're going to do it in a very steady fashion with stability in each step along the way to ensure that we have a predictable, I'll say, production system, a healthier production system and one that we can support our customers as we go up in rate.","The other things that are within that fixed cost escalation, obviously, again, facilities, tooling and also support -- additional support for deliveries as well as pulling the airplanes out of storage that we currently have within our facility. So those are, I'd say, the bigger buckets of costs that are within there.","But like Dennis said, this is day-to-day management on all aspects. So all with -- what we've been talking about is feeding into our production scenarios. And key in all of this obviously is keep all the stakeholders informed, realizing we don't have answers to some of the questions. But we've got scenarios, and we're trying to be proactive in how we address those, so -- and be strategic. So, again, going into the supply chain, rather than pulling everybody down to 42, let's go through and understand liquidity within each of those suppliers, where -- who needs help, who doesn't, who is on schedule, who can we use to get this opportunity to get back on schedule.","So, again, being very, I'll say, specific, but it's day-to-day management. And we talked about our operating rhythm being daily. Our head of the program reports on -- daily on production health to all of us, and we've got the full enterprise support in this. I know there's a question earlier on 777X. People that are part of this process are from the company. So we're bringing people in that are experts in anywhere area that we need to support, we're bringing them in from across the whole enterprise, and we'll continue to do that until we get the airplane safely back up in the air and get our production rates back to where they were."]},{"name":"Hunter Keay","speech":["Thank you."]},{"name":"Operator","speech":["Next question is from Sheila Kahyaoglu with Jefferies. Please go ahead."]},{"name":"Sheila Kahyaoglu","speech":["Good morning, Dennis and Greg, and thank you for all that color."]},{"name":"Dennis Muilenburg","speech":["Hi, Sheila."]},{"name":"Gregory Smith","speech":["Good morning."]},{"name":"Sheila Kahyaoglu","speech":["I guess how do we think about the broader customer reaction to the MAX? There's been a lot of back and forth in the media. And then how do you think about the potential risk to the backlog and maybe production scenarios and risks you're thinking about there?"]},{"name":"Dennis Muilenburg","speech":["Yeah. Sheila, to that point, let me take a long-term view here. We don't see any change. As you well know, we are continuously engaged with our customers. We have a ton of respect for them and how they operate. We have deep regret for the impact that this has had on their operations to-date, and we're very, very sensitive to that. And we're doing everything we can to get the airplane back up and flying and do that safely. Our customers are eager to do that as well.","I can tell you, I've personally talked to many, many of our customers. Our team, Commercial Airplanes team, Kevin McAllister, Ihssane, their teams are deployed daily, hourly, talking to customers. Our support teams are working around the world, helping them with the fleet that is currently grounded to maintain that fleet in good condition so that when we're ready, we can quickly bring the fleet back up to operating status.","So we're deeply engaged with our customers. We understand their operational model. We're having discussions with them on how to best get them ramped back up and to help them during this intermediate period. And I think the collaboration, the communication, it's just been very strong. And I'm thankful to our customers. They've been working with us through this period. It's been difficult. It's been challenging for all of us, but we have a mutual respect based on the health of this industry and the important work that we do around the world. And we want to make sure we can get back up and flying safely, and we know we have some work to do to earn and reearn the trust of our customers and the flying public in particular.","And so, we're working with our customers in the airlines on how we can best rebuild that public trust, working with them and engaging their pilots, for example, as they're involved in the process and our airline pilot customers who can express their views to the flying public. I think that's a big source of confidence for the future. So we're working together on that standpoint.","And then as we think about production reramp going forward, when we're ready, the skyline management, the delivery sequencing, how we can support our customers, get them airplanes as rapidly as we can and in the right order and sequence, that's all part of our daily integrated planning as well. And longer term, we're also deploying training packages and additional educational materials. I would call those above-and-beyond educational materials that are tailored for our various customers around the world. So that'll be a longer-term effort where we work with them on training, education as well as areas where we can help with the brand repair, if you will, in rebuilding the public confidence.","So we're working together across all of those fronts, and I'd say the relationship with our customers, the collaboration here is as strong as it's ever been. And, perhaps, that's what we see in difficult times like this. We see those fundamental relationships coming to the surface, and the strength of those relationships is clear."]},{"name":"Sheila Kahyaoglu","speech":["Thank you."]},{"name":"Operator","speech":["Next, we go to Rajeev Lalwani with Morgan Stanley. Please go ahead."]},{"name":"Rajeev Lalwani","speech":["Greg, a question for you. Can you just talk about the tools you're using to manage the tightness on cash flow over the coming quarters in regard to paying suppliers and the inventory build? And then, also, what's the status of advances coming from customers? Have they stopped? Or is there any sort of requirement to return them given what's happening?"]},{"name":"Gregory Smith","speech":["Yeah. No, I'd say the advances, for the most part, are coming in per schedule. And I think the thing to keep in mind there, Rajeev, is that the advances that are coming in today are really for delivery slots out in 1.5 years, 2 years from now. But it's obviously something that we're monitoring daily and working with each of our customers on. Like I said, there's daily engagement going on here on multiple fronts.","As far as what tools, again, leveraging the enterprise. So this is a One Boeing effort in what levers we have and in front of us, in what different parts of the business and recognize in short-term and long-term trade-offs here. But, obviously, the company is in a very different position than it was 10 years ago. Obviously, we're a lot larger but a lot healthier in generating in the other parts of the business, outside of 737, a lot more cash. And that certainly helps us navigate this very challenging situation that we're faced with, but it's a very big difference. And remember, too, back then, we didn't have a share repurchase program. And so that is a lever for us today that we can utilize to help navigate through this, but again, not losing sight in our long-term commitment around repo.","So my point here, we've got a lot of levers. I think as we're managing this, clearly, the operating rhythm of the rest of the company remains intact. So this is -- as Dennis said, this is the priority. But the fact is meeting our commitments to all of our stakeholders and the rest of the business is also -- continue to be a big focus, and I think you've seen it in the first quarter.","So we've got -- we're making decisions on a day-to-day basis, and we're running scenarios, as we talked about. We're running scenarios. So we're clear-eyed about what we know and what we don't know and the range of possibilities or outcomes and how would we manage it and how do we get ahead of it. And we're very much in a mindset of getting ahead of it and frankly playing on the side of being conservative at this point, and we will continue to do that. But, again, it's a One Boeing effort and multiple points of input here but critical to making the right decisions around cash and liquidity."]},{"name":"Rajeev Lalwani","speech":["Thanks, Greg."]},{"name":"Gregory Smith","speech":["You're welcome."]},{"name":"Operator","speech":["Our next question is from Carter Copeland with Melius Research. Please go ahead."]},{"name":"Carter Copeland","speech":["Hey, good morning, gentlemen."]},{"name":"Dennis Muilenburg","speech":["Hey, Carter."]},{"name":"Carter Copeland","speech":["Just -- a couple of just quick cleanups, Greg, on the commentary you already had on the 37. Does the $1 billion include any contractual remedies for delivery movements in there? And I guess just broader understanding of what you're talking about. It sounds like when you say fixed cost, you mean you've got the total internal cost to the company of keeping the 737 program resources, at least what they were, if not a little bit higher, despite the fact that there are lower deliveries and that excess cost is really the biggest driver of the $1 billion? Is that correct?"]},{"name":"Gregory Smith","speech":["Yeah, you've got it. You've got it. And like I said, too, we are holding that headcount, which is obviously a big factor in that. And you heard me earlier talk about how we're utilizing those skills near term, but also obviously thinking long term that when we go up in rate, those resources are resources that are skilled and trained in those positions within the line, so they'll go back into position and allow for a smoother rate increase with more stability. And so that's that, I'll say, investment that we're making today to ensure that we have that smooth rate increase going forward and doing that at each point of stability. So that is obviously is also a part of the additional costs that are in the block."]},{"name":"Carter Copeland","speech":["And contractual remedies, is there any -- anything -- any assumption for that of significance?"]},{"name":"Gregory Smith","speech":["No."]},{"name":"Carter Copeland","speech":["Okay. And then just one quick one, if I may. The -- you mentioned you had a sort of series of waypoints to evaluate. Can you give us some -- a sense of where the nearest one of those is? You start evaluating any other changes to production or anything else? Is this a sort of two, three-month kind of time line or is it shorter, longer? Any color would be helpful."]},{"name":"Gregory Smith","speech":["Well, look, I'd say there's waypoints daily so -- but there's some more significant ones around what Dennis talked about as return-to-service. That's fundamentally the biggest waypoint we have there and how that could play out, as Dennis articulated, and whether it happens at once or staggered. All of that is being considerated (sic-considered) and brought into our model and then looking at production rates, looking at the amount of aircraft that we would be parking. And we obviously want to minimize that and keep that to a minimum and obviously fully within our control. At the same time, factor the supply chain, making strategic decisions within the supply chain and not a one-size-fits-all with, again, the whole idea to keep them healthy and help support them through this period, but get back on schedule for those that weren't. And we're -- again, we're working hand-in-hand with each one of them, again, on a daily basis. So lots of, I'll say, small waypoints within there, but the most significant one being the return-to-service."]},{"name":"Dennis Muilenburg","speech":["Yes. And, Carter, as you look for progress points there, near term will be the certification flight. Next in line will be the actual final certification of the software and the FAA's approval and then bringing the regulatory authorities together to gain approval of return-to-service. So there's some interim milestones here that'll be visible that we are aiming to complete in the near term, and then that will subsequently cause the next set of activities to occur, which Greg outlined, in terms of production system and supply chain ramp-up. So this is an integrated sequence of events."]},{"name":"Carter Copeland","speech":["Great. Thank you, gentlemen."]},{"name":"Dennis Muilenburg","speech":["Welcome."]},{"name":"Maurita Sutedja","speech":["Operator, we have time for one more analyst question."]},{"name":"Operator","speech":["And we'll go to Cai von Rumohr with Cowen and Company. Please go ahead."]},{"name":"Cai von Rumohr","speech":["Yes, thank you very much. So 787, you had a pretty spectacular $1 billion plus decline in deferred costs and tooling costs. How did you achieve it? And you mentioned higher 787 margins, was that a function of an increase in the block size?"]},{"name":"Dennis Muilenburg","speech":["Let me comment first and, Greg, jump in on the second part there. Cai, what you're seeing here is the investment that we've made in the 787 product and manufacturing system and our team performing successfully. So while not a lot of fan here over the last quarter, we did seamlessly transition from 12 per month to 14 per month, and I want to compliment our team and our supply chain for doing that effectively. And you see that continuing to be reflected in the program's performance -- financial performance as well as the high-quality deliveries to our customers. And I think what you also see is the effectiveness of that product in the field with the orders volume continuing to come in from our customers. So that program is performing well in the factories, and it's performing well for our customers in the field. Greg, do you want to..."]},{"name":"Gregory Smith","speech":["Yeah. I mean outside of that, which frankly very much complements what Dennis said, the mix, right. I mean we're -- we've got more favorable mix. But that smooth introduction of that mix, combined with the rate increases, the supplier step-down as we move through the blocks, sky, as I talked about before, continue to play into that as well. But we didn't have any block extension in the quarter, so it's really a combination of all the efforts that Dennis and I had mentioned."]},{"name":"Dennis Muilenburg","speech":["Performance."]},{"name":"Gregory Smith","speech":["Yeah."]},{"name":"Cai von Rumohr","speech":["Thank you."]},{"name":"Gregory Smith","speech":["You're welcome."]},{"name":"Operator","speech":["Ladies and gentlemen, that completes the analyst question-and-answer session. (Operator Instructions) I will now return you to The Boeing Company for introductory remarks by Ms. Anne Toulouse, Senior Vice President of Communications. Ms. Toulouse, please go ahead."]},{"name":"Anne Toulouse","speech":["Thank you, and good morning. Now, we will continue with the media portion of today's call. For the members of the press, if you have questions after the session ends, please call our team at 312-544-2002. John, we're ready for that first question. (Operator Instructions)"]},{"name":"Operator","speech":["And first in line, we have Julie Johnsson with Bloomberg. Please go ahead."]},{"name":"Julie Johnsson","speech":["Hi. Good morning, everyone."]},{"name":"Dennis Muilenburg","speech":["Good morning."]},{"name":"Gregory Smith","speech":["Hi, Julie."]},{"name":"Julie Johnsson","speech":["Dennis, can you just dig in a little deeper into what you're expecting the Board -- or the mission of the Board Committee? And when you expect them to report on the certification process? And just to play devil's advocate, I'm just wondering how meaningful this will all be if it comes -- deepen as a recertification effort for the 737? And the Board members involved are really respected leaders, but they don't have a deep aerospace background."]},{"name":"Dennis Muilenburg","speech":["Yeah. Well, Julie, let me just take a half step back first and remind everyone again of the incredible importance of safety to us in our culture of driving safety and continuous improvement. That is -- that culture is what has made this industry the safest form of transportation, and that is a fundamental that we are committed to. And any time an accident like this happens, it's a very difficult situation. We have great sorrow for the families that are affected. This weighs heavily on us. This gets right to the core of who we are as a company and our focus on safety. And so what we're doing here is looking at every dimension of what we've learned and making sure that we, as part of that effort, focus on any potential process improvements that we can make. That is our duty and responsibility. So not only do we look at product and service improvements, but also are there any process improvements that we can make?","And there's really a twofold effort here. One, the US government is bringing together a joint authority review with international regulators around the world. That's been previously announced. That will take a look at certification processes. We'll support that with technical expertise, and any learnings from that, we'll incorporate. And then internally, I've also asked our Board to set up a committee that you referenced.","And let me give you a little more context on that. That committee will be focused on looking at our design, development, certification processes not only for the MAX but, more broadly, for our airplane programs. It will be headed up by Edmund Giambastiani, and he does have a great deal of expertise in the aerospace sector and the defense sector, as you well know. So we're bringing sector knowledge to the table. He will be joined by our Board Members who also bring expertise from other sectors who are very safety-focused and have significant government regulatory dimensions. And I think that will actually make us better, because we can do cross-sector learnings, so I would argue that that's bringing in an external view that's even more helpful.","In addition, that committee has authorized to bring in outside technical support, deep support in any areas where it's required, and they will also leverage the depth of our technical resources across Boeing. So they will have a depth of capacity to do their work. And based on the outcome of their analysis and assessment, we'll determine how we roll these results into our processes. That could be a report. It could be set of actions. Rather than stating upfront what that will be, what we want to do is see what the committee learns and see the outcome of their work and then we'll decide how to implement that. But we are committed to doing a deep and rigorous evaluation and making improvements where we can. That is part of how we operate as a company. We are always looking for opportunities to improve."]},{"name":"Operator","speech":["Next question is from Phil LeBeau with CNBC. Please go ahead."]},{"name":"Philip LeBeau","speech":["Dennis, my question is this. What is your plan or what plans are in place to reassure airlines and the traveling public that the 737 MAX will be safe to fly again once it is cleared to get back in the air? And what's your reaction when you see these reports, and you've seen them over the last couple of months, where -- whether it's airline passengers or airline executives who are saying, I'm just not sure people are going to want to fly this plane again."]},{"name":"Dennis Muilenburg","speech":["Yeah. Phil, I think that's a great question and certainly an area where we're very focused on. And this is an area where collaboration with our airline customers is extremely important, and we're working this on a daily basis. And we certainly have deep regret for the impact that this has had on our airline customers and their operations and the impact it's had on the flying public. We've got 100-plus years of history as a company on providing safe transportation, and that is a commitment that we treasure, something that we place high value on. And the respect of the flying public, the confidence of the flying public is very, very important to us. So we regret the impact that's happened here, and we're very focused on addressing that going forward.","The game plan that we've laid out with our airline customers is tailored by customer. We're talking with each of them in terms of what they're hearing from their passengers. We think a key voice in all of this will be the pilots for our airlines, and their voice is very important. That bond between the passenger and the pilot is one that's critical. And so, we're working with our airline customers and those pilot voices to ensure that we can build on that going forward.","To that end, we hosted multiple sessions around the world. More than 90% of our 50 plus MAX operators to-date have had pilots in our simulator sessions with the new software, experiencing that, building confidence. I can tell you with those series of sessions that we've had around the world, the pilot feedback from the simulator sessions has been excellent, and I think it's been a big part of building confidence in how we talk about this going forward. So we're planning to leverage that pilot voice. We'll be working closely on branding and talking about training and education activities going forward. This is a place where Boeing is going to make an investment. We know it's important to earn and reearn the trust, and this will be done jointly with our airline customers, the pilots, the flight crews, the flight attendants, everybody that supports these airplanes. And we know it'll take time. We have to earn and reearn the trust of the flying public, and that's work ahead of us, and we take that very seriously."]},{"name":"Anne Toulouse","speech":["Operator, we have time for one last question."]},{"name":"Operator","speech":["That will be from Eric Johnson with Reuters. Please go ahead."]},{"name":"Eric Johnson","speech":["Thank you. Dennis, there's been some calls for you to divide up your role as Chairman and CEO. As the grounding continues, would you say that your future in both roles or either role is tied specifically to the duration and outcome of the crisis and your ability to restore public trust in Boeing?"]},{"name":"Dennis Muilenburg","speech":["Eric, I think it's important to look at this, again, from a long-term standpoint. As we've said in the past, as we continue to say, it's important that our company has the flexibility to have the leadership structure that works best for our company. That's been our position for years and continues to be our position, and we remain consistent on that front. And we have a great, engaged Board on this topic. The working relationships are strong. Our Lead Director, Dave Calhoun, is very engaged in the work that we're doing. The Board Committee that I talked about is just another example of a very engaged Board. I have daily communications with the Board, both in my Chairman role and in my CEO role. We think that is the right, most effective structure for our company. And I think that's, again, showing it to be the case even in the midst of this challenging situation. And I also want to reiterate the fact that our Board does have a very strong, independent Lead Director and that we respect and understand those rules, and the structure that we have in place today is one that I think is healthy for our company and healthy for all of our stakeholders."]},{"name":"Anne Toulouse","speech":["Okay. That concludes our call today. Again, for members of the media, if you have further questions, please call our team at 312-544-2002. Thank you."]}],"string":"[\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"(Operator Instructions) And first in line, we have Myles Walton with UBS. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"Thanks. Good morning. Dennis or Greg, how is the 737 return-to-service effort disrupting or influencing both the 777X certification effort ongoing and then your decision on the NMA? Given that this is all hands on deck for the MAX, I imagine there's some cannibalization of resources on the 777X. And then on the NMA, how is your view on that changing given the less clear picture maybe of where the certification is or will be in the future?\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yeah. Hey, Myles, good question. First of all, again, I want to stress and reiterate the point that we are very, very focused on the safe return-to-service of the MAX, and that remains our top priority. Clear focus, clear resources being applied and daily engagement, hourly engagement by me, Greg and the leadership team. And we're going to continue to focus there and get that airplane back up and flying for our customers.\",\n \"As part of that process, we are taking a look at our certification processes. We remain confident in the fundamental processes. But as part of our continuous improvement mindset, we always take a look at opportunities to improve. So we're welcoming the government joint authorities' technical review that's been announced and that we'll be supporting that as appropriate. As you've heard earlier, I've also asked Boeing Board to stand up a committee to take a look at our certification processes and identify any potential improvements. And if we find any opportunities to improve, we will certainly adopt those on a go-forward basis.\",\n \"As far as the ripple impact or potential impact of the 777X, we haven't seen any direct impact. Again, our team has been very strong about continuing to drive 777X development and performance in parallel with our return-to-flight or return-to-service efforts on the MAX. We've deployed our teams accordingly and make sure that we've resourced the high-priority efforts on 777X. As noted earlier, we have rolled two flight test birds out of the factory, number three and number four, are in the final assembly, and we look forward to getting into flight testing here this year and delivering that airplane on schedule in 2020. We do not see any changes to the underlying certification process. But, again, as I said, if we find areas to improve, we will certainly adopt those.\",\n \"As to your NMA question, we're continuing our work on that in parallel. Certainly, the higher priority -- highest priority for us is the 737 MAX's safe return-to-service. So we have prioritized our resources accordingly, while we continue to work on our NMA effort in parallel. We're still looking at that as a potential opportunity for a 2025 entry into service date. We still have work to do before we get to an authority to offer a decision. We're still working on a pace to try to do that this year, as we previously announced. But I want to be very clear that when it comes to resource questions and application of resources, our top priority is the safe return-to-service of the 737 MAX.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"Okay. Thanks for the color.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Doug Harned with Bernstein. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Douglas Harned\",\n \"speech\": [\n \"Good morning. Thank you.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Hi, Doug.\"\n ]\n },\n {\n \"name\": \"Douglas Harned\",\n \"speech\": [\n \"As you've talked about, you have a technical fix that you're testing now for the 737 MAX, and it sounds as though you have some pretty good confidence in that. If we assume that the technical solution, that, that is what is needed, that works, then I sort of look at this as three important processes here. One, you've got to work with the authorities, the airlines, the flying public to give them the confidence that the solution works. Second, you've got an operational process where you've already taken rate down but you want to be able to take that rate up very quickly as soon as the airplane can return-to-service safely. And then, third, you have a commercial process where customers are awaiting delivery, they've been making progress payments.\",\n \"And so, what I'm interested in understanding is, as you think of that first task, that first process, which the timeline on it seems somewhat uncertain, how does that drive the way you look at different rates scenarios going forward operationally and the way your work with your customers who put money in and they've -- they're expecting to get delivery of this airplane?\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yeah. Doug, our plan integrates across all of those dimensions as it should, because they're all interrelated. I will say on that first path, returning the airplane to a service and doing so safely, just to give you a sense of the key steps to go there. As we know from the accident, investigations today have been publicly announced through the preliminary reports. Both accidents were a chain of events. We know there was one common link in that chain of events, and that was the activation of the MCAS system with erroneous angle of attack data. That's been well published. And, as we said, we understand how to address that link. That's our responsibility. We own that, and that's what that software update does. We have great confidence in that software update with the more than 200 flights that have occurred -- or excuse me, 135 flights that have occurred. I personally have the chance to fly on two of those flights, test and demonstration flights, and have seen the confidence in that software solution. We have tested it out and completed our engineering flight test last week.\",\n \"The next step in that process will be the certification flight under the FAA's authority, and we are working with the FAA right now to prepare for that in the near term. Subsequent steps will include, again, bringing all of the global regulators together with the FAA's leadership to approve the return-to-service. So that path is a well-understood set of steps, things that are being actively worked on a daily and hourly basis, and we're going to continue to pursue that and make sure we take the time to do it right. That's the most important thing here, is to make sure we have a safe return to flight.\",\n \"Once we accomplish that, then we'll have the opportunity to look at our production profiles, our delivery sequencing for our customers. As you might guess, we are in daily multiple-times-a-day conversations with our customers as well, and we regret the impact this has had to their operations. We know our customers are eager to get the MAX back into service. And we are eager, when we're ready, to get production ramp back up and provide those airplanes. So we'll be working that in a coordinated, integrated fashion. We have teams that are ready, positioned by tail number with the 737 MAXs that are already out in the fleet to get those airplanes ready and back up and flying for our customers, and we also have an integrated introduction plan, including our supply chain that will allow us to pivot and move forward. So these are actions that we are taking daily, again hourly, all in a coordinated fashion. And across those three areas that you mentioned, Doug, I'm very confident that we have an integrated plan. All of this will be paced by the safe return-to-service of the MAX. That is our first focus.\"\n ]\n },\n {\n \"name\": \"Douglas Harned\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And our next question is from Ron Epstein with Bank of America Merrill Lynch. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Ronald Epstein\",\n \"speech\": [\n \"Good morning, Dennis and Greg. To the extent that you can answer this, how does this happen, right? I mean, this sort of seemingly sort of came out of nowhere. I mean, is there any way you can kind of give us a feeling for how did this slip through the engineering organization? How did it slip through the FAA? Can you give us a feel for that? Like, I guess, that's the part that befuddles me most about all this, because it doesn't seem like there was a lot of new science going on here, right? I mean 787 had been a lot of new science, this seem to be applications of existing technology to an existing platform.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yeah. Ron, there is no technical slip or gap here, right. Again, as I mentioned, we know that both accidents were a series of events, and that is very common to all accidents that we've seen in history. And in -- what we know is that, in this case, there was erroneous angle of attack information that came into the airplane from multiple causes. We know that at some point during the flight, that activated the MCAS control loss and we know that ultimately there were actions or actions not taken that contributed to the final outcome.\",\n \"I can't really get into the details of that deep accident investigation, because this is all governed by the ICAO Annex 13 process, which I know you know well, and that is a disciplined, rigorous process that examines these accidents from every dimension to ensure that we understand them, and it's ultimately that disciplined process that has made this industry so safe. So we have been very purposeful about supporting that process, very purposeful about supporting the investigation, staying focused on safety and not speculation.\",\n \"But I can tell you with confidence that we understand our airplane. We understand how the design was accomplished, how the certification was accomplished and remain fully confident in the product that we put in the field. But we also know there are areas where we can improve, and that is the source of the software update here. But there was no surprise or gap or unknown here or something that somehow slipped through a certification process. Quite the opposite. We know exactly how the airplane was designed. We know exactly how it was certified. We have taken the time to understand that. That has led to the software update that we've been implementing and testing, and we're very confident that when the fleet comes back up, the MAX will be one of the safest airplanes ever to fly.\"\n ]\n },\n {\n \"name\": \"Ronald Epstein\",\n \"speech\": [\n \"Okay. Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next from the line of Peter Arment with Baird. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Peter Arment\",\n \"speech\": [\n \"Yes. Good morning. Dennis and Greg.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Good morning, Peter.\"\n ]\n },\n {\n \"name\": \"Peter Arment\",\n \"speech\": [\n \"Dennis. Thanks for all the color. Just maybe circling back to a piece in Doug's question. When you're thinking about the best way you could describe kind of the regulatory discussions, are they running all at the same pace or should investors expect kind of a different path with each regulatory body? And we're thinking about the FAA or EASA or FINS (ph) in Asia? Thanks.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yeah. Peter, we are working with the FAA and regulatory authorities around the world. And as you might guess, there are different paces and different processes in each country, but these are all running in parallel. We're working with those authorities to try to align schedules, both from a regulatory government standpoint as well as the customers that are operating in these countries around the world.\",\n \"As we said, we have more than 50 MAX operators today around the world, and they're all very interested in getting the airplane back up and flying. So we are coordinating across that entire network of global regulators and customers. And we're seeing the schedules, I'll say, beginning to align. There is still clearly a lot of work to go as we get through the certification.\",\n \"Another pacing item for us will be training and training deployment worldwide, and then alignment of all the regulatory agencies on approval to get the airplane back up into service and back to flying. So we have a support role across all of that.\",\n \"I want to complement the FAA, in particular, for their leadership and the work that they're doing across the global enterprise. As you might have seen, the FAA leader, Dan Elwell, hosted an international session with the counterparts from other regulatory agencies a couple of weeks ago. We were supportive to that meeting as well. So the FAA has been working hard to coordinate across all of the international regulators, drive alignment, answer questions and ensure that we're all in the same page going forward. It is fundamentally important here that we have an integrated plan and that we understand any questions or concerns that might be out around the world that we address those. And that, again, we focus on a safe return-to-service of the MAX, and I'm confident that that coordination is happening. And I think it's fair to say we still have some work to do, but we're making progress.\"\n ]\n },\n {\n \"name\": \"Peter Arment\",\n \"speech\": [\n \"Appreciate the color. Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next question is from Hunter Keay with Wolfe Research. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Hunter Keay\",\n \"speech\": [\n \"Thank you, guys. Good morning. Can you talk about the $1 billion of cost that you added to the 737 block? I'm kind of curious to -- for you, Greg, to maybe elaborate a little more what's included in that. But maybe more importantly, what was not included in that? Thank you.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Yeah. So the cost to develop and test the software, its period expense was not in there as well as the related training materials associated with that. They're booked in the quarter but not in program margin. As I said, the period expense. Within the $1 billion, really, what's taken into account there is the lower production rate. That's ultimately what's driving it, and now we'll take a little bit longer than what we originally had in the cost base, so you've got fixed cost that will be associated with that lower production rate, but we also are holding on to headcount.\",\n \"Remember, we were at 52, going down to 42. We've held that headcount in the factory, and what we've been doing with that is really working the jobs behind schedule and any jobs that are out of position in getting things back into position in the factory. At the same time, been working with the supply chain. So those that weren't on master schedule at 52, we are -- even though we came down, we have some of those suppliers staying at 52 in order to get healthy, get back on schedule. So when we do come back up and ramp, we're going to do it in a very steady fashion with stability in each step along the way to ensure that we have a predictable, I'll say, production system, a healthier production system and one that we can support our customers as we go up in rate.\",\n \"The other things that are within that fixed cost escalation, obviously, again, facilities, tooling and also support -- additional support for deliveries as well as pulling the airplanes out of storage that we currently have within our facility. So those are, I'd say, the bigger buckets of costs that are within there.\",\n \"But like Dennis said, this is day-to-day management on all aspects. So all with -- what we've been talking about is feeding into our production scenarios. And key in all of this obviously is keep all the stakeholders informed, realizing we don't have answers to some of the questions. But we've got scenarios, and we're trying to be proactive in how we address those, so -- and be strategic. So, again, going into the supply chain, rather than pulling everybody down to 42, let's go through and understand liquidity within each of those suppliers, where -- who needs help, who doesn't, who is on schedule, who can we use to get this opportunity to get back on schedule.\",\n \"So, again, being very, I'll say, specific, but it's day-to-day management. And we talked about our operating rhythm being daily. Our head of the program reports on -- daily on production health to all of us, and we've got the full enterprise support in this. I know there's a question earlier on 777X. People that are part of this process are from the company. So we're bringing people in that are experts in anywhere area that we need to support, we're bringing them in from across the whole enterprise, and we'll continue to do that until we get the airplane safely back up in the air and get our production rates back to where they were.\"\n ]\n },\n {\n \"name\": \"Hunter Keay\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next question is from Sheila Kahyaoglu with Jefferies. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Good morning, Dennis and Greg, and thank you for all that color.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Hi, Sheila.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"I guess how do we think about the broader customer reaction to the MAX? There's been a lot of back and forth in the media. And then how do you think about the potential risk to the backlog and maybe production scenarios and risks you're thinking about there?\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yeah. Sheila, to that point, let me take a long-term view here. We don't see any change. As you well know, we are continuously engaged with our customers. We have a ton of respect for them and how they operate. We have deep regret for the impact that this has had on their operations to-date, and we're very, very sensitive to that. And we're doing everything we can to get the airplane back up and flying and do that safely. Our customers are eager to do that as well.\",\n \"I can tell you, I've personally talked to many, many of our customers. Our team, Commercial Airplanes team, Kevin McAllister, Ihssane, their teams are deployed daily, hourly, talking to customers. Our support teams are working around the world, helping them with the fleet that is currently grounded to maintain that fleet in good condition so that when we're ready, we can quickly bring the fleet back up to operating status.\",\n \"So we're deeply engaged with our customers. We understand their operational model. We're having discussions with them on how to best get them ramped back up and to help them during this intermediate period. And I think the collaboration, the communication, it's just been very strong. And I'm thankful to our customers. They've been working with us through this period. It's been difficult. It's been challenging for all of us, but we have a mutual respect based on the health of this industry and the important work that we do around the world. And we want to make sure we can get back up and flying safely, and we know we have some work to do to earn and reearn the trust of our customers and the flying public in particular.\",\n \"And so, we're working with our customers in the airlines on how we can best rebuild that public trust, working with them and engaging their pilots, for example, as they're involved in the process and our airline pilot customers who can express their views to the flying public. I think that's a big source of confidence for the future. So we're working together on that standpoint.\",\n \"And then as we think about production reramp going forward, when we're ready, the skyline management, the delivery sequencing, how we can support our customers, get them airplanes as rapidly as we can and in the right order and sequence, that's all part of our daily integrated planning as well. And longer term, we're also deploying training packages and additional educational materials. I would call those above-and-beyond educational materials that are tailored for our various customers around the world. So that'll be a longer-term effort where we work with them on training, education as well as areas where we can help with the brand repair, if you will, in rebuilding the public confidence.\",\n \"So we're working together across all of those fronts, and I'd say the relationship with our customers, the collaboration here is as strong as it's ever been. And, perhaps, that's what we see in difficult times like this. We see those fundamental relationships coming to the surface, and the strength of those relationships is clear.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we go to Rajeev Lalwani with Morgan Stanley. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Rajeev Lalwani\",\n \"speech\": [\n \"Greg, a question for you. Can you just talk about the tools you're using to manage the tightness on cash flow over the coming quarters in regard to paying suppliers and the inventory build? And then, also, what's the status of advances coming from customers? Have they stopped? Or is there any sort of requirement to return them given what's happening?\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Yeah. No, I'd say the advances, for the most part, are coming in per schedule. And I think the thing to keep in mind there, Rajeev, is that the advances that are coming in today are really for delivery slots out in 1.5 years, 2 years from now. But it's obviously something that we're monitoring daily and working with each of our customers on. Like I said, there's daily engagement going on here on multiple fronts.\",\n \"As far as what tools, again, leveraging the enterprise. So this is a One Boeing effort in what levers we have and in front of us, in what different parts of the business and recognize in short-term and long-term trade-offs here. But, obviously, the company is in a very different position than it was 10 years ago. Obviously, we're a lot larger but a lot healthier in generating in the other parts of the business, outside of 737, a lot more cash. And that certainly helps us navigate this very challenging situation that we're faced with, but it's a very big difference. And remember, too, back then, we didn't have a share repurchase program. And so that is a lever for us today that we can utilize to help navigate through this, but again, not losing sight in our long-term commitment around repo.\",\n \"So my point here, we've got a lot of levers. I think as we're managing this, clearly, the operating rhythm of the rest of the company remains intact. So this is -- as Dennis said, this is the priority. But the fact is meeting our commitments to all of our stakeholders and the rest of the business is also -- continue to be a big focus, and I think you've seen it in the first quarter.\",\n \"So we've got -- we're making decisions on a day-to-day basis, and we're running scenarios, as we talked about. We're running scenarios. So we're clear-eyed about what we know and what we don't know and the range of possibilities or outcomes and how would we manage it and how do we get ahead of it. And we're very much in a mindset of getting ahead of it and frankly playing on the side of being conservative at this point, and we will continue to do that. But, again, it's a One Boeing effort and multiple points of input here but critical to making the right decisions around cash and liquidity.\"\n ]\n },\n {\n \"name\": \"Rajeev Lalwani\",\n \"speech\": [\n \"Thanks, Greg.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"You're welcome.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Carter Copeland with Melius Research. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Hey, good morning, gentlemen.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Hey, Carter.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Just -- a couple of just quick cleanups, Greg, on the commentary you already had on the 37. Does the $1 billion include any contractual remedies for delivery movements in there? And I guess just broader understanding of what you're talking about. It sounds like when you say fixed cost, you mean you've got the total internal cost to the company of keeping the 737 program resources, at least what they were, if not a little bit higher, despite the fact that there are lower deliveries and that excess cost is really the biggest driver of the $1 billion? Is that correct?\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Yeah, you've got it. You've got it. And like I said, too, we are holding that headcount, which is obviously a big factor in that. And you heard me earlier talk about how we're utilizing those skills near term, but also obviously thinking long term that when we go up in rate, those resources are resources that are skilled and trained in those positions within the line, so they'll go back into position and allow for a smoother rate increase with more stability. And so that's that, I'll say, investment that we're making today to ensure that we have that smooth rate increase going forward and doing that at each point of stability. So that is obviously is also a part of the additional costs that are in the block.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"And contractual remedies, is there any -- anything -- any assumption for that of significance?\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"No.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Okay. And then just one quick one, if I may. The -- you mentioned you had a sort of series of waypoints to evaluate. Can you give us some -- a sense of where the nearest one of those is? You start evaluating any other changes to production or anything else? Is this a sort of two, three-month kind of time line or is it shorter, longer? Any color would be helpful.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Well, look, I'd say there's waypoints daily so -- but there's some more significant ones around what Dennis talked about as return-to-service. That's fundamentally the biggest waypoint we have there and how that could play out, as Dennis articulated, and whether it happens at once or staggered. All of that is being considerated (sic-considered) and brought into our model and then looking at production rates, looking at the amount of aircraft that we would be parking. And we obviously want to minimize that and keep that to a minimum and obviously fully within our control. At the same time, factor the supply chain, making strategic decisions within the supply chain and not a one-size-fits-all with, again, the whole idea to keep them healthy and help support them through this period, but get back on schedule for those that weren't. And we're -- again, we're working hand-in-hand with each one of them, again, on a daily basis. So lots of, I'll say, small waypoints within there, but the most significant one being the return-to-service.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yes. And, Carter, as you look for progress points there, near term will be the certification flight. Next in line will be the actual final certification of the software and the FAA's approval and then bringing the regulatory authorities together to gain approval of return-to-service. So there's some interim milestones here that'll be visible that we are aiming to complete in the near term, and then that will subsequently cause the next set of activities to occur, which Greg outlined, in terms of production system and supply chain ramp-up. So this is an integrated sequence of events.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Great. Thank you, gentlemen.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Welcome.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"Operator, we have time for one more analyst question.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And we'll go to Cai von Rumohr with Cowen and Company. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Cai von Rumohr\",\n \"speech\": [\n \"Yes, thank you very much. So 787, you had a pretty spectacular $1 billion plus decline in deferred costs and tooling costs. How did you achieve it? And you mentioned higher 787 margins, was that a function of an increase in the block size?\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Let me comment first and, Greg, jump in on the second part there. Cai, what you're seeing here is the investment that we've made in the 787 product and manufacturing system and our team performing successfully. So while not a lot of fan here over the last quarter, we did seamlessly transition from 12 per month to 14 per month, and I want to compliment our team and our supply chain for doing that effectively. And you see that continuing to be reflected in the program's performance -- financial performance as well as the high-quality deliveries to our customers. And I think what you also see is the effectiveness of that product in the field with the orders volume continuing to come in from our customers. So that program is performing well in the factories, and it's performing well for our customers in the field. Greg, do you want to...\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Yeah. I mean outside of that, which frankly very much complements what Dennis said, the mix, right. I mean we're -- we've got more favorable mix. But that smooth introduction of that mix, combined with the rate increases, the supplier step-down as we move through the blocks, sky, as I talked about before, continue to play into that as well. But we didn't have any block extension in the quarter, so it's really a combination of all the efforts that Dennis and I had mentioned.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Performance.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Yeah.\"\n ]\n },\n {\n \"name\": \"Cai von Rumohr\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"You're welcome.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Ladies and gentlemen, that completes the analyst question-and-answer session. (Operator Instructions) I will now return you to The Boeing Company for introductory remarks by Ms. Anne Toulouse, Senior Vice President of Communications. Ms. Toulouse, please go ahead.\"\n ]\n },\n {\n \"name\": \"Anne Toulouse\",\n \"speech\": [\n \"Thank you, and good morning. Now, we will continue with the media portion of today's call. For the members of the press, if you have questions after the session ends, please call our team at 312-544-2002. John, we're ready for that first question. (Operator Instructions)\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And first in line, we have Julie Johnsson with Bloomberg. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Julie Johnsson\",\n \"speech\": [\n \"Hi. Good morning, everyone.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Hi, Julie.\"\n ]\n },\n {\n \"name\": \"Julie Johnsson\",\n \"speech\": [\n \"Dennis, can you just dig in a little deeper into what you're expecting the Board -- or the mission of the Board Committee? And when you expect them to report on the certification process? And just to play devil's advocate, I'm just wondering how meaningful this will all be if it comes -- deepen as a recertification effort for the 737? And the Board members involved are really respected leaders, but they don't have a deep aerospace background.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yeah. Well, Julie, let me just take a half step back first and remind everyone again of the incredible importance of safety to us in our culture of driving safety and continuous improvement. That is -- that culture is what has made this industry the safest form of transportation, and that is a fundamental that we are committed to. And any time an accident like this happens, it's a very difficult situation. We have great sorrow for the families that are affected. This weighs heavily on us. This gets right to the core of who we are as a company and our focus on safety. And so what we're doing here is looking at every dimension of what we've learned and making sure that we, as part of that effort, focus on any potential process improvements that we can make. That is our duty and responsibility. So not only do we look at product and service improvements, but also are there any process improvements that we can make?\",\n \"And there's really a twofold effort here. One, the US government is bringing together a joint authority review with international regulators around the world. That's been previously announced. That will take a look at certification processes. We'll support that with technical expertise, and any learnings from that, we'll incorporate. And then internally, I've also asked our Board to set up a committee that you referenced.\",\n \"And let me give you a little more context on that. That committee will be focused on looking at our design, development, certification processes not only for the MAX but, more broadly, for our airplane programs. It will be headed up by Edmund Giambastiani, and he does have a great deal of expertise in the aerospace sector and the defense sector, as you well know. So we're bringing sector knowledge to the table. He will be joined by our Board Members who also bring expertise from other sectors who are very safety-focused and have significant government regulatory dimensions. And I think that will actually make us better, because we can do cross-sector learnings, so I would argue that that's bringing in an external view that's even more helpful.\",\n \"In addition, that committee has authorized to bring in outside technical support, deep support in any areas where it's required, and they will also leverage the depth of our technical resources across Boeing. So they will have a depth of capacity to do their work. And based on the outcome of their analysis and assessment, we'll determine how we roll these results into our processes. That could be a report. It could be set of actions. Rather than stating upfront what that will be, what we want to do is see what the committee learns and see the outcome of their work and then we'll decide how to implement that. But we are committed to doing a deep and rigorous evaluation and making improvements where we can. That is part of how we operate as a company. We are always looking for opportunities to improve.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next question is from Phil LeBeau with CNBC. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Philip LeBeau\",\n \"speech\": [\n \"Dennis, my question is this. What is your plan or what plans are in place to reassure airlines and the traveling public that the 737 MAX will be safe to fly again once it is cleared to get back in the air? And what's your reaction when you see these reports, and you've seen them over the last couple of months, where -- whether it's airline passengers or airline executives who are saying, I'm just not sure people are going to want to fly this plane again.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yeah. Phil, I think that's a great question and certainly an area where we're very focused on. And this is an area where collaboration with our airline customers is extremely important, and we're working this on a daily basis. And we certainly have deep regret for the impact that this has had on our airline customers and their operations and the impact it's had on the flying public. We've got 100-plus years of history as a company on providing safe transportation, and that is a commitment that we treasure, something that we place high value on. And the respect of the flying public, the confidence of the flying public is very, very important to us. So we regret the impact that's happened here, and we're very focused on addressing that going forward.\",\n \"The game plan that we've laid out with our airline customers is tailored by customer. We're talking with each of them in terms of what they're hearing from their passengers. We think a key voice in all of this will be the pilots for our airlines, and their voice is very important. That bond between the passenger and the pilot is one that's critical. And so, we're working with our airline customers and those pilot voices to ensure that we can build on that going forward.\",\n \"To that end, we hosted multiple sessions around the world. More than 90% of our 50 plus MAX operators to-date have had pilots in our simulator sessions with the new software, experiencing that, building confidence. I can tell you with those series of sessions that we've had around the world, the pilot feedback from the simulator sessions has been excellent, and I think it's been a big part of building confidence in how we talk about this going forward. So we're planning to leverage that pilot voice. We'll be working closely on branding and talking about training and education activities going forward. This is a place where Boeing is going to make an investment. We know it's important to earn and reearn the trust, and this will be done jointly with our airline customers, the pilots, the flight crews, the flight attendants, everybody that supports these airplanes. And we know it'll take time. We have to earn and reearn the trust of the flying public, and that's work ahead of us, and we take that very seriously.\"\n ]\n },\n {\n \"name\": \"Anne Toulouse\",\n \"speech\": [\n \"Operator, we have time for one last question.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"That will be from Eric Johnson with Reuters. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Eric Johnson\",\n \"speech\": [\n \"Thank you. Dennis, there's been some calls for you to divide up your role as Chairman and CEO. As the grounding continues, would you say that your future in both roles or either role is tied specifically to the duration and outcome of the crisis and your ability to restore public trust in Boeing?\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Eric, I think it's important to look at this, again, from a long-term standpoint. As we've said in the past, as we continue to say, it's important that our company has the flexibility to have the leadership structure that works best for our company. That's been our position for years and continues to be our position, and we remain consistent on that front. And we have a great, engaged Board on this topic. The working relationships are strong. Our Lead Director, Dave Calhoun, is very engaged in the work that we're doing. The Board Committee that I talked about is just another example of a very engaged Board. I have daily communications with the Board, both in my Chairman role and in my CEO role. We think that is the right, most effective structure for our company. And I think that's, again, showing it to be the case even in the midst of this challenging situation. And I also want to reiterate the fact that our Board does have a very strong, independent Lead Director and that we respect and understand those rules, and the structure that we have in place today is one that I think is healthy for our company and healthy for all of our stakeholders.\"\n ]\n },\n {\n \"name\": \"Anne Toulouse\",\n \"speech\": [\n \"Okay. That concludes our call today. Again, for members of the media, if you have further questions, please call our team at 312-544-2002. Thank you.\"\n ]\n }\n]","isConversational":false}}},{"rowIdx":694,"cells":{"ticker":{"kind":"string","value":"BA"},"date":{"kind":"string","value":"2019-01-30"},"participants":{"kind":"list like","value":[{"description":"-Vice President of Investor Relations -- Vice President of Investor Relations","name":"Maurita Sutedja","position":"Executive"},{"description":"-Chairman, President, and Chief Executive Officer -- Chairman, President, and Chief Executive Officer","name":"Dennis Muilenburg","position":"Executive"},{"description":"-Chief Financial Officer and Executive Vice President of Enterprise Performance & Strategy -- Chief Financial Officer and Executive Vice President of Enterprise Performance & Strategy","name":"Gregory Smith","position":"Executive"},{"description":"-Morgan Stanley -- Analyst -- Morgan Stanley -- Analyst","name":"Rajeev Lalwani","position":"Analyst"},{"description":"-UBS -- Analyst -- UBS -- Analyst","name":"Myles Walton","position":"Analyst"},{"description":"-Credit Suisse -- Analyst -- Credit Suisse -- Analyst","name":"Rob Spingarn","position":"Analyst"},{"description":"-Melius Research -- Analyst -- Melius Research -- Analyst","name":"Carter Copeland","position":"Analyst"},{"description":"-Bernstein Research -- Analyst -- Bernstein Research -- Analyst","name":"Doug Harned","position":"Analyst"},{"description":"-J.P. Morgan -- Analyst -- J.P. Morgan -- Analyst","name":"Seth Seifman","position":"Analyst"},{"description":"-Barclays -- Analyst -- Barclays -- Analyst","name":"David Strauss","position":"Analyst"},{"description":"-Jefferies -- Analyst -- Jefferies -- Analyst","name":"Sheila Kahyaoglu","position":"Analyst"},{"description":"-Wolfe Research -- Analyst -- Wolfe Research -- Analyst","name":"Hunter Keay","position":"Analyst"},{"description":"-Bank of America Merrill Lynch -- Analyst -- Bank of America Merrill Lynch -- Analyst","name":"Ron Epstein","position":"Analyst"},{"description":"-R.W. Baird -- Analyst -- R.W. 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Morgan -- Analyst -- J.P. Morgan -- Analyst\",\n \"name\": \"Seth Seifman\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"-Barclays -- Analyst -- Barclays -- Analyst\",\n \"name\": \"David Strauss\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"-Jefferies -- Analyst -- Jefferies -- Analyst\",\n \"name\": \"Sheila Kahyaoglu\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"-Wolfe Research -- Analyst -- Wolfe Research -- Analyst\",\n \"name\": \"Hunter Keay\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"-Bank of America Merrill Lynch -- Analyst -- Bank of America Merrill Lynch -- Analyst\",\n \"name\": \"Ron Epstein\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"-R.W. Baird -- Analyst -- R.W. Baird -- Analyst\",\n \"name\": \"Peter Arment\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"-Interim Vice President of Communications -- Interim Vice President of Communications\",\n \"name\": \"Anne Toulouse\",\n \"position\": \"Executive\"\n },\n {\n \"description\": \"-Wall Street Journal -- Reporter -- Wall Street Journal -- Reporter\",\n \"name\": \"Andrew Tangel\",\n \"position\": \"Other\"\n },\n {\n \"description\": \"-Bloomberg News -- Aerospace Reporter -- Bloomberg News -- Aerospace Reporter\",\n \"name\": \"Julie Johnsson\",\n \"position\": \"Other\"\n },\n {\n \"description\": \"-Financial Times -- Special Correspondent -- Financial Times -- Special Correspondent\",\n \"name\": \"Sylvia Pfeifer\",\n \"position\": \"Other\"\n },\n {\n \"description\": \"-The Seattle Times -- Aerospace Reporter -- The Seattle Times -- Aerospace Reporter\",\n \"name\": \"Dominic Gates\",\n \"position\": \"Other\"\n }\n]","isConversational":false},"prepared_remarks":{"kind":"list like","value":[{"name":"Operator","speech":["Thank you for standing by. Good day, everyone, and welcome to The Boeing Company's fourth-quarter 2018 earnings conference call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst and media question-and-answer sessions, are being broadcast live over the Internet.","At this time, for opening remarks and introductions, I'm going to turn the call over to Ms. Maurita Sutedja, vice president of investor relations for The Boeing Company. Ms. Sutedja, please go ahead."]},{"name":"Maurita Sutedja","speech":["Thank you, and good morning. Welcome to Boeing's fourth-quarter 2018 earnings call. I'm Maurita Sutedja, and with me today is Dennis Muilenburg, Boeing's chairman, president and chief executive officer; and Greg Smith, Boeing's chief financial officer and executive vice president of Enterprise Performance and Strategy. After management comments, we will take your questions.","[Operator instructions] As always, we have provided detailed financial information in our press release issued earlier today. And as a reminder, you can follow today's broadcast and slide presentation through our website at boeing.com. Before we begin, I need to remind you that any projections and goals we include in our discussions this morning are likely to involve risks, which is detailed in our news release, in our various SEC filings and in the forward-looking statement disclaimer at the end of this web presentation. In addition, we refer you to our earnings release and presentations for disclosures and reconciliations of non-GAAP measures that we use when discussing our results and outlook.","Now I will turn the call over to Dennis Muilenburg."]},{"name":"Dennis Muilenburg","speech":["Thank you, Maurita, and good morning. Let me begin today with a brief overview of our 2018 operating performance, followed by an update on the business environment and our expectations going forward. After that, Greg will walk you through the details of our financial results and outlook. With that, let's move to Slide 2.","Thanks to the dedicated efforts of our teams across the company, Boeing delivered strong 2018 financial results that included record revenue, earnings per share and operating cash flow driven by record commercial aircraft deliveries, higher Defense, Space & Securities and services volume and strong performance. And all of our three businesses increased their backlog in 2018. We sharpened our focus on profitable, sustained, long-term growth strategies; disciplined execution of our production and development programs; delivering greater life cycle value, including growing our services business; and driving further quality, safety and productivity gains across the enterprise. For the full year, we generated record operating cash flow of $15.3 billion.","We repurchased 26.1 million shares for $9 billion and made dividend payments totaling $3.9 billion in 2018. We continued to deliver on our commitments of returning cash to shareholders while investing in our people, innovation and future growth. In December, our board of directors authorized a new $20 billion share repurchase program and a 20% increase in our quarterly dividend. The increase is a part of our balanced cash deployment strategy and reflects the confidence we have in our strong lineup of products and services and our long-term outlook for the business.","Turning to our core operating performance for the year. Boeing Commercial Airplanes generated revenue of $60.7 billion, reflecting a record 806 deliveries including the delivery of the first 787-10 Dreamliner and the first 737 MAX 9. During the year, we delivered 256 MAX airplanes, nearly half of the total 737 deliveries. Continued healthy sales activity contributed to 893 net new airplane orders during the year, adding to our robust backlog stands at nearly 5,900 airplanes and it's worth $412 billion.","Our backlog equates to about seven years of production at current rates. Key Commercial Airplane milestones in 2018 included the delivery of the 787th 787 Dreamliner and the first airplane from the new 737 completion center in China. The 737 program increased its production rate to 52 per month and made good progress on its recovery plans to mitigate supply chain challenges with 173 aircraft delivered in the fourth quarter. Also in the year, we completed the first flight of the 737 MAX 7 and delivered the first MAX Boeing Business Jet airplane.","The 777X program achieved a number of key milestones last year as we rolled out the static test airplane and began production of the flight test airplanes. We recently completed final body join for the first flight test airplane and turned on its electrically powered systems. We plan to start flight testing this year and remain on track for the first 777X delivery in 2020. Meanwhile, the 787 program further matured its rate readiness.","We have started transitioning to 14 per month in our factories and supply chain as we prepare to begin delivering at this higher rate. We expect to complete the transition in the second quarter. Now over to Defense, Space & Security. BDS reported revenue of $23.2 billion, a 13% growth year on year, reflecting higher volume across its business.","BDS booked $36 billion of new orders during the year, including wins on important new franchise opportunities, like the T-X trainer, the MQ-25 unmanned aircraft and the MH-139 helicopter. More recently in the fourth quarter, BDS was awarded contracts to modernize the entire Spanish Chinook helicopter fleet and a joint ground system to provide tactical satellite communications for the U.S. Air Force. BDS made progress on a number of critical program milestones, including delivering the first two KC-46 tankers to the U.S.","Air Force earlier this month. Two more tankers have been accepted by the Air Force, and we expect to deliver these aircraft imminently. We look forward to working with the Air Force and the Navy during their initial operational tests and evaluation of the KC-46 as we further demonstrate the operational capabilities of this next-generation aircraft across refueling, mobility and combat weapon systems missions. Additionally, we received the contract to provide the second KC-46 international tanker to Japan.","This highlights the broader demand and market opportunity that we see for this program. Other key operational milestones for BDS included the unveiling of the SB>1 DEFIANT helicopter Boeing and Sikorsky are developing for the U.S. Army's joint multi-role technology demonstrator program and completing another Minuteman III flight test. We're continuing to ramp up the activities for the T-X and MQ-25 programs.","These wins are the culmination of years of unwavering focus, improving our technology and derisking the programs. We have developed and flight tested two all-new, production-ready T-X jets with 76 flight tests having been completed to date. We've already seen strong interest as well for the T-X from outside of the U.S. On MQ-25, we have demonstrated deck handling and engine trials.","Our MQ-25 prototype aircraft is currently in ground test and expected to undergo first flight this year. Now turning to Global Services. BGS reported revenue of $17 billion, representing 17% growth year on year. Since its operations began in July of 2017, BGS growth has consistently outpaced the average for the services market.","BGS continues to win new business, highlighting the value we bring to our broad range of commercial and government customers and the strength of our One Boeing offerings. BGS booked new orders totaling approximately $18 billion in 2018. Key awards included support services and sustainment contracts for military customers globally, such as the recent C-17, F/A-18 and F-22 contracts with U.S. Navy and Air Force and F-15 for Qatar.","In addition to the strong momentum in its parts and supply chain business, BGS continues to expand its market-leading digital solution portfolio and customer base. In the fourth quarter, more than 5,300 commercial and military aircraft were monitored in flight by Airplane Health Management, a cloud-based, real-time health monitoring solution. Adding to the list our digital analytics customers, Shenzhen Airlines recently signed up for crew pairing and rostering services. Shenzhen will be the first airline in China to use Boeing AnalytX-powered crew management solutions, bringing the most advanced data analytics capabilities to the airlines, allow them to focus on their core business of serving their customers while improving efficiency and costs.","In the fourth quarter, we also completed acquisition of KLX, a major global provider of aviation parts and services, boosting our supply chain capability enables us to better serve our customers while profitably and purposefully growing our business. Our integration activities continue to progress well. We've retained top KLX talent and are on track to achieve or exceed our business case synergy value. Additionally, last year, we started operations for our airplane seat joint venture with Adient and auxiliary power units joint venture with Safran.","These partnerships support Boeing's vertical integration strategy to strengthen in-house capabilities and depth in key areas to offer better products that deliver greater value to our customers, grow our services business and generate greater life cycle value. We've also made progress in our strategic partnership with Embraer. We recently received approval by the government of Brazil and signed the definitive agreements with Embraer. The Embraer shareholder vote, scheduled for February 26, is the next major milestone.","Over the coming months, we'll continue to work with Embraer, global regulators and other stakeholders to complete the transaction and create the most important strategic partnership in the aerospace industry. Assuming the approvals are received in a timely manner, we expect to close the transaction by the end of this year. In summary, we delivered another year of strong operating performance, captured noteworthy additions to our large and diverse backlog, returned significant cash to our shareholders, invested in our people and our business to drive innovation and excellence and complemented our organic growth with planned strategic inorganic investments. With that, let's turn to the business environment on Slide 3.","We continue to see healthy global demand for our offerings in commercial, defense, space and services. These are sizable sectors that are growing and backed by strong fundamentals with a combined market opportunity of $8.1 trillion over the next 10 years. I would note that as a global company with customers in 150 countries, we are always mindful of the potential impact of geopolitical and macroeconomic forces. We continue to track a host of near-term issues and mitigate potential risks as appropriate.","We value and maintain strong relationships with our customers, suppliers and other stakeholders around the world, reinforcing the mutual economic benefits of a strong and prosperous aerospace industry. In commercial aviation, global passenger traffic continues to grow faster than GDP and long-term trends. For 2018, passenger traffic grew 6.6% through November, representing the ninth straight year of above-trend growth. We believe the changing nature of travel, with more connected city pairs and a rising middle class, has fundamentally expanded traffic patterns and supports sustained growth.","At the same time, airlines are maintaining capacity discipline, keeping supply and demand in balance as industry profitability remains near historic highs. Meanwhile, air cargo continued its solid momentum in 2018 with traffic increasing nearly 4% through November. Our customers continue to recognize the superior value proposition of our more fuel-efficient airplanes as reflected in the strong intake of new orders we saw last year. For 2019, we expect to see our new order intake to be moderated but still at a healthy pace.","Our sales expectations are built on the diverse demand that we're seeing around the world and across airline business models. There also is more balance between airplanes purchased for fleet growth and replacement, leading to more stable purchasing patterns. We believe the evolution in these key market dynamics, in aggregate, continues to drive less cyclicality for our industry. Over the long term, we remain highly confident in our outlook, which forecasts a demand for nearly 43,000 new airplanes over the next 20 years, which will help double the size of the global fleet.","These long-term demand fundamentals, combined with healthy market conditions and a robust backlog, provide a solid foundation for our planned production rates. Now turning to our product segments, starting with the narrowbody. Our current production rate of 52 per month and planned increase to 57 this year is based on our backlog of more than 4,700 aircraft and a production skyline that is sold out into early next decade. The 737 program added 13 new customers during the year and the MAX family surpassed 5,000 net orders in December.","We continue to assess the market upward pressure on the 737 production rate. As with all rate increases, we continue to assess the supply chain readiness as well as the market demand in an integrated manner as part of our disciplined decision-making. In the widebody segment, we have seen steady orders with the 787 and the 777 and have high confidence in a meaningful increase in widebody replacement demand early next decade. The current generation 777 continued its steady sales momentum with 51 net orders.","The 777 program has captured more than 2,000 orders since its launch. These additional orders brought the backlog to 100 aircraft and provide further support for the 777 bridge. Turning to the 777X. We recently launched our Boeing Business Jet variant, the longest range business jet ever that can connect virtually any two cities in the world.","We have a strong foundation of 340 orders and commitments for the 777X, which support our plan for ramping up production and delivery of this new aircraft. We're focused on further bolstering the 777X skyline. The combined 777, 777X production rate is 5 per month. As we transition to 777X, we continue to expect the delivery rate to be approximately 3.5 aircraft per month in 2019, and we expect the delivery rate to increase slightly in 2020 as we continue to assess 777 demand as well as 777X timing.","The 787 Dreamliner extended its status as the fastest selling twin-aisle jet in history with 109 net orders last year or more than 1,400 since the program launched. Highlights include Hawaiian Airlines and Turkish Airlines becoming new 787 customers. American Airlines and United Airlines added to the growing list of repeat 787 Dreamliner customers, highlighting the strong market preference for the 787 family and its superior value. With more than 600 in the backlog, our planned increased Dreamliner production to 14 airplanes per month this year is well supported.","Turning to our 747 and 767 programs. With our unmatched freighter product lines, we are well-positioned to capture the increased cargo demand. We added four new orders for the 747 in the fourth quarter. And as previously announced, we plan to increase 767 production rate from 2.5 per month to three per month in 2020.","At Defense, Space & Security, we continue to see solid demand for our major platforms and programs. The BDS portfolio is well-positioned with a mature world-class set of platforms to address current needs and innovative, capable and affordable new franchise programs to build the future. We expect to continue to see broad support for our products from the Pentagon and Congress. The fiscal year 2019 defense bill has authorized the fourth multiyear procurement for the F/A-18 fighter, added funding for additional rotorcraft, funded the requested quantities for our key programs across our fixed wing and commercial-derivative aircraft portfolios and supported our missile, space and satellite products.","While the fiscal year 2019 NASA appropriations have not yet been enacted, Congress has also demonstrated robust support for our key space exploration programs. Demand from outside of U.S. for our defense and space offerings also remains high, in particular for rotorcraft, commercial derivatives, fighters and satellites. Our investment in future growth and new sales continues in areas that are priorities for our customers.","We will continue to leverage capabilities and technologies from across our enterprise to win important opportunities such as the Ground Based Strategic Deterrent. Turning to the services sector. We see the $2.8 trillion services market over the next 10 years as a significant growth opportunity for our company. BGS provides agile, cost-competitive services to our customers worldwide.","We aim to continue growing faster than the average services market growth rate of 3.5% as we further expand our broad portfolio of services offerings and continue to gain market share. BGS' 17% year-on-year revenue increase solidifies our confidence in the growth opportunity and our team's ability to capture it. Strong orders of $18 billion in the year reflect our customers' recognition of our value proposition in helping them optimize the performance of their fleets and reduce operational costs through the life cycle. Our focus for BGS remains on optimizing the business and expanding our portfolio offerings through organic growth investments, such as strengthening our vertical capabilities, complemented by strategic acquisitions and partnership to position BGS for sustained, long-term and profitable growth.","Our expertise, the global reach of our business and our strong customer partnerships have us well-positioned to compete and win in this important sector. In summary, with growing markets and opportunities ahead, our team remains intensely focused on growth, innovation and accelerating productivity improvements to fuel our investments in the future. For example, the first test flight of our autonomous passenger air vehicle prototype last week shows our efforts to continue to lead with a safe, innovative and responsible approach to new mobility solutions. Our One Boeing strategy and offerings across our three businesses are key differentiators that help cement our position as the world's leading aerospace company.","With that, Greg, over to you for the financial results."]},{"name":"Gregory Smith","speech":["Great. Thanks, Dennis. Good morning, everybody. Let's turn to Slide 4, and we'll discuss our full-year results.","We booked record revenue of $101 billion in 2018, exceeding $100 billion for the first time in the company's history. This was driven by record commercial aircraft deliveries, higher Defense, Space & Security volume and continued growth in services. Core earnings per share totaled $16.01 for the full year, another record, reflecting higher volume, improved mix and solid execution across the company. Operating cash flow for the year was also a record at $15.3 billion.","The robust cash generation was largely driven by higher volume and strong operating performance across the businesses. Let's move now to our quarterly results on Slide 5. Fourth-quarter revenue increased to $28.3 billion driven by growth in all three businesses while core earnings per share grew to $5.48 driven by higher volume and strong operating performance across the portfolio, which outweighed the favorable tax reform impact in the fourth quarter of last year. Now let's discuss Commercial Airplanes on Slide 6.","Our Commercial Airplanes business revenue of $17.3 billion during the quarter reflected higher deliveries and favorable mix. BCA operating margins increased to 15.6% driven by higher 737 volume and strong operating performance on production programs, including higher 787 margins. BCA captured $16 billion in net orders during the fourth quarter, and the backlog remains strong at $412 billion with nearly 5,900 aircraft representing approximately seven years of production. We delivered 238 aircraft in the quarter, including 173 737s.","And as we've discussed, the 737 deliveries for the year were backloaded due to production and supply chain recovery efforts. Let's now turn to Defense, Space & Security results on Slide 7. Fourth-quarter revenue increased to $6.1 billion, driven by higher volume across the BDS portfolio including F/A-18, satellites and weapons. BDS margins increased to 10.9%, reflecting solid performance and favorable mix.","BDS added $5 billion of new orders in the quarter, bringing its backlog to $57 billion with 30% of that from outside the United States. Turning now to Global Services results on Slide 8. In the fourth quarter, Global Services revenue increased $4.9 billion, reflecting higher volume, predominantly driven by increased sales of parts and supply chain solutions. Year-over-year growth of 17% for the full year, which was predominantly driven by organically, more than meets our objective to outpace the average annual service market growth rate of 3.5%.","BGS operating margins were strong at 15%, reflecting the mix of products and services in the quarter as well as improved performance, partially offset by higher period costs for investments focused on expanding our portfolio of offerings going forward. During the quarter, BGS won key contract awards worth approximately $6 billion, bringing our backlog to $21 billion. These wins underscore the strength of our One Boeing offerings to our customers. Let's turn now to cash flow on Slide 9.","Operating cash flow for the quarter and full year was strong at $2.9 billion and $15.3 billion, respectively. These results were driven by planned higher volumes, strong operating performance across the business and some timing of receipts and expenditures. We remain focused and on track with our balanced cash deployment strategy. In 2018, we invested $5 billion in R&D and CAPEX, repurchased $9 billion of Boeing stock and paid $3.9 billion in dividends, reflecting a 20% increase in dividend per share from last year.","And we also completed the KLX acquisition in the fourth quarter. The strength of our business and our confidence in the sustainable long-term outlook are powering investments and productivity, innovation and growth while delivering on our commitments to return cash to shareholders. As Dennis mentioned earlier, in December last year, we reinforced our commitment to returning value to shareholders as our board of directors authorized a new $20 billion share repurchase program and a 20% increase in our quarterly dividend. Over the last five years, we've repurchased more than 205 million shares and increased our dividend by more than 180%.","At the same time, we've invested nearly $35 billion in key strategic areas of our business to support long-term growth sustainability for Boeing, for our customers and our shareholders. We remain committed to continue to execute on our balanced cash deployment strategy going forward. Let's move now to cash and debt balances on Slide 10. We ended the quarter with $8.6 billion of cash and marketable securities, $13.8 billion of debt and stable credit ratings.","Our cash and debt position reflects the acquisition of KLX in the fourth quarter, and our balance sheet position continues to provide us with flexibility to invest in innovation and profitable growth opportunities while, again, returning value back to shareholders. Turning now to Slide 11 to discuss our outlook for 2019. Building on the strong performance in 2018, our guidance for 2019 reflects higher volume, improved core operating performance, additional productivity capture and continued focus and effort to drive growing cash flows. Total company revenue for 2019 is forecasted to be between $109.5 billion and $111.5 billion, largely reflecting higher planned 737 and 787 production rates and growth in both services as well as Defense, Space & Security.","Core earnings per share guidance for 2019 is set to be between $19.90 and $20.10 per share on higher volume, favorable mix and improved productivity and affordability. Operating cash flow for 2019 is forecasted to increase by $2 billion to be between $17 billion and $17.5 billion. This is largely driven by improved 787 cash generation in 2019, higher overall volume, including 737 and 787 production; and improving Tanker cash profile that's partially offset by increased planned 777X inventory-related test aircraft and early build units and higher cash taxes, primarily due to improved unit profitability as well as higher planned R&D spending in 2019. Capital spending is forecasted to be approximately $2.3 billion and includes the timing shift of some expenditures that were expected in 2018.","Our investments align with our long-term growth and productivity strategy that supports core programs, innovation, productivity, verticals and services. And before we discuss the business unit guidance, I'd like to highlight in the beginning -- in January of 2019, we are changing the realignment of our military derivative aircraft contracts, such as the KC-46 Tanker, P-8 Poseidon, VC-25 Air Force One between BCA and BDS. This change is to better reflect the contractual relationship with the end customers as BDS holds the prime contracts. This accounting realignment does not change how BCA and BDS execute together on these contracts.","Also, it does not affect total Boeing sales, earnings, cash flow, assets or liabilities. Our 2019 segment guidance includes the impact of this realignment. And beginning in January 2019, the revenue and costs associated with military derivative aircraft that was previously reported in both BCA and BDS will now be 100% reported in the BDS segment. And for comparison purposes, as part of this earnings release, we've provided restated 2018 and 2017 financial information incorporating this accounting change.","Now for 2019 commercial airplane revenue guidance. It is set to be between $64.5 billion and $65.5 billion. And as we've discussed, this is largely driven on the higher deliveries of 737 and 787 program, partially offset by the impact of the military derivative aircraft realignment to BDS. The ramp-up on the 737 MAX production continues, and we expect 737 MAX to account for approximately 90% of total of 737 deliveries in 2019.","In all, BCA is expected to deliver between 895 and 905 airplanes for the full year. Incorporated in this delivery guidance assumption are planned 737 and 787 production rate increases and the intercompany deliveries of the military aircraft from BCA to BDS. Commercial airplane operating margin guidance is set to be between 14.5% and 15% on higher 737 volume and improved operating performance, which more than offset the higher period costs, including R&D. The margin guidance also reflects all planned production rate increases.","Defense, Space & Security revenue guidance for 2019 is between $26.5 billion and $27.5 billion, reflecting the higher volume on new programs, strong backlog on core programs and the impact of the military derivative aircraft realignment from BCA. Operating margin guidance for Defense business is greater than 11% based on continued productivity efforts across the portfolio, offset by less favorable mix. Global Services' revenue guidance is set to be between $18.5 billion and $19 billion with operating margins of greater than 15%. BGS margin guidance reflects solid performance, mix of products and services as well as investments to expand our portfolio of offerings.","And as we've discussed, we aim to grow faster than the average service market growth rate at 3.5% as we expand our broad service offerings and gain market share while maintaining and growing margins. We expect research and development spending to increase to approximately $4.1 billion in 2019 with approximately 60% related to BCA as we invest in future growth. BDS and BGS also continue to invest in key strategic growth opportunities and productivity enablers. In addition, we will continue to make investments at the corporate level for technology and innovation with enterprise applicability.","This 2019 R&D forecast also includes some timing shifts of some expenditures previously planned in 2018. Our R&D funding will continue to be focused on our core programs; key future franchises; productivity enablers, such as automation, prototyping; and capabilities to further our vertical content, life cycle capture and other key growth areas, such as autonomy and mobility solutions. We will continue to make the required investment in innovation and technology to ensure our products and services continue to win in the marketplace. And going forward, we expect our overall R&D spending as a percentage of revenue to be relatively stable.","While our organic investment remains the primary engine for growth, we may partner with other industry players in investments that accelerate our life cycle value strategy and strengthen our vertical capabilities and content, as demonstrated by the proposed strategic partnership with Embraer, which, assuming all approvals are received in a timely manner, we expect to close by the end of the year. Now consistent with prior years and given the seasonality of our business, as we look into the next quarter, we expect first quarter to be the lowest quarter of the year for revenue. With a relatively light commercial airplane deliveries, January is expected to have slow delivery activity, consistent with prior-year trends and reflects the supply chain recovery plans. Core EPS is estimated to be approximately 20% of the full-year earnings; and first quarter operating cash is forecast to be approximately 10% to 15%, again driven by lower volume and the timing of receipts and expenditures.","As we look toward the remainder of the year, our key focus areas are continuing to manage the 737 recovery progress within our factory and throughout our supply chain, including assuring rate readiness for a smooth transition to 57 a month. Also working together with our U.S. Air Force customer, delivering additional KC-46 Tankers, continuing healthy order momentum, especially on new programs such as the 777X as well as strong execution across the portfolio, including T-X and MQ-25 development. So in summary, our core operating engine continues to deliver strong results.","We continue to use our three business unit strategy as a key differentiator to win in the marketplace, to make prudent strategic investments and leverage the talent and innovation from across the company. At the same time, we will set challenging goals and objectives around elements of operations support functions tied to profitability and efficiency to generate cash, improve working capital while driving value to our customers. All these will help us achieve our goal to grow year-over-year revenue, margins and cash flow. With that, I'll turn it back to Dennis for some closing comments."]},{"name":"Dennis Muilenburg","speech":["All right. Thanks, Greg. 2018 was a year of strong performance and record results on many different fronts, operationally and financially, a demonstration of how our team remains focused on further driving both growth and productivity. These results were achieved through the hard work and dedication of our employees and the great partnerships that we have with our customers and suppliers.","In addition to the strong commercial airplane market dynamics I mentioned earlier in my remarks, we've taken our own actions to reduce cyclicality in our business. This includes remaining disciplined in our production rate decisions, derisking our pension liabilities, strategically phasing our research and development spending, creating labor stability with long-term contracts and expanding our services business, which is also less cyclical. We've executed on our long-term strategy of robust and continuing organic growth investment and returning value to our shareholders, complemented by strategic acquisitions and partnerships that enhance and accelerate our growth plans. The planned strategic partnerships with Embraer, the recent KLX acquisition and the seats and APU joint ventures are entirely consistent with this strategy.","Our priorities going forward are to leverage our unique One Boeing advantages, continue building strength on strength to deliver and improve on our commitments and to stretch beyond those plans and sharpen and accelerate our pace of progress on key enterprise growth and productivity efforts. As always, we'll continue to keep a close eye on the geopolitical and macroeconomic forces and prudently manage risks. Achieving these objectives will require a clear and consistent focus on the profitable ramp-up in commercial airplane production; continuing to strengthen our Defense, Space & Security business; growing our integrated services business and leveraging the power of our three business unit strategy; delivering on our development programs; driving world-class levels of productivity and performance throughout the enterprise to fund our investments in innovation and growth; disciplined, leading-edge investments and a balanced, value-creating cash deployment strategy; and continuing to develop and maintain the best team and talent in the industry, all of which position Boeing for continued market leadership, sustained top and bottom-line growth and increasing value for our customers, shareholders, employees and other stakeholders. With that, we'll be happy to take your questions."]}],"string":"[\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Thank you for standing by. Good day, everyone, and welcome to The Boeing Company's fourth-quarter 2018 earnings conference call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst and media question-and-answer sessions, are being broadcast live over the Internet.\",\n \"At this time, for opening remarks and introductions, I'm going to turn the call over to Ms. Maurita Sutedja, vice president of investor relations for The Boeing Company. Ms. Sutedja, please go ahead.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"Thank you, and good morning. Welcome to Boeing's fourth-quarter 2018 earnings call. I'm Maurita Sutedja, and with me today is Dennis Muilenburg, Boeing's chairman, president and chief executive officer; and Greg Smith, Boeing's chief financial officer and executive vice president of Enterprise Performance and Strategy. After management comments, we will take your questions.\",\n \"[Operator instructions] As always, we have provided detailed financial information in our press release issued earlier today. And as a reminder, you can follow today's broadcast and slide presentation through our website at boeing.com. Before we begin, I need to remind you that any projections and goals we include in our discussions this morning are likely to involve risks, which is detailed in our news release, in our various SEC filings and in the forward-looking statement disclaimer at the end of this web presentation. In addition, we refer you to our earnings release and presentations for disclosures and reconciliations of non-GAAP measures that we use when discussing our results and outlook.\",\n \"Now I will turn the call over to Dennis Muilenburg.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Thank you, Maurita, and good morning. Let me begin today with a brief overview of our 2018 operating performance, followed by an update on the business environment and our expectations going forward. After that, Greg will walk you through the details of our financial results and outlook. With that, let's move to Slide 2.\",\n \"Thanks to the dedicated efforts of our teams across the company, Boeing delivered strong 2018 financial results that included record revenue, earnings per share and operating cash flow driven by record commercial aircraft deliveries, higher Defense, Space & Securities and services volume and strong performance. And all of our three businesses increased their backlog in 2018. We sharpened our focus on profitable, sustained, long-term growth strategies; disciplined execution of our production and development programs; delivering greater life cycle value, including growing our services business; and driving further quality, safety and productivity gains across the enterprise. For the full year, we generated record operating cash flow of $15.3 billion.\",\n \"We repurchased 26.1 million shares for $9 billion and made dividend payments totaling $3.9 billion in 2018. We continued to deliver on our commitments of returning cash to shareholders while investing in our people, innovation and future growth. In December, our board of directors authorized a new $20 billion share repurchase program and a 20% increase in our quarterly dividend. The increase is a part of our balanced cash deployment strategy and reflects the confidence we have in our strong lineup of products and services and our long-term outlook for the business.\",\n \"Turning to our core operating performance for the year. Boeing Commercial Airplanes generated revenue of $60.7 billion, reflecting a record 806 deliveries including the delivery of the first 787-10 Dreamliner and the first 737 MAX 9. During the year, we delivered 256 MAX airplanes, nearly half of the total 737 deliveries. Continued healthy sales activity contributed to 893 net new airplane orders during the year, adding to our robust backlog stands at nearly 5,900 airplanes and it's worth $412 billion.\",\n \"Our backlog equates to about seven years of production at current rates. Key Commercial Airplane milestones in 2018 included the delivery of the 787th 787 Dreamliner and the first airplane from the new 737 completion center in China. The 737 program increased its production rate to 52 per month and made good progress on its recovery plans to mitigate supply chain challenges with 173 aircraft delivered in the fourth quarter. Also in the year, we completed the first flight of the 737 MAX 7 and delivered the first MAX Boeing Business Jet airplane.\",\n \"The 777X program achieved a number of key milestones last year as we rolled out the static test airplane and began production of the flight test airplanes. We recently completed final body join for the first flight test airplane and turned on its electrically powered systems. We plan to start flight testing this year and remain on track for the first 777X delivery in 2020. Meanwhile, the 787 program further matured its rate readiness.\",\n \"We have started transitioning to 14 per month in our factories and supply chain as we prepare to begin delivering at this higher rate. We expect to complete the transition in the second quarter. Now over to Defense, Space & Security. BDS reported revenue of $23.2 billion, a 13% growth year on year, reflecting higher volume across its business.\",\n \"BDS booked $36 billion of new orders during the year, including wins on important new franchise opportunities, like the T-X trainer, the MQ-25 unmanned aircraft and the MH-139 helicopter. More recently in the fourth quarter, BDS was awarded contracts to modernize the entire Spanish Chinook helicopter fleet and a joint ground system to provide tactical satellite communications for the U.S. Air Force. BDS made progress on a number of critical program milestones, including delivering the first two KC-46 tankers to the U.S.\",\n \"Air Force earlier this month. Two more tankers have been accepted by the Air Force, and we expect to deliver these aircraft imminently. We look forward to working with the Air Force and the Navy during their initial operational tests and evaluation of the KC-46 as we further demonstrate the operational capabilities of this next-generation aircraft across refueling, mobility and combat weapon systems missions. Additionally, we received the contract to provide the second KC-46 international tanker to Japan.\",\n \"This highlights the broader demand and market opportunity that we see for this program. Other key operational milestones for BDS included the unveiling of the SB>1 DEFIANT helicopter Boeing and Sikorsky are developing for the U.S. Army's joint multi-role technology demonstrator program and completing another Minuteman III flight test. We're continuing to ramp up the activities for the T-X and MQ-25 programs.\",\n \"These wins are the culmination of years of unwavering focus, improving our technology and derisking the programs. We have developed and flight tested two all-new, production-ready T-X jets with 76 flight tests having been completed to date. We've already seen strong interest as well for the T-X from outside of the U.S. On MQ-25, we have demonstrated deck handling and engine trials.\",\n \"Our MQ-25 prototype aircraft is currently in ground test and expected to undergo first flight this year. Now turning to Global Services. BGS reported revenue of $17 billion, representing 17% growth year on year. Since its operations began in July of 2017, BGS growth has consistently outpaced the average for the services market.\",\n \"BGS continues to win new business, highlighting the value we bring to our broad range of commercial and government customers and the strength of our One Boeing offerings. BGS booked new orders totaling approximately $18 billion in 2018. Key awards included support services and sustainment contracts for military customers globally, such as the recent C-17, F/A-18 and F-22 contracts with U.S. Navy and Air Force and F-15 for Qatar.\",\n \"In addition to the strong momentum in its parts and supply chain business, BGS continues to expand its market-leading digital solution portfolio and customer base. In the fourth quarter, more than 5,300 commercial and military aircraft were monitored in flight by Airplane Health Management, a cloud-based, real-time health monitoring solution. Adding to the list our digital analytics customers, Shenzhen Airlines recently signed up for crew pairing and rostering services. Shenzhen will be the first airline in China to use Boeing AnalytX-powered crew management solutions, bringing the most advanced data analytics capabilities to the airlines, allow them to focus on their core business of serving their customers while improving efficiency and costs.\",\n \"In the fourth quarter, we also completed acquisition of KLX, a major global provider of aviation parts and services, boosting our supply chain capability enables us to better serve our customers while profitably and purposefully growing our business. Our integration activities continue to progress well. We've retained top KLX talent and are on track to achieve or exceed our business case synergy value. Additionally, last year, we started operations for our airplane seat joint venture with Adient and auxiliary power units joint venture with Safran.\",\n \"These partnerships support Boeing's vertical integration strategy to strengthen in-house capabilities and depth in key areas to offer better products that deliver greater value to our customers, grow our services business and generate greater life cycle value. We've also made progress in our strategic partnership with Embraer. We recently received approval by the government of Brazil and signed the definitive agreements with Embraer. The Embraer shareholder vote, scheduled for February 26, is the next major milestone.\",\n \"Over the coming months, we'll continue to work with Embraer, global regulators and other stakeholders to complete the transaction and create the most important strategic partnership in the aerospace industry. Assuming the approvals are received in a timely manner, we expect to close the transaction by the end of this year. In summary, we delivered another year of strong operating performance, captured noteworthy additions to our large and diverse backlog, returned significant cash to our shareholders, invested in our people and our business to drive innovation and excellence and complemented our organic growth with planned strategic inorganic investments. With that, let's turn to the business environment on Slide 3.\",\n \"We continue to see healthy global demand for our offerings in commercial, defense, space and services. These are sizable sectors that are growing and backed by strong fundamentals with a combined market opportunity of $8.1 trillion over the next 10 years. I would note that as a global company with customers in 150 countries, we are always mindful of the potential impact of geopolitical and macroeconomic forces. We continue to track a host of near-term issues and mitigate potential risks as appropriate.\",\n \"We value and maintain strong relationships with our customers, suppliers and other stakeholders around the world, reinforcing the mutual economic benefits of a strong and prosperous aerospace industry. In commercial aviation, global passenger traffic continues to grow faster than GDP and long-term trends. For 2018, passenger traffic grew 6.6% through November, representing the ninth straight year of above-trend growth. We believe the changing nature of travel, with more connected city pairs and a rising middle class, has fundamentally expanded traffic patterns and supports sustained growth.\",\n \"At the same time, airlines are maintaining capacity discipline, keeping supply and demand in balance as industry profitability remains near historic highs. Meanwhile, air cargo continued its solid momentum in 2018 with traffic increasing nearly 4% through November. Our customers continue to recognize the superior value proposition of our more fuel-efficient airplanes as reflected in the strong intake of new orders we saw last year. For 2019, we expect to see our new order intake to be moderated but still at a healthy pace.\",\n \"Our sales expectations are built on the diverse demand that we're seeing around the world and across airline business models. There also is more balance between airplanes purchased for fleet growth and replacement, leading to more stable purchasing patterns. We believe the evolution in these key market dynamics, in aggregate, continues to drive less cyclicality for our industry. Over the long term, we remain highly confident in our outlook, which forecasts a demand for nearly 43,000 new airplanes over the next 20 years, which will help double the size of the global fleet.\",\n \"These long-term demand fundamentals, combined with healthy market conditions and a robust backlog, provide a solid foundation for our planned production rates. Now turning to our product segments, starting with the narrowbody. Our current production rate of 52 per month and planned increase to 57 this year is based on our backlog of more than 4,700 aircraft and a production skyline that is sold out into early next decade. The 737 program added 13 new customers during the year and the MAX family surpassed 5,000 net orders in December.\",\n \"We continue to assess the market upward pressure on the 737 production rate. As with all rate increases, we continue to assess the supply chain readiness as well as the market demand in an integrated manner as part of our disciplined decision-making. In the widebody segment, we have seen steady orders with the 787 and the 777 and have high confidence in a meaningful increase in widebody replacement demand early next decade. The current generation 777 continued its steady sales momentum with 51 net orders.\",\n \"The 777 program has captured more than 2,000 orders since its launch. These additional orders brought the backlog to 100 aircraft and provide further support for the 777 bridge. Turning to the 777X. We recently launched our Boeing Business Jet variant, the longest range business jet ever that can connect virtually any two cities in the world.\",\n \"We have a strong foundation of 340 orders and commitments for the 777X, which support our plan for ramping up production and delivery of this new aircraft. We're focused on further bolstering the 777X skyline. The combined 777, 777X production rate is 5 per month. As we transition to 777X, we continue to expect the delivery rate to be approximately 3.5 aircraft per month in 2019, and we expect the delivery rate to increase slightly in 2020 as we continue to assess 777 demand as well as 777X timing.\",\n \"The 787 Dreamliner extended its status as the fastest selling twin-aisle jet in history with 109 net orders last year or more than 1,400 since the program launched. Highlights include Hawaiian Airlines and Turkish Airlines becoming new 787 customers. American Airlines and United Airlines added to the growing list of repeat 787 Dreamliner customers, highlighting the strong market preference for the 787 family and its superior value. With more than 600 in the backlog, our planned increased Dreamliner production to 14 airplanes per month this year is well supported.\",\n \"Turning to our 747 and 767 programs. With our unmatched freighter product lines, we are well-positioned to capture the increased cargo demand. We added four new orders for the 747 in the fourth quarter. And as previously announced, we plan to increase 767 production rate from 2.5 per month to three per month in 2020.\",\n \"At Defense, Space & Security, we continue to see solid demand for our major platforms and programs. The BDS portfolio is well-positioned with a mature world-class set of platforms to address current needs and innovative, capable and affordable new franchise programs to build the future. We expect to continue to see broad support for our products from the Pentagon and Congress. The fiscal year 2019 defense bill has authorized the fourth multiyear procurement for the F/A-18 fighter, added funding for additional rotorcraft, funded the requested quantities for our key programs across our fixed wing and commercial-derivative aircraft portfolios and supported our missile, space and satellite products.\",\n \"While the fiscal year 2019 NASA appropriations have not yet been enacted, Congress has also demonstrated robust support for our key space exploration programs. Demand from outside of U.S. for our defense and space offerings also remains high, in particular for rotorcraft, commercial derivatives, fighters and satellites. Our investment in future growth and new sales continues in areas that are priorities for our customers.\",\n \"We will continue to leverage capabilities and technologies from across our enterprise to win important opportunities such as the Ground Based Strategic Deterrent. Turning to the services sector. We see the $2.8 trillion services market over the next 10 years as a significant growth opportunity for our company. BGS provides agile, cost-competitive services to our customers worldwide.\",\n \"We aim to continue growing faster than the average services market growth rate of 3.5% as we further expand our broad portfolio of services offerings and continue to gain market share. BGS' 17% year-on-year revenue increase solidifies our confidence in the growth opportunity and our team's ability to capture it. Strong orders of $18 billion in the year reflect our customers' recognition of our value proposition in helping them optimize the performance of their fleets and reduce operational costs through the life cycle. Our focus for BGS remains on optimizing the business and expanding our portfolio offerings through organic growth investments, such as strengthening our vertical capabilities, complemented by strategic acquisitions and partnership to position BGS for sustained, long-term and profitable growth.\",\n \"Our expertise, the global reach of our business and our strong customer partnerships have us well-positioned to compete and win in this important sector. In summary, with growing markets and opportunities ahead, our team remains intensely focused on growth, innovation and accelerating productivity improvements to fuel our investments in the future. For example, the first test flight of our autonomous passenger air vehicle prototype last week shows our efforts to continue to lead with a safe, innovative and responsible approach to new mobility solutions. Our One Boeing strategy and offerings across our three businesses are key differentiators that help cement our position as the world's leading aerospace company.\",\n \"With that, Greg, over to you for the financial results.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Great. Thanks, Dennis. Good morning, everybody. Let's turn to Slide 4, and we'll discuss our full-year results.\",\n \"We booked record revenue of $101 billion in 2018, exceeding $100 billion for the first time in the company's history. This was driven by record commercial aircraft deliveries, higher Defense, Space & Security volume and continued growth in services. Core earnings per share totaled $16.01 for the full year, another record, reflecting higher volume, improved mix and solid execution across the company. Operating cash flow for the year was also a record at $15.3 billion.\",\n \"The robust cash generation was largely driven by higher volume and strong operating performance across the businesses. Let's move now to our quarterly results on Slide 5. Fourth-quarter revenue increased to $28.3 billion driven by growth in all three businesses while core earnings per share grew to $5.48 driven by higher volume and strong operating performance across the portfolio, which outweighed the favorable tax reform impact in the fourth quarter of last year. Now let's discuss Commercial Airplanes on Slide 6.\",\n \"Our Commercial Airplanes business revenue of $17.3 billion during the quarter reflected higher deliveries and favorable mix. BCA operating margins increased to 15.6% driven by higher 737 volume and strong operating performance on production programs, including higher 787 margins. BCA captured $16 billion in net orders during the fourth quarter, and the backlog remains strong at $412 billion with nearly 5,900 aircraft representing approximately seven years of production. We delivered 238 aircraft in the quarter, including 173 737s.\",\n \"And as we've discussed, the 737 deliveries for the year were backloaded due to production and supply chain recovery efforts. Let's now turn to Defense, Space & Security results on Slide 7. Fourth-quarter revenue increased to $6.1 billion, driven by higher volume across the BDS portfolio including F/A-18, satellites and weapons. BDS margins increased to 10.9%, reflecting solid performance and favorable mix.\",\n \"BDS added $5 billion of new orders in the quarter, bringing its backlog to $57 billion with 30% of that from outside the United States. Turning now to Global Services results on Slide 8. In the fourth quarter, Global Services revenue increased $4.9 billion, reflecting higher volume, predominantly driven by increased sales of parts and supply chain solutions. Year-over-year growth of 17% for the full year, which was predominantly driven by organically, more than meets our objective to outpace the average annual service market growth rate of 3.5%.\",\n \"BGS operating margins were strong at 15%, reflecting the mix of products and services in the quarter as well as improved performance, partially offset by higher period costs for investments focused on expanding our portfolio of offerings going forward. During the quarter, BGS won key contract awards worth approximately $6 billion, bringing our backlog to $21 billion. These wins underscore the strength of our One Boeing offerings to our customers. Let's turn now to cash flow on Slide 9.\",\n \"Operating cash flow for the quarter and full year was strong at $2.9 billion and $15.3 billion, respectively. These results were driven by planned higher volumes, strong operating performance across the business and some timing of receipts and expenditures. We remain focused and on track with our balanced cash deployment strategy. In 2018, we invested $5 billion in R&D and CAPEX, repurchased $9 billion of Boeing stock and paid $3.9 billion in dividends, reflecting a 20% increase in dividend per share from last year.\",\n \"And we also completed the KLX acquisition in the fourth quarter. The strength of our business and our confidence in the sustainable long-term outlook are powering investments and productivity, innovation and growth while delivering on our commitments to return cash to shareholders. As Dennis mentioned earlier, in December last year, we reinforced our commitment to returning value to shareholders as our board of directors authorized a new $20 billion share repurchase program and a 20% increase in our quarterly dividend. Over the last five years, we've repurchased more than 205 million shares and increased our dividend by more than 180%.\",\n \"At the same time, we've invested nearly $35 billion in key strategic areas of our business to support long-term growth sustainability for Boeing, for our customers and our shareholders. We remain committed to continue to execute on our balanced cash deployment strategy going forward. Let's move now to cash and debt balances on Slide 10. We ended the quarter with $8.6 billion of cash and marketable securities, $13.8 billion of debt and stable credit ratings.\",\n \"Our cash and debt position reflects the acquisition of KLX in the fourth quarter, and our balance sheet position continues to provide us with flexibility to invest in innovation and profitable growth opportunities while, again, returning value back to shareholders. Turning now to Slide 11 to discuss our outlook for 2019. Building on the strong performance in 2018, our guidance for 2019 reflects higher volume, improved core operating performance, additional productivity capture and continued focus and effort to drive growing cash flows. Total company revenue for 2019 is forecasted to be between $109.5 billion and $111.5 billion, largely reflecting higher planned 737 and 787 production rates and growth in both services as well as Defense, Space & Security.\",\n \"Core earnings per share guidance for 2019 is set to be between $19.90 and $20.10 per share on higher volume, favorable mix and improved productivity and affordability. Operating cash flow for 2019 is forecasted to increase by $2 billion to be between $17 billion and $17.5 billion. This is largely driven by improved 787 cash generation in 2019, higher overall volume, including 737 and 787 production; and improving Tanker cash profile that's partially offset by increased planned 777X inventory-related test aircraft and early build units and higher cash taxes, primarily due to improved unit profitability as well as higher planned R&D spending in 2019. Capital spending is forecasted to be approximately $2.3 billion and includes the timing shift of some expenditures that were expected in 2018.\",\n \"Our investments align with our long-term growth and productivity strategy that supports core programs, innovation, productivity, verticals and services. And before we discuss the business unit guidance, I'd like to highlight in the beginning -- in January of 2019, we are changing the realignment of our military derivative aircraft contracts, such as the KC-46 Tanker, P-8 Poseidon, VC-25 Air Force One between BCA and BDS. This change is to better reflect the contractual relationship with the end customers as BDS holds the prime contracts. This accounting realignment does not change how BCA and BDS execute together on these contracts.\",\n \"Also, it does not affect total Boeing sales, earnings, cash flow, assets or liabilities. Our 2019 segment guidance includes the impact of this realignment. And beginning in January 2019, the revenue and costs associated with military derivative aircraft that was previously reported in both BCA and BDS will now be 100% reported in the BDS segment. And for comparison purposes, as part of this earnings release, we've provided restated 2018 and 2017 financial information incorporating this accounting change.\",\n \"Now for 2019 commercial airplane revenue guidance. It is set to be between $64.5 billion and $65.5 billion. And as we've discussed, this is largely driven on the higher deliveries of 737 and 787 program, partially offset by the impact of the military derivative aircraft realignment to BDS. The ramp-up on the 737 MAX production continues, and we expect 737 MAX to account for approximately 90% of total of 737 deliveries in 2019.\",\n \"In all, BCA is expected to deliver between 895 and 905 airplanes for the full year. Incorporated in this delivery guidance assumption are planned 737 and 787 production rate increases and the intercompany deliveries of the military aircraft from BCA to BDS. Commercial airplane operating margin guidance is set to be between 14.5% and 15% on higher 737 volume and improved operating performance, which more than offset the higher period costs, including R&D. The margin guidance also reflects all planned production rate increases.\",\n \"Defense, Space & Security revenue guidance for 2019 is between $26.5 billion and $27.5 billion, reflecting the higher volume on new programs, strong backlog on core programs and the impact of the military derivative aircraft realignment from BCA. Operating margin guidance for Defense business is greater than 11% based on continued productivity efforts across the portfolio, offset by less favorable mix. Global Services' revenue guidance is set to be between $18.5 billion and $19 billion with operating margins of greater than 15%. BGS margin guidance reflects solid performance, mix of products and services as well as investments to expand our portfolio of offerings.\",\n \"And as we've discussed, we aim to grow faster than the average service market growth rate at 3.5% as we expand our broad service offerings and gain market share while maintaining and growing margins. We expect research and development spending to increase to approximately $4.1 billion in 2019 with approximately 60% related to BCA as we invest in future growth. BDS and BGS also continue to invest in key strategic growth opportunities and productivity enablers. In addition, we will continue to make investments at the corporate level for technology and innovation with enterprise applicability.\",\n \"This 2019 R&D forecast also includes some timing shifts of some expenditures previously planned in 2018. Our R&D funding will continue to be focused on our core programs; key future franchises; productivity enablers, such as automation, prototyping; and capabilities to further our vertical content, life cycle capture and other key growth areas, such as autonomy and mobility solutions. We will continue to make the required investment in innovation and technology to ensure our products and services continue to win in the marketplace. And going forward, we expect our overall R&D spending as a percentage of revenue to be relatively stable.\",\n \"While our organic investment remains the primary engine for growth, we may partner with other industry players in investments that accelerate our life cycle value strategy and strengthen our vertical capabilities and content, as demonstrated by the proposed strategic partnership with Embraer, which, assuming all approvals are received in a timely manner, we expect to close by the end of the year. Now consistent with prior years and given the seasonality of our business, as we look into the next quarter, we expect first quarter to be the lowest quarter of the year for revenue. With a relatively light commercial airplane deliveries, January is expected to have slow delivery activity, consistent with prior-year trends and reflects the supply chain recovery plans. Core EPS is estimated to be approximately 20% of the full-year earnings; and first quarter operating cash is forecast to be approximately 10% to 15%, again driven by lower volume and the timing of receipts and expenditures.\",\n \"As we look toward the remainder of the year, our key focus areas are continuing to manage the 737 recovery progress within our factory and throughout our supply chain, including assuring rate readiness for a smooth transition to 57 a month. Also working together with our U.S. Air Force customer, delivering additional KC-46 Tankers, continuing healthy order momentum, especially on new programs such as the 777X as well as strong execution across the portfolio, including T-X and MQ-25 development. So in summary, our core operating engine continues to deliver strong results.\",\n \"We continue to use our three business unit strategy as a key differentiator to win in the marketplace, to make prudent strategic investments and leverage the talent and innovation from across the company. At the same time, we will set challenging goals and objectives around elements of operations support functions tied to profitability and efficiency to generate cash, improve working capital while driving value to our customers. All these will help us achieve our goal to grow year-over-year revenue, margins and cash flow. With that, I'll turn it back to Dennis for some closing comments.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"All right. Thanks, Greg. 2018 was a year of strong performance and record results on many different fronts, operationally and financially, a demonstration of how our team remains focused on further driving both growth and productivity. These results were achieved through the hard work and dedication of our employees and the great partnerships that we have with our customers and suppliers.\",\n \"In addition to the strong commercial airplane market dynamics I mentioned earlier in my remarks, we've taken our own actions to reduce cyclicality in our business. This includes remaining disciplined in our production rate decisions, derisking our pension liabilities, strategically phasing our research and development spending, creating labor stability with long-term contracts and expanding our services business, which is also less cyclical. We've executed on our long-term strategy of robust and continuing organic growth investment and returning value to our shareholders, complemented by strategic acquisitions and partnerships that enhance and accelerate our growth plans. The planned strategic partnerships with Embraer, the recent KLX acquisition and the seats and APU joint ventures are entirely consistent with this strategy.\",\n \"Our priorities going forward are to leverage our unique One Boeing advantages, continue building strength on strength to deliver and improve on our commitments and to stretch beyond those plans and sharpen and accelerate our pace of progress on key enterprise growth and productivity efforts. As always, we'll continue to keep a close eye on the geopolitical and macroeconomic forces and prudently manage risks. Achieving these objectives will require a clear and consistent focus on the profitable ramp-up in commercial airplane production; continuing to strengthen our Defense, Space & Security business; growing our integrated services business and leveraging the power of our three business unit strategy; delivering on our development programs; driving world-class levels of productivity and performance throughout the enterprise to fund our investments in innovation and growth; disciplined, leading-edge investments and a balanced, value-creating cash deployment strategy; and continuing to develop and maintain the best team and talent in the industry, all of which position Boeing for continued market leadership, sustained top and bottom-line growth and increasing value for our customers, shareholders, employees and other stakeholders. With that, we'll be happy to take your questions.\"\n ]\n }\n]","isConversational":false},"questions_and_answers":{"kind":"list like","value":[{"name":"Operator","speech":["[Operator instructions] Our first question comes from Rajeev Lalwani with Morgan Stanley. Please go ahead."]},{"name":"Rajeev Lalwani","speech":["On the 737, at what point do you expect to be caught up on deliveries? And where are the pressure points been of late? Also, how does that inform the latest thinking in time line on a decision beyond 57 a month?"]},{"name":"Dennis Muilenburg","speech":["Rajeev, good question. Certainly, 737 production system health remains a key focus for us. As you can see by the fourth-quarter deliveries with 173 in the quarter and 69 in December, you have good signs of recovering to our production plan. You can also see the increased rates reflected in our total year guidance for deliveries for 2019 as we continue to ramp up.","I would say we still have work to do on the recovery efforts. We've seen some good, solid progress. We still have work to do inside our own factories and in our supply chain, and that is a daily and weekly focus for us, very intense effort. I'll say within the supply chain, we've seen some solid recovery in several areas.","We still have some areas that need work, including engines. And we're doing some additional work with CFM, including deploying some additional Boeing personnel to their factories and to their sub-tier suppliers. So that's one area that will have some additional focus for us in the first quarter. And as Greg mentioned, just in terms of production profile for the year, we expect the first quarter to be the lightest quarter of the year, and we expect January to be the lightest month within that quarter.","So we're going to continue to work hard on production system health and recovery. And then as you alluded to, at the same time, we're moving forward on our plans to ramp up to 57 a month during the year. Some elements of the supply chain have already moved to that position. We still have some work to do before we move the entire line to 57 a month.","And we're going to be very, very disciplined in that process. Again, we're making good progress, we know exactly what needs to be done. But we're going to just look at this through very clear eyes and step through it day by day, week by week and make sure that we, in a very disciplined and smooth way, move to 57 a month. I think we learned some lessons from the 52 a month step that we did last year.","And those lessons are certainly being applied this year on the 57 a month rate change. But you see all of that, again, reflected in our plans and our guidance for 2019."]},{"name":"Operator","speech":["Our next question is from Myles Walton with UBS. Please go ahead."]},{"name":"Myles Walton","speech":["Thanks. Good morning. Could you catch us up on your latest thinking on the NMA and maybe tie that to your view on moderating demand -- I guess, if -- demand would obviously fluctuate a bit if you chose to launch the aircraft with a pile of launch customers, I'd imagine. So maybe just juxtapose those two different points."]},{"name":"Dennis Muilenburg","speech":["Yes. Myles, I'd say first of all, if you take a look at NMA, we're still working through that same disciplined decision process that we've talked about previously. We're making progress on that. We've had very productive conversations with customers.","We understand the market. It's clear that there's a market need, but we're working through the details of the business case. And as we said, we're going to be very disciplined on how we do that. And while we're making progress, we're not up to our decision point yet.","And just to provide clarity on that, as we've mentioned before, we do see a decision point this year, and that is a decision of whether we would offer the airplane in the market. And we need to complete the business case analysis before we arrive at that decision, but that is one that's for this year. And then assuming a positive market response or depending on the market response, we'll make the final launch decision next year. So it's a 2-step decision process, as we've always done with Commercial Airplanes and a very disciplined process.","All of that, we're continuing to work our development program work and maturing the technologies, reducing risk in parallel to protect a 2025 EIS or entry into service. We think that remains important to our customers, so we're working all of that in parallel. And again, we'll march in a disciplined way through our decision process. Our assessment of the market and the size of that market hasn't changed.","Now to your broader question on orders and how the market's looking. Again, we've continued to see strong demand signals. I think you see that reflected in the orders volume for this past year with 806 deliveries and 893 orders. And while as I said, we expect some moderation or timing on orders going forward, we have a very robust backlog position with about seven years of backlog -- equivalent backlog in position now.","If you look at the stats on traffic growth, cargo, global, expansion of route structures, all the fundamentals remain very strong. And we're encouraged by that. So we expect to see continuing, steady orders volume. I wouldn't expect that to change significantly depending on the NMA decision.","So we're going to be in the marketplace continuing to compete and win. I guess, one other reminder on NMA, if we do decide to proceed with the authority to offer, don't expect a big change in the R&D profile. This is all part of our plan to R&D profile. As Greg said earlier, we expect R&D to continue to be roughly the same in terms of percentage of revenue going forward.","So as revenue grows, you'll see some R&D growth. It'll be at the same percent. And if we launch NMA, it will feather in on the backside of 777X. So from a profile standpoint, it fits very nicely.","Greg, anything you want to add on that?"]},{"name":"Gregory Smith","speech":["No. I think you got it."]},{"name":"Operator","speech":["Next question is from Rob Spingarn with Credit Suisse. Please go ahead."]},{"name":"Rob Spingarn","speech":["Good morning, gentlemen. So margins at BCA are now in your targeted area, in the mid-teens, with the 2019 guidance where it is, and you're still not fully ramped with the production rates. There's more upside there. And you've built the higher R&D into the '19 forecast.","So I wanted to ask, how much of this 2019 improvement in margins is volume versus mix versus productivity? And with the supply chain initiative still ongoing, what is your longer-term margin potential now? How much further can you go? I was going to ask you how much that differs with and without a new airplane, but I think you just answered that part. So the components of the improvement in 2019 and then what the potential is long term now that you've have gotten this far."]},{"name":"Gregory Smith","speech":["Yes. No, it's a great question, Rob. I would say, it's all of the above. I mean, certainly, the increased volume is a big driver to that.","But the mix of that volume is important. And we've talked about, in particular, 787, executing on bringing in the -9, the -10 flawlessly into the market and meeting the commitments to our customers there and ensuring that happens smoothly while going up in rate. You saw that in '18 and you're going to see that in '19 as we look to go to 14 a month there. But the productivity engine, so the -- I'll say the targets that we've set for ourselves is the same playbook that we put in place for the last number of years of really just looking where we have opportunity -- where we can leverage best practices.","We've talked a lot about this whole One Boeing effort. But there's a lot of -- there's a lot behind that in leveraging things that are going on in F/A-18, on 87 and leveraging things on 87 over onto Chinook and vice versa. That's now part of our operating rhythm. And certainly, it's how we're all rewarded and ultimately how the company is rewarded.","So there's complete alignment to leverage these practices. Same in the supply chain. So the whole Partnering for Success effort, some of that is also where we've had productivity gains. How do we take those back in the supply chain? Frankly, make the supply chain even better, but come up with ways where we can both take that to the bottom line and reinvest in growth for the future.","So I'd say, it plays into all three. But I, Rob, I would think about the playbook, the same playbook you saw for the last couple of years, that's the playbook. And I'd say, I'd add to that, benchmarking ourselves outside. This whole global industrial champion effort that -- you can imagine, that target keeps moving.","So when we look at cost as a function. What's the cost just to run a function? Or how efficient are we with our capital and with our R&D? And what are some best practices within industrials, outside the industrials, how we bring them back into Boeing, make it part of our operating rhythm and hold ourselves to a standard that is not necessarily industry? It could be that it's best-in-class. And then again, holding ourselves accountable and targeting ourselves to go achieve all that. So I'd say, same playbook.","So we don't really have a cap, I think I would say. It's really just continuing to look for opportunities and then compete to win. Use some of that..."]},{"name":"Rob Spingarn","speech":["But is there a pace of improvement? Because you've hit your target or at least you will in '19 based on the guidance, and again, you're not done improving the organization. So is there a new target?"]},{"name":"Dennis Muilenburg","speech":["Rob, we're not slowing down. So as we said, we set a target. We've been aggressively pursuing that. We've made some great progress.","I'm proud of the team's efforts there. But the competition is only getting tougher, and we're not going to slow down. So the pace of progress you've seen is the pace of progress we aim to sustain. And what we're looking for is continued year-over-year margin and cash flow growth.","That's part of our planning. That's the framework that we've set up for the team, and we're going to continue to push with that pace."]},{"name":"Rob Spingarn","speech":["OK. Well, thank you very much. Very well done, guys."]},{"name":"Dennis Muilenburg","speech":["Thanks, Rob."]},{"name":"Operator","speech":["Our next question is from Carter Copeland with Melius Research. Please go ahead."]},{"name":"Carter Copeland","speech":["Good and frosty morning to you, guys. Greg, I wonder if I could just get a couple of clarifications on the quarter and then a question about the guidance. With respect to what you printed, just wanted to check on the unit earnings that the -- it looks like the 737 is still unit below your program margin but not by much. And then with respect to the 87 deferred, it looks like you had a margin expansion there that kept the deferred down.","I just wondered if that was correct. And then just building on Rob's question and what's built into your '19 plan, do you have any material difference in period expenses outside of R&D that you envision for next year that we should be considering? And if so, can you help us quantify how to think about that? Thanks."]},{"name":"Gregory Smith","speech":["Yes. I mean, I'd say outside of R&D, we definitely got some investments around productivity and systems that we're making, again, thinking about kind of long-term competitiveness. So we've got some money put aside in there and budgeted for the year."]},{"name":"Carter Copeland","speech":["That's up year on year?"]},{"name":"Gregory Smith","speech":["Pardon me? Yes. So obviously, we'll manage that extremely tight as we always do, but we've got budgets in place there and clear initiatives and business cases to go drive that, that are a little over and above what we were spending in 2018."]},{"name":"Dennis Muilenburg","speech":["All included in the guidance."]},{"name":"Gregory Smith","speech":["All included, absolutely, yes. And your unit to program, you got it, you're right on. I mean, 737, but increase in 787, and we had a block extension in the quarter that was a big, big driver of that unit -- or that -- sorry, that program margin increase."]},{"name":"Carter Copeland","speech":["Great. Thank you."]},{"name":"Gregory Smith","speech":["You're welcome. Thanks."]},{"name":"Operator","speech":["And next, we go to Doug Harned with Bernstein. Please go ahead."]},{"name":"Doug Harned","speech":["Thank you. Good morning. I wanted to continue on the 787. And just to understand a little bit better how you're looking at this longer term and in terms of cash margin improvement.","I mean, you're at a point now where you don't have that many -8s in the mix anymore. You're going to have more -10s. And then if I look at pricing, I wouldn't -- at this stage in the cycle, I wouldn't expect you to get a lot more from there. So can you talk about, as you look at the next few years, how you see that cash margin trajectory evolving? And what's likely to drive it?"]},{"name":"Gregory Smith","speech":["Yes. Well, it is going to continue to grow, Doug. And as Dennis said, I mean, the team has done a great job executing to our commitments, our rate breaks. But I know I keep going on about this, but bringing two derivatives in while going up in rate is no small task, and they've done it extremely well.","And then at the same time, leveraging the best practices. So that's all going to continue to play out as you go forward here. You're right, bringing in more -10s. So the mix will be higher 9s and 10s.","Right now, it's predominantly 9, and -10 is -- you're going to see the benefit of that over that kind of longer-term period from a cash perspective and then going up in rate. So you will see the cash associated with those advances as well as with that higher rate, but again, at the same time, bringing down the expenditures. And don't forget, we've got step-down pricing as well on the supply chain that will play into that along with our own productivity. So it probably fits into about 6 categories of things that need to happen or things that are just going to happen through time as we execute through each of these blocks and having a more favorable mix combined with continuing to have a step-down in the supply chain.","So we -- again, we see growing cash flow on the 787. They've done a great job in delivering on their commitments to shareholders, but also the customers. And now we're kind of moving into the next phase of moving up into 14 and continuing to capture productivity gains."]},{"name":"Doug Harned","speech":["And then just on the -10. I mean, you delivered, I think, nine of them in Q4. So would it be fair to say that your -10 margins were probably a little less mature in the quarter we just saw? And you should get some improvement out of that as well, is that fair?"]},{"name":"Gregory Smith","speech":["Right. It's still -- to your point, it's still relatively early in the production system and in the supply chain. So if that becomes more mature, just like we would normally, we'll come down that learning curve as the supply chain will, and we'll capture the benefit of that."]},{"name":"Dennis Muilenburg","speech":["To that, Doug, there's also a big benefit from the high level of manufacturing commonality between the -10 and -9, which accelerates and reinforces what Greg said. And then the value proposition for that airplane in the market with our customers, it's very clear that it's generating value and it's winning in the marketplace. So on the pricing side, it's holding up well there as well just because of the value it's creating for our customers."]},{"name":"Doug Harned","speech":["Very good. Thank you."]},{"name":"Gregory Smith","speech":["Welcome."]},{"name":"Operator","speech":["Next question is from Seth Seifman with J.P. Morgan. Please go ahead"]},{"name":"Seth Seifman","speech":["Thanks very much and good morning. So you mentioned the idea of, I think, trying to bolster the backlog for 777 and 777X. And you talked a lot in the past about a widebody replacement, where it's coming in the early part of the next decade. Does that mean in the near term, are there 777X order opportunities? Or does the order opportunities in the near term kind of focus on more of the classic and the freighters and we'll kind of wait until we get into the early part of the next decade to see the orders for the 777X come through?"]},{"name":"Dennis Muilenburg","speech":["Seth, we're working both in parallel. Certainly, during the last year, we've seen some great progress on the 777 with 51 net orders in the year. And that's really strengthened the bridge that we're building, 777 to 777X. We still have some work to do to fill out the remainder of the bridge, but our confidence continues to grow in our ability to do that.","And as we've made that progress, we're now shifting our teams more and more to 777X opportunities. As you said, we do see a high wave of replacement demand early in the next decade, but that means those sales campaigns are under way now. So those are very active. We're very engaged with a number of customers around the world.","The 777X clearly is bringing a value proposition to the market that's attractive. And you'll see us focusing more and more on those 777X campaigns here during this coming year. So that's a very near-term effort as well. And all of that is consistent with the investment profile and the production system ramp and transition that we talked about earlier."]},{"name":"Seth Seifman","speech":["Thanks very much."]},{"name":"Dennis Muilenburg","speech":["You bet."]},{"name":"Operator","speech":["Next, we go to David Strauss with Barclays. Please go ahead."]},{"name":"David Strauss","speech":["Thanks. Good morning. In the free cash flow walk that you provided, you highlighted the headwind from 777X in 2019. Could you maybe talk about, is 2019 going to be the peak year for 777X investment? I'm thinking mainly in working capital.","And how many airplanes do you plan on kind of having in flow before you actually start making deliveries?"]},{"name":"Gregory Smith","speech":["Yes. No, the profile, David, certainly, for the reasons you described, building the inventory and the test aircraft and so on. So this year, there's more headwind. And then as we move into 2020, that headwind will moderate, and so we'll start to have some more positive cash flow with the combination of 777X moving into production and then into delivery.","So this is kind of a peak year for us on, I'll say, cash usage on 777 combined with 777X. So as Dennis said, transitioning the airplane today in the factory and moving through and building up that move from development to production will be key and obviously a big driver on the cash flow. And things are going well out there today. So we're -- we've got very good early signs that the aircraft is moving into the production systems smoothly.","And any challenges we're having, we're working through and we know what they are. But so far, so good. So that will be a big driver of cash flow going forward."]},{"name":"David Strauss","speech":["And did I hear you say that 777 deliveries in 2020 would actually step up a bit? Is that just the legacy kind of 777 rate holding and 777X starting to deliver?"]},{"name":"Gregory Smith","speech":["Well, it's really the combined of the two. So it's the X and the 777. Now having said that, as Dennis indicated, we're still seeing a lot of demand for the 777, in particular in the area of freight. So we're feathering all this together and making sure that we're in the marketplace and we're meeting the demands of the customers in the near term, but at the same time, feathering in the 777X.","So that's kind of key in 2020, but we're not -- we're seeing good demand there on the 777. So we'll combine -- that'll be a combined production rate on those two programs."]},{"name":"Dennis Muilenburg","speech":["Yes. Just for clarity, 2020 production system will be operating in five months. So we look at delivery rate slightly increasing over the current 3.5 month delivery rate. That's the combination of 777s and 777Xs that Greg mentioned."]},{"name":"David Strauss","speech":["Great. Thanks very much."]},{"name":"Dennis Muilenburg","speech":["You're welcome."]},{"name":"Operator","speech":["Next, we go to Sheila Kahyaoglu with Jefferies. Please go ahead."]},{"name":"Sheila Kahyaoglu","speech":["Good morning and thank you. Going back to commercial profitability just because it's such a standout. How sustainable is the 100 bps of margin improvement? Are there any mix impacts we should be thinking about with the 777 coming in, which is changing customer dynamics or any pricing dynamic that would alter that trajectory?"]},{"name":"Gregory Smith","speech":["You're thinking kind of beyond '19?"]},{"name":"Sheila Kahyaoglu","speech":["Yes."]},{"name":"Gregory Smith","speech":["Well, I mean, there's -- yes, to your point, there's a lot of moving pieces. Obviously, when you get into '19, we're more stable at the 14 a month and we're more stable at the 57. So again, we should be able to capture productivity and we're expecting to capture productivity in that. And there are some mix movements certainly between the 777 ramping down and the X moving in, so there's a lot of moving pieces.","But I'd say, Sheila, and I'll let Dennis comment here, but the objective we have in place is the same one as I addressed on a prior question. We're looking for opportunities where we can to derisk production system and bringing in automation where we can bring in automation and bring in best practices with an overall objective to grow margins and fund our future and return cash to shareholders. So that playbook, you should just think of that as the same no matter what the mix. So we don't let mix be the deciding factor.","Mix is mix. It's our job to try to offset that or use that to our advantage the best way possible."]},{"name":"Dennis Muilenburg","speech":["Yes. And just to reinforce that, Sheila, as Greg said, a lot of moving parts here, but the sustained margin growth trend is one that's long term. So we expect to continue to see year-over-year margin growth in 2019 and further growth in 2020 and beyond. So this is all about long-term, sustained top and bottom-line growth.","And the game book that we're operating here will drive that year over year."]},{"name":"Sheila Kahyaoglu","speech":["Thank you."]},{"name":"Dennis Muilenburg","speech":["Welcome."]},{"name":"Operator","speech":["Next question is from Hunter Keay with Wolfe Research. Please go ahead."]},{"name":"Hunter Keay","speech":["Thank you for getting me in. Good morning. I'd like to go back to NMA for a second. I don't want to nitpick a little bit.","But Dennis, you did mention that NMA was going to be a two-step decision process with the final decision coming in '20. Are you saying that you would make the announcement for the public, so to speak, in '20 after talking to your customers in '19? So if you could just clarify that announcement. And then the second part of the NMA question is, how are these conversations going with your customers around this plane being used as a replacement aircraft versus opening up new markets maybe relative to new designs in the past? Thanks."]},{"name":"Dennis Muilenburg","speech":["Yes. Hunter, let me take on the first one there. The process we're talking about here, the decision process is identical to what we've used in all of our previous programs. So this year's decision is what we call authority to offer.","That's based on a business case and our ability to go and have deep, detailed discussions with customers. That will be something that will be publicly announced once we make our decision around that. So that will be information that you'll see and that will initiate deep and meaningful customer conversations. And then depending on the market response and our ability to build the right kind of group of launch customers, then we get to an official launch or authority to launch decision next year.","So both of those steps are typically public steps and ones that you would see. Again, I want to reemphasize the discipline that we're putting into these. These are not only decisions related to the airplane in that market, there are also decisions related to the enterprise transformation objectives that we have in terms of production system for the future. So we're looking at this as a total enterprise effort and really being very disciplined in our business case analysis.","And then your second question, Hunter?"]},{"name":"Hunter Keay","speech":["Yes. It was sort of just how the conversations are going with your customers, preliminarily at least, around this plane being used as sort of an enabler of opening up new point-to-point markets versus replacement relative to say -- really, I was thinking of 787s specifically, but just broader in general. Thanks."]},{"name":"Dennis Muilenburg","speech":["Yes. We've talked extensively with customers here, more than 60 customers and very consistent feedback. And we do see several different market segments and potential applications for this airplane. We do see a market need here that's in between today's narrowbody and widebody families.","It's a market area that really cannot be addressed by modifying those existing platforms and aircraft. Some of that is medium-haul, medium-range segments that today are being served by, I'll say, inefficient use of widebodies. And we see that as an opportunity for airline customers to gain efficiency. But a good portion of this is also a creation of new medium-range route structures.","And just as we saw with the introduction of the 787 where we saw roughly already 200 new city pairs emerge because of the capability of the airplane in the medium-range marketplace, again, 4,000 to 5000 mile kind of range, we see an opportunity for significant regional city pair growth from this airplane. And that's another area where we're gaining customer feedback. So there are multiple segments of applicability, significant customer interest. The key here is for us to build a business case that's going to create value for our customers as well as value for our company and our shareholders.","And that's the work we still need to finish."]},{"name":"Hunter Keay","speech":["Thank you."]},{"name":"Operator","speech":["Next, we go to Ron Epstein with Bank of America Merrill Lynch. Please go ahead."]},{"name":"Ron Epstein","speech":["Good afternoon, guys. Just a question and maybe a follow-up. How do we think about the 900 airplanes? Like where do you have to transition on 73 and 78 to get to 900? That's a lot of airplanes, right? I mean, it's something like 75 a month, right, on average?"]},{"name":"Dennis Muilenburg","speech":["Yes. Ron, you've made the right calculation there. So as I mentioned, we are well into the 14 a month rate step on 787, and we expect to complete that transition in the second quarter. So that's moving forward very briskly and on track.","On the 737, we've already moved parts of the supply chain to 57 a month, but we still have some work to do on some elements of the supply chain, in particular with engines and CFM. And we're not going to make that full transition to 57 a month until we're very confident that we're ready. And it's important that we do that in a very disciplined way. So you can back into the number mathematically with about 900 deliveries for the year.","Note that, that 900 roughly deliveries for the year also includes the military derivatives, the P-8, tankers are all included in that number just for clarity."]},{"name":"Ron Epstein","speech":["OK. Great, great. And then -- and maybe just one follow-on on the NMA question. In the business case, when you think about NMA, how do you think about it and the potential relationship it could have with the future family of narrowbodies?"]},{"name":"Dennis Muilenburg","speech":["It's one of the parameters that we think through any time we're thinking about investments for the future. I think as we relayed earlier, we fundamentally have changed our R&D investment strategy for the company, so that it's feathered over the long term where we can sequence development programs, so that we gain the benefits of continuous development and lessons learned program to program rather than stacking multiple development programs on top of each other. And that's the way we're thinking through NMA as well, so not only the development program for that particular airplane and the market it will serve, but also how do we sequence it, how do we leverage learnings from 777X, how do we leverage what we're learning from things like T-X and roll that into NMA and then how could we use an NMA investment to think about leverage and creating the production system for the even more distant future, whether that be some future narrowbody airplane or other alternatives that we might invest in. But think of this as a continuum of R&D efforts.","This, again, is all key to creating a sustained growth business where top and bottom line are both long-term sustained growth levels. That is our approach here, and so we're thinking about NMA in that multi-program context."]},{"name":"Ron Epstein","speech":["Got you? Can I ask one more at the tail end here?"]},{"name":"Maurita Sutedja","speech":["Well, I think we're..."]},{"name":"Ron Epstein","speech":["Can I? Just sort of quick one? This is for Greg. Greg, when we think about the 737NG versus the MAX and just for modeling purposes because there's going to be 90% MAXs this year, how do we think about the margin profile of one variant versus the other?"]},{"name":"Gregory Smith","speech":["Well, it's still kind of early introduction, right? So just take that into account. But net-net, you're in a similar margin profile as you are on the NG. It's really just more around on timing from a unit perspective and how they're feathered in. So I wouldn't think of it any different.","It's really just, again, more timing."]},{"name":"Ron Epstein","speech":["OK, great. Thank you."]},{"name":"Gregory Smith","speech":["Yes. Thank you."]},{"name":"Maurita Sutedja","speech":["OK. So operator, we have time for just one more analyst question."]},{"name":"Operator","speech":["Great. That will be from Peter Arment with Baird. Please go ahead."]},{"name":"Peter Arment","speech":["Thanks. Dennis, just maybe an easier one on book-to-bill expectations in 2019, I guess, specifically, around 737 MAX orders. You mentioned you had 13 new customers in 2018, and you've had really, I think, 5,000 aircraft since the launch. So that's close to 68%, I think, of the coverage of NGs.","Just how you're thinking about the order momentum with that program. Thanks."]},{"name":"Dennis Muilenburg","speech":["Yes. Peter, we continued to see strong order momentum there. I think just another sign of it, this week earlier, you saw ANA's announcement about their intent to buy the MAX. And that's another addition to the fleet there.","So you see continued momentum on the MAX sales front. That airplane is creating value in the market for our customers. And we are oversold against our production profile. We talked earlier about ramping up to 57 a month.","We are oversold against that profile. We're filling skyline slots way out in 2023. We continue see upward market pressure overall on the production rate as a result. And we think the demand for that airplane continues to be sustained.","So while we had great orders, volume and momentum this year, and I mentioned we might see some moderation in that demand this coming year, we still expect book-to-bill to be in that sort of one to one range. And there's always timing variability. But in terms of the MAX, the demand signals in the marketplace continue to be very strong."]},{"name":"Peter Arment","speech":["OK. Thanks."]},{"name":"Operator","speech":["Ladies and gentlemen, that completes the analyst question-and-answer session. [Operator instructions] I will now return you to The Boeing Company for introductory remarks by Ms. Anne Toulouse, interim vice president of communications. Ms.","Toulouse, please go ahead."]},{"name":"Anne Toulouse","speech":["Thank you. We will now continue the call with media questions for Dennis and Greg. And if you have additional queries following this session, please call our Media Relations team at (312) 544-2002. Operator, we're ready for that first question.","[Operator instructions]"]},{"name":"Operator","speech":["And first from the line of Andrew Tangel with Wall Street Journal. Please go ahead."]},{"name":"Andrew Tangel","speech":["Good morning. Some other manufacturers have reported seeing economic weakness in China as a major headwind. What are you all seeing? And are the orders from China setting, slowing, picking up? And overall, where do you expect to see that moderating order intake coming from around the world? And where is -- either demand slowing a bit or growth slowing a bit from what you all see?"]},{"name":"Dennis Muilenburg","speech":["Yes. Andrew, let me touch on the China question first. We continue to see strong demand in China overall in terms of market dynamics. As I said earlier, over the 20 years, we see a world that needs about 43,000 new commercial airplanes.","We remain very confident in that outlook, and about 7,700 of those 43,000 are in China. And that remains solid. Traffic patterns in China continue to progress. We're seeing passenger growth there that exceeds the overall market growth around the world, and we also see passenger traffic growth there continuing to exceed GDP growth.","So those market fundamentals remain strongly in place. In terms of orders volume in China, that's typically paced by timing of their five-year planning. So it tends to come in waves. So that's why we -- again, as we look to the future, we expect to see some timing adjustments on orders.","But overall, volume over the long term remains very strong. And that really applies to my broader comment, too, about moderation of orders in 2019. As we look to the long term, the market fundamentals are very strong. And we see long-term volume of orders continuing to grow and adding to backlog.","It just gets into a question of local timing quarter to quarter and year to year as our customers meet their fleet needs. So nothing here that I would say is a macro trend or a substantial change. We just see fundamental aerospace growth and air traffic growth as a long-term, sustainable trend. And with a backlog of about 5,900 aircraft or roughly seven years in production, that gives us the ability to weather any local variations and maintain a long-term view in terms of sustained growth."]},{"name":"Operator","speech":["Our next question from Julie Johnsson with Bloomberg. Please go ahead."]},{"name":"Julie Johnsson","speech":["So I just wanted to make sure that I understood what you're -- the point you're making on China, Dennis. Do you potentially see a lull in orders this year because the next five-year plan is looming in the headlights? And then totally unrelated question and apologies for that, but where does CFM stand on its catch-up plan for the LEAP? How unusual is it for Boeing to embed your people in their supply chain?"]},{"name":"Dennis Muilenburg","speech":["Yes. Julie, on your first question regarding China, that was exactly my point earlier given the five-year planning cycle there. We're having ongoing discussions with our customers in China, the Chinese government, the U.S. government.","This also factors into the trade dialogue between the U.S. and China. So these are all factors that we're very much engaged in. Again, we expect China is a long-term growth market for us, but exactly how those efforts play out over the next quarter or two is still an open question as we proceed with trade discussions.","I can tell you, having been intimately involved in the discussions and engagement with the governments, both in U.S. and China, we see progress on that front. We see convergence. And we also see that there's clearly a neutral benefit to having a healthy aerospace industry for both the U.S.","and China. China needs the airplanes for growth to fuel their economy and to meet their passenger growth and cargo growth needs. And here in the U.S., our aerospace business is a tremendous U.S. jobs generator, manufacturing jobs.","We hired 34,000 people last year. And we, as an aerospace industry here in the U.S., create about an $80 billion a year trade surplus for the country. So there's mutual interest in a healthy aerospace business. We expect that to lead to productive trade discussions between the U.S.","and China or at least be part of that. And then that will factor into the ultimate orders volume and timing with China. So that's just a little additional context there. Regarding your CFM question, it's not unusual for us to have Boeing personnel at our suppliers' sites and down into their supply chain.","That's a very typical process that we would have. But I will say again, as it goes to 737, one of the supply chain health issues that we're spending a lot of time on right now is engines and our work with CFM. And so we are deploying additional resources with them into their factories and supply chain. We do expect to recover, we're seeing signs of recovery, but we still have work to go.","And being deeply engaged in our supply chain is part of how we do business."]},{"name":"Operator","speech":["Our next question is from Sylvia Pfeifer with Financial Times. Please go ahead."]},{"name":"Sylvia Pfeifer","speech":["Hi, good morning. Sorry, I had the China question, which was one of my main ones. Can I just ask you about Brexit then? I know you're in a very different position to Airbus here in the U.K. But I just wondered whether you saw any risks to your own operations in the U.K.","in the event of a hard Brexit with just a few weeks to go before the 29th of March?"]},{"name":"Dennis Muilenburg","speech":["Yes. Sylvia, we're continuing to keep a very close eye on that, as you might guess. And again, we're very involved in the discussion. That said, we're committed to our operations in the U.K.","We've ramped up significantly over the last many years, roughly doubling the size of our operations, roughly tripling the size of our supply chain in the U.K. And those are long-term, sustained investments. And we don't expect that to change based on the outcome of Brexit. That said, we're keeping a very close eye on it and making sure it doesn't impact our operations.","I think just as a further sign of our commitment in the U.K., you'll note that during the last year, we opened our new operation in Sheffield where we're doing some advanced manufacturing work. That's also helping us to build out our actuation vertical capability. So just another example of our long-term commitment to the U.K. and the investments that we'll continue to make."]},{"name":"Anne Toulouse","speech":["OK. Operator, we have time for one last question from the media."]},{"name":"Operator","speech":["And that will be from Dominic Gates with The Seattle Times. Please go ahead."]},{"name":"Dominic Gates","speech":["Hey, good morning. Going back to the 737 MAX situation and CFM. In December, with the delivery of 69 airplanes, it did seem like you had almost fully recovered. Has there been some further setback? And is the need to send people to CFM, is that because there's a problem with the ramp-up of the engine production? Or is there some configuration change that's become necessary? Can you just tell us a bit more? Also what's the time line you expect to be back to normal, let's say?"]},{"name":"Dennis Muilenburg","speech":["Yes, Dominic, first of all, as you saw in our December deliveries, as you alluded to, we did see some recovery across our supply chain, including engine supply, and that enabled us to drive those December deliveries of 69 aircraft. But we were not yet fully recovered at that point, so we've continued to work supply chain recovery. And there's still work to go there. There's nothing here that I would say is an issue associated with having to change a configuration or make that kind of alteration to the engine.","This is really about just ramping up production and doing it efficiently and being able to get a linear profile of engine deliveries that matches up with our factory production rate for the airplane and synchronizing those production systems. That's really what we're focused on. We still have work to go to get CFM to be supporting our 52 a month production rate and having those systems synchronized; and then even more work to go yet to get them ramped up to 57 a month. And that's really what we're focused on.","This is about production system ramp-up and synchronization. And by us getting deeper into their factories, it's going to give us better insights on long lead items. And frankly, it will, I think, help us do best practice sharing between Boeing and CFM, which is part of how we operate, right? That will make us better and it will make CFM better. And that's the work that we plan to be very focused on in the first quarter.","And timing of that is reflected in our overall delivery guidance for the year, so you can see that factored in. But we're going to be very, very disciplined about ensuring supply chain health before we fully move to the 57 a month production rate."]},{"name":"Anne Toulouse","speech":["OK. That concludes our earnings call. Again, for members of the media, if you have further questions, please call our team at (312) 544-2002. Thank you."]},{"name":"Dominic Gates --The Seattle Times -- Aerospace Reporter","speech":["More BA analysis","This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see ourTerms and Conditionsfor additional details, including our Obligatory Capitalized Disclaimers of Liability."]}],"string":"[\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"[Operator instructions] Our first question comes from Rajeev Lalwani with Morgan Stanley. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Rajeev Lalwani\",\n \"speech\": [\n \"On the 737, at what point do you expect to be caught up on deliveries? And where are the pressure points been of late? Also, how does that inform the latest thinking in time line on a decision beyond 57 a month?\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Rajeev, good question. Certainly, 737 production system health remains a key focus for us. As you can see by the fourth-quarter deliveries with 173 in the quarter and 69 in December, you have good signs of recovering to our production plan. You can also see the increased rates reflected in our total year guidance for deliveries for 2019 as we continue to ramp up.\",\n \"I would say we still have work to do on the recovery efforts. We've seen some good, solid progress. We still have work to do inside our own factories and in our supply chain, and that is a daily and weekly focus for us, very intense effort. I'll say within the supply chain, we've seen some solid recovery in several areas.\",\n \"We still have some areas that need work, including engines. And we're doing some additional work with CFM, including deploying some additional Boeing personnel to their factories and to their sub-tier suppliers. So that's one area that will have some additional focus for us in the first quarter. And as Greg mentioned, just in terms of production profile for the year, we expect the first quarter to be the lightest quarter of the year, and we expect January to be the lightest month within that quarter.\",\n \"So we're going to continue to work hard on production system health and recovery. And then as you alluded to, at the same time, we're moving forward on our plans to ramp up to 57 a month during the year. Some elements of the supply chain have already moved to that position. We still have some work to do before we move the entire line to 57 a month.\",\n \"And we're going to be very, very disciplined in that process. Again, we're making good progress, we know exactly what needs to be done. But we're going to just look at this through very clear eyes and step through it day by day, week by week and make sure that we, in a very disciplined and smooth way, move to 57 a month. I think we learned some lessons from the 52 a month step that we did last year.\",\n \"And those lessons are certainly being applied this year on the 57 a month rate change. But you see all of that, again, reflected in our plans and our guidance for 2019.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Myles Walton with UBS. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"Thanks. Good morning. Could you catch us up on your latest thinking on the NMA and maybe tie that to your view on moderating demand -- I guess, if -- demand would obviously fluctuate a bit if you chose to launch the aircraft with a pile of launch customers, I'd imagine. So maybe just juxtapose those two different points.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yes. Myles, I'd say first of all, if you take a look at NMA, we're still working through that same disciplined decision process that we've talked about previously. We're making progress on that. We've had very productive conversations with customers.\",\n \"We understand the market. It's clear that there's a market need, but we're working through the details of the business case. And as we said, we're going to be very disciplined on how we do that. And while we're making progress, we're not up to our decision point yet.\",\n \"And just to provide clarity on that, as we've mentioned before, we do see a decision point this year, and that is a decision of whether we would offer the airplane in the market. And we need to complete the business case analysis before we arrive at that decision, but that is one that's for this year. And then assuming a positive market response or depending on the market response, we'll make the final launch decision next year. So it's a 2-step decision process, as we've always done with Commercial Airplanes and a very disciplined process.\",\n \"All of that, we're continuing to work our development program work and maturing the technologies, reducing risk in parallel to protect a 2025 EIS or entry into service. We think that remains important to our customers, so we're working all of that in parallel. And again, we'll march in a disciplined way through our decision process. Our assessment of the market and the size of that market hasn't changed.\",\n \"Now to your broader question on orders and how the market's looking. Again, we've continued to see strong demand signals. I think you see that reflected in the orders volume for this past year with 806 deliveries and 893 orders. And while as I said, we expect some moderation or timing on orders going forward, we have a very robust backlog position with about seven years of backlog -- equivalent backlog in position now.\",\n \"If you look at the stats on traffic growth, cargo, global, expansion of route structures, all the fundamentals remain very strong. And we're encouraged by that. So we expect to see continuing, steady orders volume. I wouldn't expect that to change significantly depending on the NMA decision.\",\n \"So we're going to be in the marketplace continuing to compete and win. I guess, one other reminder on NMA, if we do decide to proceed with the authority to offer, don't expect a big change in the R&D profile. This is all part of our plan to R&D profile. As Greg said earlier, we expect R&D to continue to be roughly the same in terms of percentage of revenue going forward.\",\n \"So as revenue grows, you'll see some R&D growth. It'll be at the same percent. And if we launch NMA, it will feather in on the backside of 777X. So from a profile standpoint, it fits very nicely.\",\n \"Greg, anything you want to add on that?\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"No. I think you got it.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next question is from Rob Spingarn with Credit Suisse. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Rob Spingarn\",\n \"speech\": [\n \"Good morning, gentlemen. So margins at BCA are now in your targeted area, in the mid-teens, with the 2019 guidance where it is, and you're still not fully ramped with the production rates. There's more upside there. And you've built the higher R&D into the '19 forecast.\",\n \"So I wanted to ask, how much of this 2019 improvement in margins is volume versus mix versus productivity? And with the supply chain initiative still ongoing, what is your longer-term margin potential now? How much further can you go? I was going to ask you how much that differs with and without a new airplane, but I think you just answered that part. So the components of the improvement in 2019 and then what the potential is long term now that you've have gotten this far.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Yes. No, it's a great question, Rob. I would say, it's all of the above. I mean, certainly, the increased volume is a big driver to that.\",\n \"But the mix of that volume is important. And we've talked about, in particular, 787, executing on bringing in the -9, the -10 flawlessly into the market and meeting the commitments to our customers there and ensuring that happens smoothly while going up in rate. You saw that in '18 and you're going to see that in '19 as we look to go to 14 a month there. But the productivity engine, so the -- I'll say the targets that we've set for ourselves is the same playbook that we put in place for the last number of years of really just looking where we have opportunity -- where we can leverage best practices.\",\n \"We've talked a lot about this whole One Boeing effort. But there's a lot of -- there's a lot behind that in leveraging things that are going on in F/A-18, on 87 and leveraging things on 87 over onto Chinook and vice versa. That's now part of our operating rhythm. And certainly, it's how we're all rewarded and ultimately how the company is rewarded.\",\n \"So there's complete alignment to leverage these practices. Same in the supply chain. So the whole Partnering for Success effort, some of that is also where we've had productivity gains. How do we take those back in the supply chain? Frankly, make the supply chain even better, but come up with ways where we can both take that to the bottom line and reinvest in growth for the future.\",\n \"So I'd say, it plays into all three. But I, Rob, I would think about the playbook, the same playbook you saw for the last couple of years, that's the playbook. And I'd say, I'd add to that, benchmarking ourselves outside. This whole global industrial champion effort that -- you can imagine, that target keeps moving.\",\n \"So when we look at cost as a function. What's the cost just to run a function? Or how efficient are we with our capital and with our R&D? And what are some best practices within industrials, outside the industrials, how we bring them back into Boeing, make it part of our operating rhythm and hold ourselves to a standard that is not necessarily industry? It could be that it's best-in-class. And then again, holding ourselves accountable and targeting ourselves to go achieve all that. So I'd say, same playbook.\",\n \"So we don't really have a cap, I think I would say. It's really just continuing to look for opportunities and then compete to win. Use some of that...\"\n ]\n },\n {\n \"name\": \"Rob Spingarn\",\n \"speech\": [\n \"But is there a pace of improvement? Because you've hit your target or at least you will in '19 based on the guidance, and again, you're not done improving the organization. So is there a new target?\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Rob, we're not slowing down. So as we said, we set a target. We've been aggressively pursuing that. We've made some great progress.\",\n \"I'm proud of the team's efforts there. But the competition is only getting tougher, and we're not going to slow down. So the pace of progress you've seen is the pace of progress we aim to sustain. And what we're looking for is continued year-over-year margin and cash flow growth.\",\n \"That's part of our planning. That's the framework that we've set up for the team, and we're going to continue to push with that pace.\"\n ]\n },\n {\n \"name\": \"Rob Spingarn\",\n \"speech\": [\n \"OK. Well, thank you very much. Very well done, guys.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Thanks, Rob.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Carter Copeland with Melius Research. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Good and frosty morning to you, guys. Greg, I wonder if I could just get a couple of clarifications on the quarter and then a question about the guidance. With respect to what you printed, just wanted to check on the unit earnings that the -- it looks like the 737 is still unit below your program margin but not by much. And then with respect to the 87 deferred, it looks like you had a margin expansion there that kept the deferred down.\",\n \"I just wondered if that was correct. And then just building on Rob's question and what's built into your '19 plan, do you have any material difference in period expenses outside of R&D that you envision for next year that we should be considering? And if so, can you help us quantify how to think about that? Thanks.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Yes. I mean, I'd say outside of R&D, we definitely got some investments around productivity and systems that we're making, again, thinking about kind of long-term competitiveness. So we've got some money put aside in there and budgeted for the year.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"That's up year on year?\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Pardon me? Yes. So obviously, we'll manage that extremely tight as we always do, but we've got budgets in place there and clear initiatives and business cases to go drive that, that are a little over and above what we were spending in 2018.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"All included in the guidance.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"All included, absolutely, yes. And your unit to program, you got it, you're right on. I mean, 737, but increase in 787, and we had a block extension in the quarter that was a big, big driver of that unit -- or that -- sorry, that program margin increase.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Great. Thank you.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"You're welcome. Thanks.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And next, we go to Doug Harned with Bernstein. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Doug Harned\",\n \"speech\": [\n \"Thank you. Good morning. I wanted to continue on the 787. And just to understand a little bit better how you're looking at this longer term and in terms of cash margin improvement.\",\n \"I mean, you're at a point now where you don't have that many -8s in the mix anymore. You're going to have more -10s. And then if I look at pricing, I wouldn't -- at this stage in the cycle, I wouldn't expect you to get a lot more from there. So can you talk about, as you look at the next few years, how you see that cash margin trajectory evolving? And what's likely to drive it?\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Yes. Well, it is going to continue to grow, Doug. And as Dennis said, I mean, the team has done a great job executing to our commitments, our rate breaks. But I know I keep going on about this, but bringing two derivatives in while going up in rate is no small task, and they've done it extremely well.\",\n \"And then at the same time, leveraging the best practices. So that's all going to continue to play out as you go forward here. You're right, bringing in more -10s. So the mix will be higher 9s and 10s.\",\n \"Right now, it's predominantly 9, and -10 is -- you're going to see the benefit of that over that kind of longer-term period from a cash perspective and then going up in rate. So you will see the cash associated with those advances as well as with that higher rate, but again, at the same time, bringing down the expenditures. And don't forget, we've got step-down pricing as well on the supply chain that will play into that along with our own productivity. So it probably fits into about 6 categories of things that need to happen or things that are just going to happen through time as we execute through each of these blocks and having a more favorable mix combined with continuing to have a step-down in the supply chain.\",\n \"So we -- again, we see growing cash flow on the 787. They've done a great job in delivering on their commitments to shareholders, but also the customers. And now we're kind of moving into the next phase of moving up into 14 and continuing to capture productivity gains.\"\n ]\n },\n {\n \"name\": \"Doug Harned\",\n \"speech\": [\n \"And then just on the -10. I mean, you delivered, I think, nine of them in Q4. So would it be fair to say that your -10 margins were probably a little less mature in the quarter we just saw? And you should get some improvement out of that as well, is that fair?\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Right. It's still -- to your point, it's still relatively early in the production system and in the supply chain. So if that becomes more mature, just like we would normally, we'll come down that learning curve as the supply chain will, and we'll capture the benefit of that.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"To that, Doug, there's also a big benefit from the high level of manufacturing commonality between the -10 and -9, which accelerates and reinforces what Greg said. And then the value proposition for that airplane in the market with our customers, it's very clear that it's generating value and it's winning in the marketplace. So on the pricing side, it's holding up well there as well just because of the value it's creating for our customers.\"\n ]\n },\n {\n \"name\": \"Doug Harned\",\n \"speech\": [\n \"Very good. Thank you.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Welcome.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next question is from Seth Seifman with J.P. Morgan. Please go ahead\"\n ]\n },\n {\n \"name\": \"Seth Seifman\",\n \"speech\": [\n \"Thanks very much and good morning. So you mentioned the idea of, I think, trying to bolster the backlog for 777 and 777X. And you talked a lot in the past about a widebody replacement, where it's coming in the early part of the next decade. Does that mean in the near term, are there 777X order opportunities? Or does the order opportunities in the near term kind of focus on more of the classic and the freighters and we'll kind of wait until we get into the early part of the next decade to see the orders for the 777X come through?\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Seth, we're working both in parallel. Certainly, during the last year, we've seen some great progress on the 777 with 51 net orders in the year. And that's really strengthened the bridge that we're building, 777 to 777X. We still have some work to do to fill out the remainder of the bridge, but our confidence continues to grow in our ability to do that.\",\n \"And as we've made that progress, we're now shifting our teams more and more to 777X opportunities. As you said, we do see a high wave of replacement demand early in the next decade, but that means those sales campaigns are under way now. So those are very active. We're very engaged with a number of customers around the world.\",\n \"The 777X clearly is bringing a value proposition to the market that's attractive. And you'll see us focusing more and more on those 777X campaigns here during this coming year. So that's a very near-term effort as well. And all of that is consistent with the investment profile and the production system ramp and transition that we talked about earlier.\"\n ]\n },\n {\n \"name\": \"Seth Seifman\",\n \"speech\": [\n \"Thanks very much.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"You bet.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we go to David Strauss with Barclays. Please go ahead.\"\n ]\n },\n {\n \"name\": \"David Strauss\",\n \"speech\": [\n \"Thanks. Good morning. In the free cash flow walk that you provided, you highlighted the headwind from 777X in 2019. Could you maybe talk about, is 2019 going to be the peak year for 777X investment? I'm thinking mainly in working capital.\",\n \"And how many airplanes do you plan on kind of having in flow before you actually start making deliveries?\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Yes. No, the profile, David, certainly, for the reasons you described, building the inventory and the test aircraft and so on. So this year, there's more headwind. And then as we move into 2020, that headwind will moderate, and so we'll start to have some more positive cash flow with the combination of 777X moving into production and then into delivery.\",\n \"So this is kind of a peak year for us on, I'll say, cash usage on 777 combined with 777X. So as Dennis said, transitioning the airplane today in the factory and moving through and building up that move from development to production will be key and obviously a big driver on the cash flow. And things are going well out there today. So we're -- we've got very good early signs that the aircraft is moving into the production systems smoothly.\",\n \"And any challenges we're having, we're working through and we know what they are. But so far, so good. So that will be a big driver of cash flow going forward.\"\n ]\n },\n {\n \"name\": \"David Strauss\",\n \"speech\": [\n \"And did I hear you say that 777 deliveries in 2020 would actually step up a bit? Is that just the legacy kind of 777 rate holding and 777X starting to deliver?\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Well, it's really the combined of the two. So it's the X and the 777. Now having said that, as Dennis indicated, we're still seeing a lot of demand for the 777, in particular in the area of freight. So we're feathering all this together and making sure that we're in the marketplace and we're meeting the demands of the customers in the near term, but at the same time, feathering in the 777X.\",\n \"So that's kind of key in 2020, but we're not -- we're seeing good demand there on the 777. So we'll combine -- that'll be a combined production rate on those two programs.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yes. Just for clarity, 2020 production system will be operating in five months. So we look at delivery rate slightly increasing over the current 3.5 month delivery rate. That's the combination of 777s and 777Xs that Greg mentioned.\"\n ]\n },\n {\n \"name\": \"David Strauss\",\n \"speech\": [\n \"Great. Thanks very much.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"You're welcome.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we go to Sheila Kahyaoglu with Jefferies. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Good morning and thank you. Going back to commercial profitability just because it's such a standout. How sustainable is the 100 bps of margin improvement? Are there any mix impacts we should be thinking about with the 777 coming in, which is changing customer dynamics or any pricing dynamic that would alter that trajectory?\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"You're thinking kind of beyond '19?\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Yes.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Well, I mean, there's -- yes, to your point, there's a lot of moving pieces. Obviously, when you get into '19, we're more stable at the 14 a month and we're more stable at the 57. So again, we should be able to capture productivity and we're expecting to capture productivity in that. And there are some mix movements certainly between the 777 ramping down and the X moving in, so there's a lot of moving pieces.\",\n \"But I'd say, Sheila, and I'll let Dennis comment here, but the objective we have in place is the same one as I addressed on a prior question. We're looking for opportunities where we can to derisk production system and bringing in automation where we can bring in automation and bring in best practices with an overall objective to grow margins and fund our future and return cash to shareholders. So that playbook, you should just think of that as the same no matter what the mix. So we don't let mix be the deciding factor.\",\n \"Mix is mix. It's our job to try to offset that or use that to our advantage the best way possible.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yes. And just to reinforce that, Sheila, as Greg said, a lot of moving parts here, but the sustained margin growth trend is one that's long term. So we expect to continue to see year-over-year margin growth in 2019 and further growth in 2020 and beyond. So this is all about long-term, sustained top and bottom-line growth.\",\n \"And the game book that we're operating here will drive that year over year.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Welcome.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next question is from Hunter Keay with Wolfe Research. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Hunter Keay\",\n \"speech\": [\n \"Thank you for getting me in. Good morning. I'd like to go back to NMA for a second. I don't want to nitpick a little bit.\",\n \"But Dennis, you did mention that NMA was going to be a two-step decision process with the final decision coming in '20. Are you saying that you would make the announcement for the public, so to speak, in '20 after talking to your customers in '19? So if you could just clarify that announcement. And then the second part of the NMA question is, how are these conversations going with your customers around this plane being used as a replacement aircraft versus opening up new markets maybe relative to new designs in the past? Thanks.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yes. Hunter, let me take on the first one there. The process we're talking about here, the decision process is identical to what we've used in all of our previous programs. So this year's decision is what we call authority to offer.\",\n \"That's based on a business case and our ability to go and have deep, detailed discussions with customers. That will be something that will be publicly announced once we make our decision around that. So that will be information that you'll see and that will initiate deep and meaningful customer conversations. And then depending on the market response and our ability to build the right kind of group of launch customers, then we get to an official launch or authority to launch decision next year.\",\n \"So both of those steps are typically public steps and ones that you would see. Again, I want to reemphasize the discipline that we're putting into these. These are not only decisions related to the airplane in that market, there are also decisions related to the enterprise transformation objectives that we have in terms of production system for the future. So we're looking at this as a total enterprise effort and really being very disciplined in our business case analysis.\",\n \"And then your second question, Hunter?\"\n ]\n },\n {\n \"name\": \"Hunter Keay\",\n \"speech\": [\n \"Yes. It was sort of just how the conversations are going with your customers, preliminarily at least, around this plane being used as sort of an enabler of opening up new point-to-point markets versus replacement relative to say -- really, I was thinking of 787s specifically, but just broader in general. Thanks.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yes. We've talked extensively with customers here, more than 60 customers and very consistent feedback. And we do see several different market segments and potential applications for this airplane. We do see a market need here that's in between today's narrowbody and widebody families.\",\n \"It's a market area that really cannot be addressed by modifying those existing platforms and aircraft. Some of that is medium-haul, medium-range segments that today are being served by, I'll say, inefficient use of widebodies. And we see that as an opportunity for airline customers to gain efficiency. But a good portion of this is also a creation of new medium-range route structures.\",\n \"And just as we saw with the introduction of the 787 where we saw roughly already 200 new city pairs emerge because of the capability of the airplane in the medium-range marketplace, again, 4,000 to 5000 mile kind of range, we see an opportunity for significant regional city pair growth from this airplane. And that's another area where we're gaining customer feedback. So there are multiple segments of applicability, significant customer interest. The key here is for us to build a business case that's going to create value for our customers as well as value for our company and our shareholders.\",\n \"And that's the work we still need to finish.\"\n ]\n },\n {\n \"name\": \"Hunter Keay\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we go to Ron Epstein with Bank of America Merrill Lynch. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Ron Epstein\",\n \"speech\": [\n \"Good afternoon, guys. Just a question and maybe a follow-up. How do we think about the 900 airplanes? Like where do you have to transition on 73 and 78 to get to 900? That's a lot of airplanes, right? I mean, it's something like 75 a month, right, on average?\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yes. Ron, you've made the right calculation there. So as I mentioned, we are well into the 14 a month rate step on 787, and we expect to complete that transition in the second quarter. So that's moving forward very briskly and on track.\",\n \"On the 737, we've already moved parts of the supply chain to 57 a month, but we still have some work to do on some elements of the supply chain, in particular with engines and CFM. And we're not going to make that full transition to 57 a month until we're very confident that we're ready. And it's important that we do that in a very disciplined way. So you can back into the number mathematically with about 900 deliveries for the year.\",\n \"Note that, that 900 roughly deliveries for the year also includes the military derivatives, the P-8, tankers are all included in that number just for clarity.\"\n ]\n },\n {\n \"name\": \"Ron Epstein\",\n \"speech\": [\n \"OK. Great, great. And then -- and maybe just one follow-on on the NMA question. In the business case, when you think about NMA, how do you think about it and the potential relationship it could have with the future family of narrowbodies?\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"It's one of the parameters that we think through any time we're thinking about investments for the future. I think as we relayed earlier, we fundamentally have changed our R&D investment strategy for the company, so that it's feathered over the long term where we can sequence development programs, so that we gain the benefits of continuous development and lessons learned program to program rather than stacking multiple development programs on top of each other. And that's the way we're thinking through NMA as well, so not only the development program for that particular airplane and the market it will serve, but also how do we sequence it, how do we leverage learnings from 777X, how do we leverage what we're learning from things like T-X and roll that into NMA and then how could we use an NMA investment to think about leverage and creating the production system for the even more distant future, whether that be some future narrowbody airplane or other alternatives that we might invest in. But think of this as a continuum of R&D efforts.\",\n \"This, again, is all key to creating a sustained growth business where top and bottom line are both long-term sustained growth levels. That is our approach here, and so we're thinking about NMA in that multi-program context.\"\n ]\n },\n {\n \"name\": \"Ron Epstein\",\n \"speech\": [\n \"Got you? Can I ask one more at the tail end here?\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"Well, I think we're...\"\n ]\n },\n {\n \"name\": \"Ron Epstein\",\n \"speech\": [\n \"Can I? Just sort of quick one? This is for Greg. Greg, when we think about the 737NG versus the MAX and just for modeling purposes because there's going to be 90% MAXs this year, how do we think about the margin profile of one variant versus the other?\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Well, it's still kind of early introduction, right? So just take that into account. But net-net, you're in a similar margin profile as you are on the NG. It's really just more around on timing from a unit perspective and how they're feathered in. So I wouldn't think of it any different.\",\n \"It's really just, again, more timing.\"\n ]\n },\n {\n \"name\": \"Ron Epstein\",\n \"speech\": [\n \"OK, great. Thank you.\"\n ]\n },\n {\n \"name\": \"Gregory Smith\",\n \"speech\": [\n \"Yes. Thank you.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"OK. So operator, we have time for just one more analyst question.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Great. That will be from Peter Arment with Baird. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Peter Arment\",\n \"speech\": [\n \"Thanks. Dennis, just maybe an easier one on book-to-bill expectations in 2019, I guess, specifically, around 737 MAX orders. You mentioned you had 13 new customers in 2018, and you've had really, I think, 5,000 aircraft since the launch. So that's close to 68%, I think, of the coverage of NGs.\",\n \"Just how you're thinking about the order momentum with that program. Thanks.\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yes. Peter, we continued to see strong order momentum there. I think just another sign of it, this week earlier, you saw ANA's announcement about their intent to buy the MAX. And that's another addition to the fleet there.\",\n \"So you see continued momentum on the MAX sales front. That airplane is creating value in the market for our customers. And we are oversold against our production profile. We talked earlier about ramping up to 57 a month.\",\n \"We are oversold against that profile. We're filling skyline slots way out in 2023. We continue see upward market pressure overall on the production rate as a result. And we think the demand for that airplane continues to be sustained.\",\n \"So while we had great orders, volume and momentum this year, and I mentioned we might see some moderation in that demand this coming year, we still expect book-to-bill to be in that sort of one to one range. And there's always timing variability. But in terms of the MAX, the demand signals in the marketplace continue to be very strong.\"\n ]\n },\n {\n \"name\": \"Peter Arment\",\n \"speech\": [\n \"OK. Thanks.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Ladies and gentlemen, that completes the analyst question-and-answer session. [Operator instructions] I will now return you to The Boeing Company for introductory remarks by Ms. Anne Toulouse, interim vice president of communications. Ms.\",\n \"Toulouse, please go ahead.\"\n ]\n },\n {\n \"name\": \"Anne Toulouse\",\n \"speech\": [\n \"Thank you. We will now continue the call with media questions for Dennis and Greg. And if you have additional queries following this session, please call our Media Relations team at (312) 544-2002. Operator, we're ready for that first question.\",\n \"[Operator instructions]\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And first from the line of Andrew Tangel with Wall Street Journal. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Andrew Tangel\",\n \"speech\": [\n \"Good morning. Some other manufacturers have reported seeing economic weakness in China as a major headwind. What are you all seeing? And are the orders from China setting, slowing, picking up? And overall, where do you expect to see that moderating order intake coming from around the world? And where is -- either demand slowing a bit or growth slowing a bit from what you all see?\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yes. Andrew, let me touch on the China question first. We continue to see strong demand in China overall in terms of market dynamics. As I said earlier, over the 20 years, we see a world that needs about 43,000 new commercial airplanes.\",\n \"We remain very confident in that outlook, and about 7,700 of those 43,000 are in China. And that remains solid. Traffic patterns in China continue to progress. We're seeing passenger growth there that exceeds the overall market growth around the world, and we also see passenger traffic growth there continuing to exceed GDP growth.\",\n \"So those market fundamentals remain strongly in place. In terms of orders volume in China, that's typically paced by timing of their five-year planning. So it tends to come in waves. So that's why we -- again, as we look to the future, we expect to see some timing adjustments on orders.\",\n \"But overall, volume over the long term remains very strong. And that really applies to my broader comment, too, about moderation of orders in 2019. As we look to the long term, the market fundamentals are very strong. And we see long-term volume of orders continuing to grow and adding to backlog.\",\n \"It just gets into a question of local timing quarter to quarter and year to year as our customers meet their fleet needs. So nothing here that I would say is a macro trend or a substantial change. We just see fundamental aerospace growth and air traffic growth as a long-term, sustainable trend. And with a backlog of about 5,900 aircraft or roughly seven years in production, that gives us the ability to weather any local variations and maintain a long-term view in terms of sustained growth.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question from Julie Johnsson with Bloomberg. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Julie Johnsson\",\n \"speech\": [\n \"So I just wanted to make sure that I understood what you're -- the point you're making on China, Dennis. Do you potentially see a lull in orders this year because the next five-year plan is looming in the headlights? And then totally unrelated question and apologies for that, but where does CFM stand on its catch-up plan for the LEAP? How unusual is it for Boeing to embed your people in their supply chain?\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yes. Julie, on your first question regarding China, that was exactly my point earlier given the five-year planning cycle there. We're having ongoing discussions with our customers in China, the Chinese government, the U.S. government.\",\n \"This also factors into the trade dialogue between the U.S. and China. So these are all factors that we're very much engaged in. Again, we expect China is a long-term growth market for us, but exactly how those efforts play out over the next quarter or two is still an open question as we proceed with trade discussions.\",\n \"I can tell you, having been intimately involved in the discussions and engagement with the governments, both in U.S. and China, we see progress on that front. We see convergence. And we also see that there's clearly a neutral benefit to having a healthy aerospace industry for both the U.S.\",\n \"and China. China needs the airplanes for growth to fuel their economy and to meet their passenger growth and cargo growth needs. And here in the U.S., our aerospace business is a tremendous U.S. jobs generator, manufacturing jobs.\",\n \"We hired 34,000 people last year. And we, as an aerospace industry here in the U.S., create about an $80 billion a year trade surplus for the country. So there's mutual interest in a healthy aerospace business. We expect that to lead to productive trade discussions between the U.S.\",\n \"and China or at least be part of that. And then that will factor into the ultimate orders volume and timing with China. So that's just a little additional context there. Regarding your CFM question, it's not unusual for us to have Boeing personnel at our suppliers' sites and down into their supply chain.\",\n \"That's a very typical process that we would have. But I will say again, as it goes to 737, one of the supply chain health issues that we're spending a lot of time on right now is engines and our work with CFM. And so we are deploying additional resources with them into their factories and supply chain. We do expect to recover, we're seeing signs of recovery, but we still have work to go.\",\n \"And being deeply engaged in our supply chain is part of how we do business.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Sylvia Pfeifer with Financial Times. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Sylvia Pfeifer\",\n \"speech\": [\n \"Hi, good morning. Sorry, I had the China question, which was one of my main ones. Can I just ask you about Brexit then? I know you're in a very different position to Airbus here in the U.K. But I just wondered whether you saw any risks to your own operations in the U.K.\",\n \"in the event of a hard Brexit with just a few weeks to go before the 29th of March?\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yes. Sylvia, we're continuing to keep a very close eye on that, as you might guess. And again, we're very involved in the discussion. That said, we're committed to our operations in the U.K.\",\n \"We've ramped up significantly over the last many years, roughly doubling the size of our operations, roughly tripling the size of our supply chain in the U.K. And those are long-term, sustained investments. And we don't expect that to change based on the outcome of Brexit. That said, we're keeping a very close eye on it and making sure it doesn't impact our operations.\",\n \"I think just as a further sign of our commitment in the U.K., you'll note that during the last year, we opened our new operation in Sheffield where we're doing some advanced manufacturing work. That's also helping us to build out our actuation vertical capability. So just another example of our long-term commitment to the U.K. and the investments that we'll continue to make.\"\n ]\n },\n {\n \"name\": \"Anne Toulouse\",\n \"speech\": [\n \"OK. Operator, we have time for one last question from the media.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And that will be from Dominic Gates with The Seattle Times. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Dominic Gates\",\n \"speech\": [\n \"Hey, good morning. Going back to the 737 MAX situation and CFM. In December, with the delivery of 69 airplanes, it did seem like you had almost fully recovered. Has there been some further setback? And is the need to send people to CFM, is that because there's a problem with the ramp-up of the engine production? Or is there some configuration change that's become necessary? Can you just tell us a bit more? Also what's the time line you expect to be back to normal, let's say?\"\n ]\n },\n {\n \"name\": \"Dennis Muilenburg\",\n \"speech\": [\n \"Yes, Dominic, first of all, as you saw in our December deliveries, as you alluded to, we did see some recovery across our supply chain, including engine supply, and that enabled us to drive those December deliveries of 69 aircraft. But we were not yet fully recovered at that point, so we've continued to work supply chain recovery. And there's still work to go there. There's nothing here that I would say is an issue associated with having to change a configuration or make that kind of alteration to the engine.\",\n \"This is really about just ramping up production and doing it efficiently and being able to get a linear profile of engine deliveries that matches up with our factory production rate for the airplane and synchronizing those production systems. That's really what we're focused on. We still have work to go to get CFM to be supporting our 52 a month production rate and having those systems synchronized; and then even more work to go yet to get them ramped up to 57 a month. And that's really what we're focused on.\",\n \"This is about production system ramp-up and synchronization. And by us getting deeper into their factories, it's going to give us better insights on long lead items. And frankly, it will, I think, help us do best practice sharing between Boeing and CFM, which is part of how we operate, right? That will make us better and it will make CFM better. And that's the work that we plan to be very focused on in the first quarter.\",\n \"And timing of that is reflected in our overall delivery guidance for the year, so you can see that factored in. But we're going to be very, very disciplined about ensuring supply chain health before we fully move to the 57 a month production rate.\"\n ]\n },\n {\n \"name\": \"Anne Toulouse\",\n \"speech\": [\n \"OK. That concludes our earnings call. Again, for members of the media, if you have further questions, please call our team at (312) 544-2002. Thank you.\"\n ]\n },\n {\n \"name\": \"Dominic Gates --The Seattle Times -- Aerospace Reporter\",\n \"speech\": [\n \"More BA analysis\",\n \"This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see ourTerms and Conditionsfor additional details, including our Obligatory Capitalized Disclaimers of Liability.\"\n ]\n }\n]","isConversational":false}}},{"rowIdx":695,"cells":{"ticker":{"kind":"string","value":"BA"},"date":{"kind":"string","value":"2020-01-29"},"participants":{"kind":"list like","value":[{"description":"Vice President of Investor Relations","name":"Maurita Sutedja","position":"Executive"},{"description":"President and Chief Executive Officer","name":"David L. Calhoun","position":"Executive"},{"description":"Chief Financial Officer and Executive Vice President, Enterprise Performance & Strategy","name":"Greg Smith","position":"Executive"},{"description":"Melius Research -- Analyst","name":"Carter Copeland","position":"Analyst"},{"description":"UBS -- Analyst","name":"Myles Walton","position":"Analyst"},{"description":"Bank of America Merrill Lynch -- Analyst","name":"Ronald J. Epstein","position":"Analyst"},{"description":"Jefferies -- Analyst","name":"Sheila Kahyaoglu","position":"Analyst"},{"description":"Bernstein Research -- Analyst","name":"Douglas S. Harned","position":"Analyst"},{"description":"Barclays -- Analyst","name":"David Strauss","position":"Analyst"},{"description":"Citi -- Analyst","name":"Jonathan Raviv","position":"Analyst"},{"description":"Goldman Sachs -- Analyst","name":"Noah Poponak","position":"Analyst"},{"description":"Wolfe Research -- Analyst","name":"Hunter K. Keay","position":"Analyst"}],"string":"[\n {\n \"description\": \"Vice President of Investor Relations\",\n \"name\": \"Maurita Sutedja\",\n \"position\": \"Executive\"\n },\n {\n \"description\": \"President and Chief Executive Officer\",\n \"name\": \"David L. Calhoun\",\n \"position\": \"Executive\"\n },\n {\n \"description\": \"Chief Financial Officer and Executive Vice President, Enterprise Performance & Strategy\",\n \"name\": \"Greg Smith\",\n \"position\": \"Executive\"\n },\n {\n \"description\": \"Melius Research -- Analyst\",\n \"name\": \"Carter Copeland\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"UBS -- Analyst\",\n \"name\": \"Myles Walton\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Bank of America Merrill Lynch -- Analyst\",\n \"name\": \"Ronald J. Epstein\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Jefferies -- Analyst\",\n \"name\": \"Sheila Kahyaoglu\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Bernstein Research -- Analyst\",\n \"name\": \"Douglas S. Harned\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Barclays -- Analyst\",\n \"name\": \"David Strauss\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Citi -- Analyst\",\n \"name\": \"Jonathan Raviv\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Goldman Sachs -- Analyst\",\n \"name\": \"Noah Poponak\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Wolfe Research -- Analyst\",\n \"name\": \"Hunter K. Keay\",\n \"position\": \"Analyst\"\n }\n]","isConversational":false},"prepared_remarks":{"kind":"list like","value":[{"name":"Operator","speech":["Good day everyone, and welcome to The Boeing Company's Fourth Quarter 2019 Earnings Conference Call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst question-and-answer session are being broadcast live over the Internet.","[Operator Instructions]","At this time, for opening remarks and introductions, I'm turning the call over to Ms. Maurita Sutedja, Vice President of Investor Relations for The Boeing Company. Ms. Sutedja, please go ahead."]},{"name":"Maurita Sutedja","speech":["Thank you, and good morning.","Welcome to Boeing's fourth quarter 2019 earnings call. I'm Maurita Sutedja, and with me today are David Calhoun, Boeing's President and Chief Executive Officer, and Greg Smith, Boeing's Chief Financial Officer and Executive Vice President of Enterprise Performance & Strategy. Dave will start with some opening comments and hand it over to Greg to address the business environment and our financial results. After management comments, we will conduct a question-and-answer session.","In fairness to others on the call, we ask that you please limit yourself to one question. As always, we have provided detailed financial information in our press release issued earlier today. And as a reminder, you can follow today's broadcast and slide presentation through our website at Boeing.com.","Before we begin, I need to remind you that any projections, estimates and goals we include in our discussion today are likely to involve risks, which are detailed in our news release, in our various SEC filings, and in the forward-looking statement disclaimer at the end of this web presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of certain non-GAAP measures.","Now I will turn over the call to Dave Calhoun."]},{"name":"David L. Calhoun","speech":["Thank you, Maurita. Good morning to everyone.","I'll state the obvious. I've been here 2.5 weeks, and this is my first earnings call as the President and CEO of the company. While I'm new to the CEO role, I am certainly not new to the company and have long admired the business, the products that we build, and the people that serve the company. It's a very challenging moment for Boeing, we got a lot of work to do, but I'm confident that we will manage the situation in the right way and I'm optimistic about the company's future, both in terms of the markets that we serve and maybe more importantly the engineering and technical capabilities we bring.","Before we proceed, let me just say to the families and the loved ones of those who perished in the Lion Air Flight 610 and Ethiopian Airlines Flight 302 accidents, we -- I am truly and deeply sorry for your loss. I will repeat this many, many times in the years ahead. Their memories will drive me personally to do everything I can to make our airplanes and our industry safer. And I know I speak for all of my Boeing associates accordingly.","I've been spending a lot of my first weeks meeting, connecting with, listening to my Boeing teammates across the country. What I'm seeing and hearing is that our employees are incredibly proud to work at Boeing, but they're also hurt and disappointed that we've let our stakeholders down. Together, we are committed to getting back on our front foot, learning with humility, and building on the powerful legacy that they and their predecessors have created over the last century. This includes engaging with one another and our stakeholders with greater transparency, holding ourselves accountable to the highest standards of safety and quality, and incorporating an outside-in perspective on what we do and how we do it.","To that end, I've also been reaching out to important external stakeholders, I know you know that, including our customers of our three businesses, our supply base, our supply chain, which is under stress, business partners, and finally, maybe most importantly, regulators. I look forward to engaging with many others with whom I have not yet had the opportunity to meet with in the weeks and the months to come. All of these conversations that I have had and I'm certain the ones I will have, are laced with support for our company, the important work that we do, and the importance of what we do for the country. We will be transparent in everything that we do as we move forward.","I want to express my personal thanks to everyone who has been our partner in this journey. We're mindful that these are challenging times for many and we remain grateful for your support. Before going through my initial priorities for 2020, let me share a brief history of my interactions with Boeing.","I've known Boeing since the year 2000 when I started with GE's aircraft engine business and we were engaged in the development of a new centerline engine for the long-range 777, capable of delivering 115,000 pounds of thrust to the airframe. That was the first of its kind. When you're on the wing, you are on the T. Given this history, the 777X first flight on Saturday not only was a major milestone and a proud moment for the company, but also has a significant meaning for me. I've watched the development of the 777 series from the very first engine, to the new wing tip on the 777X and see it as a proof point of Boeing's engineering and technology prowess. Shortly after leaving GE, I turned to Boeing when Jim McNerney invited me to join the Board in 2009. As a Board member of Boeing with institutional knowledge of the business, I was able to develop my initial priorities right away in my first week.","We can turn to the second slide please. First and foremost, our primary focus continues to be returning the 737 MAX to service safely. This include following the lead of our regulators and working with them to ensure they're satisfied completely with the airplane and our work. The FAA and the global regulatory authorities will determine the timeline for certification and return to service, and we remain fully committed to supporting this process. Our job is to ensure that every requirement is fulfilled, every question from the regulators answered. We'll get it done and we'll get it done the right way.","As you well know, over the last year, the entire Boeing Board has been actively engaged in helping to resolve our current challenges and enhancing our governance and safety oversight. These actions included establishing a Board safety committee, and realigning and elevating the safety management and engineering organizations across the company. These organization design changes will shine bright lights on the safety process and the engineering disciplines that underlie them. As previously announced, we've also decided to temporarily suspend the 737 production beginning this month. We believe this decision is least disruptive to maintaining long-term production system and supply chain health. We will work closely with our supply chain to ensure we are ready to safely and smartly return to production.","Similarly, public, customer and stakeholder confidence in the 737 MAX is critically important to us. And with that focus, we've decided to recommend simulator training combined with computer-based training for all pilots prior to return to service. Our singular priority is safety, and every decision, every action, every step we take, as we move forward, will be guided by it. As we mentioned last week, we are currently estimating the ungrounding of the 737 MAX will begin mid-2020. This estimate is informed by our experience to date with the certification process. It is subject to our ongoing attempts to address known schedule risks and further developments that may arise in connection with the certification process. It also accounts for the rigorous scrutiny that regulatory authorities are rightly applying at every step of their review of the 737 MAX's flight control system and the Joint Operations Evaluation Board process, which determines pilot training requirements.","It's important to emphasize that this estimate should not be interpreted as an attempt to influence or interfere with the FAA and other regulators' absolute authority to determine the timing and conditions of return to service. Very simply, accurate financial reporting requires that we provide our latest and most informed schedule. Similarly, our supply chain, in the name of transparency, requires a schedule to perform up to its standard.","Moving on to rebuilding trust, which I briefly touched on earlier. We recognize that many of our stakeholders are rightly disappointed in us, and it's our job to repair these vital relationships. We will do so through a commitment to transparency in everything we do, and by meeting or exceeding expectations. We will listen, we will seek feedback and respond appropriately, urgently and respectfully. Our culture is centered around strong shared value, safety, quality and integrity. Every day, we will recommit to these and foster an inclusive environment that embraces oversight and accountability, and puts these three core principles, above all else. We will listen and resolve real-time any/all employee concerns pertaining to safety or other of our shared values.","We will also focus on operating with excellence. We must get back to basics, delivering safe products and services to our customers while continuously improving our quality. We will complete our work in-station, wherever we are and whatever we do, and we will do it to the highest standards. We are committed to do it across our Commercial, Defense, Space & Security, and Services businesses. This is not relegated to just the MAX or the 737. This requires a focused approach and simplification in everything we do to ensure we deliver on what matters most with accountability. We will restore production health, both within the Boeing's four walls and the industry at large. We'll keep taking steps to manage our supply chain health and maintain workforce expertise across the enterprise, so that in particularly with respect to the 737 MAX, we'll be ready to restart production, increase rate safely, smartly, disciplined and with the highest standards of quality.","While doing all of these, we will not lose sight of the importance of investing in our future. Our markets are growing. Customer demand is evolving. The competition is increasing. The technology is advancing at a pace we've never seen before. Boeing must keep innovating to succeed. We'll continue to invest in our global workforce and new processes, new technologies that will help us become safer, more efficient as we define the future of aerospace. This work includes preparing for the first Starliner crewed mission, continuing to progress the 777X and the 737 MAX 10, and further growth of our Global Services business and full implementation of our Embraer partnership. That said, there are always some investment reprioritizing and streamlining that we can do and we will. We'll take the time to reassess our product development strategy in a fairly methodical way. I think that's a natural course for any new incoming leader to take. We'll return to this topic in future discussions. This is not intended to delay, simply to refresh. By focusing on these priorities and unleashing our talent, I'm confident we have the right foundation to keep the business strong, to keep it healthy, while navigating this very difficult moment.","Before I turn it over to Greg for an update on the business environment and our performance, I want to pause and thank him for the leadership he has provided throughout this challenging time and for so ably filling the CEO role during the transition. Everybody here knows we've had a number of leadership changes over the past few months, including me. The strong teams we have supporting our leaders have provided the stability we need and pave the way for seamless transitions. But Greg has set in motion some of the changes we need to see and he has led it with real skill. He will continue to be my partner and we will lead the company together. I'm excited now to be working alongside him and the rest of our senior leaders.","And now, I'll turn it over to Greg."]},{"name":"Greg Smith","speech":["Great. Thanks, Dave, and good morning, everybody.","As many of you know, I've had the distinct pleasure of knowing Dave for a long time, and we're extremely lucky to have him in the chair helping us navigate through these challenging times and the path forward. I have a lot of respect for Dave and look forward to the continued partnership. And I can tell you, we are completely 100% aligned on our priorities and the path forward for our company.","Let's now move to Slide 3 and we'll discuss our overall business environment. We continue to be operating in sizable sectors that are growing and backed by strong fundamentals with a combined market opportunity of $8.7 trillion over the next 10 years. We continue to see healthy global demand for our offerings in commercial, defense, space and services. However, we are starting to see some pressure, such as in the cargo market, that we will continue to monitor going forward. In commercial aviation, although we've seen some moderation in passenger traffic this year, we saw growth of a solid 4.2% through November. The fundamentals remain intact. However, the impact of the Coronavirus on near-term traffic growth is clearly a watch item this year. On the air cargo side, volumes have contracted due to challenging trading environment, and improvements in industrial production and global trade will be key to rebound the air traffic cargo market in 2020. We will continue to see steady utilization of global freighters, while carriers are placing incremental orders to support their fleet replacement needs, but this is definitely something we're keeping a close eye on.","In the narrow-body segment, although the MAX grounding has presented us with near-term challenges, the depth and breadth of our backlog affords us the time to assess and mitigate the longer-term implications. Our 737 program has a backlog of approximately 4,400 aircraft and we continue to see these new airplanes creating capacity for growth and provide required replacements for older, less efficient aircraft. Clearly, our narrow-body delivery market share has been and will continue to be impacted by the MAX. Although we've not seen a direct impact on the value proposition of the 737 MAX in the marketplace, we will continue to monitor the market dynamics this creates. The limited production slot availability of aircraft from both Boeing and our competitor affords us ample time to double down on improving operating efficiency in order to mitigate some of these challenges the program is facing in the near term.","With regards to the middle of the market aircraft, as Dave noted, we are reprioritizing and streamlining some of our investments. We've asked the team to step back and reassess our commercial product development strategy to determine what family of airplanes will be needed in the future. The team will build on the work we have done as part of the NMA design and production system analysis as we move forward. In the wide-body segment, we saw solid order activity in 2019 for the 787 and 777 families. However, as we mentioned before, in the near term, the global trade environment has presented challenges for our wide-body production plans, in particular the 787 program. As part of our process, we are continually assessing the environment to determine if any further rate adjustments are required.","We previously announced that we will transition the 787 production rate from 14 per month to 12 per month in late '20. As we are in the planning window of a rate decision and to reduce risk in the '21 and 2022 skyline, we've decided to further reduce the rate to 10 per month in early '21 before returning to 12 per month in 2023. We are pleased with the recent announcement of the Phase 1 deal between the US and China, and we're proud that Boeing airplanes will continue to be part of this valued relationship. Progress on the trade deal is obviously very encouraging, and we will continue to work closely with our customer and awaiting details of access the implementation of our backlog and how this will fit into our skyline given production lead times. In the meantime, we think it's prudent to take more measured approach to our 787 future production rates. We will continue to maintain this disciplined rate management process going forward, taking into account a host of risks and opportunities. We will also continue to assess the demand environment and make adjustments as appropriate in the future.","Turning to triple 777X, we successfully completed the 777X first flight last week. The test fleet, which began ground testing in Everett last year will, continue its rigorous test program over the coming months to demonstrate safety and reliability. This is a comprehensive series of testing conditions on the ground and in the air to evaluate flight controls, aerodynamic performance and cabin environmental controls among many others. We're currently expecting first delivery of the 777-9 to be in 2021. We continue to expect the 777 delivery rate to be approximately three per month in 2020. Progress on the 777X will be the primary driver of future delivery rate for the combined 777/777X program.","We will take a measured approach to the 777X rate ramp and we will look to minimize the amount of change in corporation work by managing the number of aircraft produced prior to entry into service. On the 777, as I discussed earlier, we will continually closely monitor the cargo market and carefully manage our skyline. Finally, as we previously announced, we are in the process of starting to transition the 767 production rate from 2.5 to 3.0 per month.","At Defense, Space & Security, we continue to see solid global demand for major platforms and programs. In addition, the FY '20 Enacted Budget provides support for a broad range of products, including procurement of the F-15EX. Our portfolio remains well positioned with proven world-class platforms to address current needs, and innovative capable and affordable new franchises to build the future. We are maintaining a sharp focus on our future franchise programs such as the MQ-25, the T-7A Red Hawk, and the MH-139A Grey Wolf, while working to ensure strong performance on existing platforms, especially our US Air Force KC-46 program and our space programs including Commercial Crew and Space Launch Systems. Last month marked a significant milestone for the Commercial Crew program with an uncrewed Orbital Flight Test of the CST-100 Starliner. However, as reported, this test was abbreviated due to anomalies experienced during the mission preventing the docking with the International Space Station. NASA is in the process of reviewing the data from our December 2019 mission and the uncrewed mission including docking to the space station became part of the company's contract with NASA. And NASA's approval is required to proceed with a flight test with astronauts on onboard. Given this obligation, we are provisioned for another uncrewed mission, and you'll see this crew impact reflected in BDS financial results.","Turning to the services sector, the $3.1 trillion services market over the next 10 years is a significant opportunity for our company. We continue to see growth with expanded service offerings of our supply chain portfolio and our global digital solutions. The MAX grounding has had impact on BGS growth in 2019 by pushing back the timing of some service demand from our airline customers who have been impacted by the grounding. We expect much of this to be resolved over time. Given the backdrop of demand, the healthy supply chain ecosystem is critical to sustain production system stability. Some of the suppliers have had challenges with production rate changes in the past. And therefore, we are extremely engaged and especially as we navigate the current MAX grounding and production rate outlook. Suppliers' health and readiness will be critical as we assess production rates going forward.","Let's now turn to Slide 4 for our full-year results. Our financial results continue to be impacted by the 737 MAX grounding. Revenue, earnings per share and operating cash were materially reduced. Our revenue of $76.6 billion reflects the 737 MAX impacts, partially offset by higher service volume. Core earnings per share was negative $3.47 for the full year, and operating cash was a negative $2.4 billion, again primarily due to the 737 MAX impacts.","Let's now move to our quarterly results on Slide 5. During the quarter, we recorded revenue of $17.9 billion, core earnings per share of negative $2.33, and negative $2.2 billion of operating cash. Before we discuss segment performance, let me go over 737 MAX financials in more detail.","Turning now to Slide 6. In preparation for our fourth quarter financial statements, we made certain assumptions including timing of resumption of delivery production, the production rate and ramp up profile. Again, let me reiterate, it is the FAA and the global regulators who will determine the timing and the conditions of return to service. We've assumed that the regulatory approval for the 737 MAX will enable deliveries to begin in mid-2020. We've also assume that as a condition of return to service, regulators will require 737 MAX pilots to undergo combination of computer and simulator training. We've assumed that we will resume 737 MAX aircraft production at low rates in 2020 as timing and conditions of return to service are better understood. And then we expect to gradually increase previously planned production rates over the next few years.","We're also assuming that the 737 MAX airplanes produced and stored during the grounding will be delivered over several quarters with the majority of them delivered during the first year after resumption of deliveries. Any changes to these assumptions will require us to recognize additional financial impacts. In the fourth quarter, we added $2.6 billion of program cost to the 737 program. This is primarily to reflect current assumptions regarding timing of return to service and the timing planned production rates and reflect the additional time required to produce and complete undelivered aircraft in the accounting quantity. These additional cost will be spread across the undelivered aircraft in the accounting block of approximately 3,100 units, and therefore reduce the 737 program margin.","Adding these to the program cost brings the total cumulative program impact to $6.3 billion. In addition, the suspension of the 737 MAX production means that some costs must be recorded as abnormal production costs under US GAAP. This includes costs related to our decision to maintain the 737 production infrastructure including labor during the suspension and low rate production. As you may recall, this decision is part of our efforts to sustain the gains in the production system and supply chain quality and health made over the last several months. We currently estimate these abnormal costs to be approximately $4 billion. These costs will be expensed as incurred primarily in 2020, and you'll see these flow through earnings as period expense starting in the first quarter. Since the portion of these costs deemed abnormal will be the largest when the production rate is zero and the rates are low, we expect expense to be front-end loaded.","During the quarter, we also reassessed our estimate of potential concessions and other considerations to customers for disruptions related to the 737 MAX grounding and associated delivery delays. This reassessment included updating estimates that reflect our most recent assumptions as well as latest information based on engagement with 737 customers. Based on our assessment, we added $2.6 billion to the recorded liability in the quarter. This brings the total cumulative impacts to $8.3 billion net of insurance. As we've mentioned, we are addressing the impact individually customer by customer. We expect any concessions or other considerations to be provided over a number of years and we continue to see the cash impact to be more front-end loaded in the first few years, but of course will be dependent upon individual conversations with customers. In 2019, we reduced the liability balance by $1.4 billion through cash payments, but also other in kind considerations.","Looking forward, the key drivers of financial impact related to the 737 will continue to be the return to service timeline and conditions, the delivery ramp up, which will be dependent on how fast we can deliver the aircraft once the fleet returns to service and how fast our customers can accept aircraft, and the duration of the 737 production suspension and rate ramp profile and discussions with customers regarding potential concessions and other considerations. We expect our financial results to continue to be adversely impacted until we safely return the 737 MAX to service, resume deliveries to customers, and ramp up production rates.","We continue to perform detailed scenario planning around return to service and production rates including analyzing the implications on our supply chain, customer fleet and deliveries, to fully understand the range of financial outcomes. We're also taking actions to prudently manage our liquidity, increase our balance sheet flexibility, manage our spending and stay laser focused on productivity. I'll talk more about that a little later.","Let's now move to Commercial Airplanes on Slide 7. Our Commercial Airplanes business revenue decreased to $7.5 billion during the quarter and operating margins declined to negative 38%, both reflecting 737 deliveries and additional $2.6 billion of estimated potential customer concessions and other considerations. BCA backlog includes 5,400 aircraft valued at $377 billion, equating to more than six years of production.","Let's now move to Defense, Space & Security on Slide 8. Fourth quarter revenue decreased to $6 billion reflecting lower volume across the portfolio as well as impact of previously mentioned Commercial Crew charge, which affected revenue recognition on the program. BDS operating margin of 0.5% reflected $410 million pre-tax charge to provision for the additional uncrewed mission for the Commercial Crew program as well as several performance items, and the mix within the portfolio in the quarter. During the quarter, BDS won key contract awards worth $8 billion and our backlog now stands at $64 billion with 29% from outside the US.","Let's now turn to Boeing Global Services results on Slide 9. In the fourth quarter, the global services revenue decreased to $4.6 billion, reflecting lower commercial service volume. Year-over-year growth of 8% is lower than we expected partially due to the impact of the 737 MAX grounding, which affected the timing of demand of some of our service offerings. BGS operating margin of 14.7% reflected non-cash charge related to the retirement of the Aviall brand as we consolidate our distribution businesses under the Boeing brand as well as mix of products and services in the quarter. We were partially offset by a one-time gain on the divestiture. During the quarter, BGS won key contract awards worth approximately $6 billion, which brings its backlog now to $23 billion.","Let's now turn to cash flow on Slide 10. As I mentioned, operating cash flow in the fourth quarter was a negative $2.2 billion driven by lower 737 deliveries, lower advanced payments, higher inventories and timing of receipts and expenditures. We expect continued cash flow pressure from the MAX impacting until production stabilizes. Strong operating cash flow from other parts of the business and further balance sheet levers will help provide adequate liquidity during this time. We also continue to look at all aspects of spending to ensure we have the right prioritization and sharpen our focus on operational excellence, including closely assessing the timing of non-critical expenditures. Additionally, we are accelerating key working capital initiatives to help navigate this difficult period.","During the fourth quarter, we paid $1.2 billion in dividends and our share repurchase program remains on pause. Near term, managing our liquidity and balance sheet leverage are top priorities, and we will continue to be, until the MAX deliveries resume, we execute the 737 production rate increases and see stability in the production system. But as Dave mentioned, we will also continue to make necessary investments in the business, in our people, new technology and better processes and tools. Our debt level has been elevated during the grounding and we are planning to immediately reduce it once our cash flow generation returns to more normalized levels. Again, we will continue to evaluate all available liquidity levers as we navigate the current challenges. Investing in our business and repaying debt will remain our cash deployment priority for the next few years.","Let's now move to cash and debt balances on Slide 11. We ended the quarter with $10 billion of cash and marketable securities. We raised additional commercial paper in the quarter increasing the debt balance to $2.6 billion and helping shore up our liquidity position as we work through the current MAX challenges, our strategy of maintaining a strong balance sheet and providing us with substantial borrowing capacity through capital markets access of our credit facility of $9.6 billion. Additionally, we've received commitment from a syndicate of banks sufficient to enter into $12 billion term loan facility. Based on the strong demand, the size of the facility could exceed this amount when the transaction closes in February. We are mindful of the impacts the additional debt has on our credit ratings.","Currently at A-minus, A3, we're confident we have the sufficient balance sheet flexibility and operational levers to navigate this challenging time. Our financials this year will continue to be negatively impacted by the MAX. Cash flow in particular will be more significantly impacted in 2020 than 2019. We expect the use of cash flow in 2020 to be greater than '19 primarily due to 737 MAX advance payments will be lower in 2019 based on our latest 737 delivery assumptions. As I mentioned previously, we are increasing our customer consideration liability and expect the cash impact to be higher this year. Also due to the additional 787 production rate reduction, as I discussed, as well as our current 777X entry into service assumptions, wide-body receipts will be a headwind in 2020.","Keep in mind, we'll continue to see expenditures in the 777 program despite the production suspension, as we invest in the production system health to de-risk our future production rate. And these investment decisions including keeping our workforce in place and continuing to make payments to our supply chain for inventory are examples of our focus on long-term stability, but will require cash in the near term. Given these headwinds and our current assumptions on 737 MAX return to service, as well as future production and delivery rates, cash flow recovery is now expected to start until 2021. We are committed to providing you with additional updates on the MAX return to service progress and production rate plans as we have more information. Once we have further clarity, we will schedule a follow up investor and media conference call to discuss the financial implications and provide financial guidance, which will capture the puts and takes including the impact of the most recent wide-body changes.","So with that, I'll turn it back over to Dave for some closing comments."]},{"name":"David L. Calhoun","speech":["Greg, thanks.","Thanks to everyone on the other end of this line. I want you to know I'm as excited as I can be about taking on this challenge. I wish the moment was different, but we can get through this moment and we will get through this moment. I'm confident in this airplane. The MAX is a sound airplane. We believe we're going to deliver the safest airplane in the sky and we're committed to do just that. And I know our regulator is as well.","So with that, and again, open this line up to questions. And I want to thank Greg for the last time, since now we're partners. But at any rate, he has really stood tall in this big transition process and I appreciate it."]},{"name":"Greg Smith","speech":["Thanks, Dave."]},{"name":"David L. Calhoun","speech":["Thanks."]},{"name":"Greg Smith","speech":["I appreciate it."]}],"string":"[\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Good day everyone, and welcome to The Boeing Company's Fourth Quarter 2019 Earnings Conference Call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst question-and-answer session are being broadcast live over the Internet.\",\n \"[Operator Instructions]\",\n \"At this time, for opening remarks and introductions, I'm turning the call over to Ms. Maurita Sutedja, Vice President of Investor Relations for The Boeing Company. Ms. Sutedja, please go ahead.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"Thank you, and good morning.\",\n \"Welcome to Boeing's fourth quarter 2019 earnings call. I'm Maurita Sutedja, and with me today are David Calhoun, Boeing's President and Chief Executive Officer, and Greg Smith, Boeing's Chief Financial Officer and Executive Vice President of Enterprise Performance & Strategy. Dave will start with some opening comments and hand it over to Greg to address the business environment and our financial results. After management comments, we will conduct a question-and-answer session.\",\n \"In fairness to others on the call, we ask that you please limit yourself to one question. As always, we have provided detailed financial information in our press release issued earlier today. And as a reminder, you can follow today's broadcast and slide presentation through our website at Boeing.com.\",\n \"Before we begin, I need to remind you that any projections, estimates and goals we include in our discussion today are likely to involve risks, which are detailed in our news release, in our various SEC filings, and in the forward-looking statement disclaimer at the end of this web presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of certain non-GAAP measures.\",\n \"Now I will turn over the call to Dave Calhoun.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Thank you, Maurita. Good morning to everyone.\",\n \"I'll state the obvious. I've been here 2.5 weeks, and this is my first earnings call as the President and CEO of the company. While I'm new to the CEO role, I am certainly not new to the company and have long admired the business, the products that we build, and the people that serve the company. It's a very challenging moment for Boeing, we got a lot of work to do, but I'm confident that we will manage the situation in the right way and I'm optimistic about the company's future, both in terms of the markets that we serve and maybe more importantly the engineering and technical capabilities we bring.\",\n \"Before we proceed, let me just say to the families and the loved ones of those who perished in the Lion Air Flight 610 and Ethiopian Airlines Flight 302 accidents, we -- I am truly and deeply sorry for your loss. I will repeat this many, many times in the years ahead. Their memories will drive me personally to do everything I can to make our airplanes and our industry safer. And I know I speak for all of my Boeing associates accordingly.\",\n \"I've been spending a lot of my first weeks meeting, connecting with, listening to my Boeing teammates across the country. What I'm seeing and hearing is that our employees are incredibly proud to work at Boeing, but they're also hurt and disappointed that we've let our stakeholders down. Together, we are committed to getting back on our front foot, learning with humility, and building on the powerful legacy that they and their predecessors have created over the last century. This includes engaging with one another and our stakeholders with greater transparency, holding ourselves accountable to the highest standards of safety and quality, and incorporating an outside-in perspective on what we do and how we do it.\",\n \"To that end, I've also been reaching out to important external stakeholders, I know you know that, including our customers of our three businesses, our supply base, our supply chain, which is under stress, business partners, and finally, maybe most importantly, regulators. I look forward to engaging with many others with whom I have not yet had the opportunity to meet with in the weeks and the months to come. All of these conversations that I have had and I'm certain the ones I will have, are laced with support for our company, the important work that we do, and the importance of what we do for the country. We will be transparent in everything that we do as we move forward.\",\n \"I want to express my personal thanks to everyone who has been our partner in this journey. We're mindful that these are challenging times for many and we remain grateful for your support. Before going through my initial priorities for 2020, let me share a brief history of my interactions with Boeing.\",\n \"I've known Boeing since the year 2000 when I started with GE's aircraft engine business and we were engaged in the development of a new centerline engine for the long-range 777, capable of delivering 115,000 pounds of thrust to the airframe. That was the first of its kind. When you're on the wing, you are on the T. Given this history, the 777X first flight on Saturday not only was a major milestone and a proud moment for the company, but also has a significant meaning for me. I've watched the development of the 777 series from the very first engine, to the new wing tip on the 777X and see it as a proof point of Boeing's engineering and technology prowess. Shortly after leaving GE, I turned to Boeing when Jim McNerney invited me to join the Board in 2009. As a Board member of Boeing with institutional knowledge of the business, I was able to develop my initial priorities right away in my first week.\",\n \"We can turn to the second slide please. First and foremost, our primary focus continues to be returning the 737 MAX to service safely. This include following the lead of our regulators and working with them to ensure they're satisfied completely with the airplane and our work. The FAA and the global regulatory authorities will determine the timeline for certification and return to service, and we remain fully committed to supporting this process. Our job is to ensure that every requirement is fulfilled, every question from the regulators answered. We'll get it done and we'll get it done the right way.\",\n \"As you well know, over the last year, the entire Boeing Board has been actively engaged in helping to resolve our current challenges and enhancing our governance and safety oversight. These actions included establishing a Board safety committee, and realigning and elevating the safety management and engineering organizations across the company. These organization design changes will shine bright lights on the safety process and the engineering disciplines that underlie them. As previously announced, we've also decided to temporarily suspend the 737 production beginning this month. We believe this decision is least disruptive to maintaining long-term production system and supply chain health. We will work closely with our supply chain to ensure we are ready to safely and smartly return to production.\",\n \"Similarly, public, customer and stakeholder confidence in the 737 MAX is critically important to us. And with that focus, we've decided to recommend simulator training combined with computer-based training for all pilots prior to return to service. Our singular priority is safety, and every decision, every action, every step we take, as we move forward, will be guided by it. As we mentioned last week, we are currently estimating the ungrounding of the 737 MAX will begin mid-2020. This estimate is informed by our experience to date with the certification process. It is subject to our ongoing attempts to address known schedule risks and further developments that may arise in connection with the certification process. It also accounts for the rigorous scrutiny that regulatory authorities are rightly applying at every step of their review of the 737 MAX's flight control system and the Joint Operations Evaluation Board process, which determines pilot training requirements.\",\n \"It's important to emphasize that this estimate should not be interpreted as an attempt to influence or interfere with the FAA and other regulators' absolute authority to determine the timing and conditions of return to service. Very simply, accurate financial reporting requires that we provide our latest and most informed schedule. Similarly, our supply chain, in the name of transparency, requires a schedule to perform up to its standard.\",\n \"Moving on to rebuilding trust, which I briefly touched on earlier. We recognize that many of our stakeholders are rightly disappointed in us, and it's our job to repair these vital relationships. We will do so through a commitment to transparency in everything we do, and by meeting or exceeding expectations. We will listen, we will seek feedback and respond appropriately, urgently and respectfully. Our culture is centered around strong shared value, safety, quality and integrity. Every day, we will recommit to these and foster an inclusive environment that embraces oversight and accountability, and puts these three core principles, above all else. We will listen and resolve real-time any/all employee concerns pertaining to safety or other of our shared values.\",\n \"We will also focus on operating with excellence. We must get back to basics, delivering safe products and services to our customers while continuously improving our quality. We will complete our work in-station, wherever we are and whatever we do, and we will do it to the highest standards. We are committed to do it across our Commercial, Defense, Space & Security, and Services businesses. This is not relegated to just the MAX or the 737. This requires a focused approach and simplification in everything we do to ensure we deliver on what matters most with accountability. We will restore production health, both within the Boeing's four walls and the industry at large. We'll keep taking steps to manage our supply chain health and maintain workforce expertise across the enterprise, so that in particularly with respect to the 737 MAX, we'll be ready to restart production, increase rate safely, smartly, disciplined and with the highest standards of quality.\",\n \"While doing all of these, we will not lose sight of the importance of investing in our future. Our markets are growing. Customer demand is evolving. The competition is increasing. The technology is advancing at a pace we've never seen before. Boeing must keep innovating to succeed. We'll continue to invest in our global workforce and new processes, new technologies that will help us become safer, more efficient as we define the future of aerospace. This work includes preparing for the first Starliner crewed mission, continuing to progress the 777X and the 737 MAX 10, and further growth of our Global Services business and full implementation of our Embraer partnership. That said, there are always some investment reprioritizing and streamlining that we can do and we will. We'll take the time to reassess our product development strategy in a fairly methodical way. I think that's a natural course for any new incoming leader to take. We'll return to this topic in future discussions. This is not intended to delay, simply to refresh. By focusing on these priorities and unleashing our talent, I'm confident we have the right foundation to keep the business strong, to keep it healthy, while navigating this very difficult moment.\",\n \"Before I turn it over to Greg for an update on the business environment and our performance, I want to pause and thank him for the leadership he has provided throughout this challenging time and for so ably filling the CEO role during the transition. Everybody here knows we've had a number of leadership changes over the past few months, including me. The strong teams we have supporting our leaders have provided the stability we need and pave the way for seamless transitions. But Greg has set in motion some of the changes we need to see and he has led it with real skill. He will continue to be my partner and we will lead the company together. I'm excited now to be working alongside him and the rest of our senior leaders.\",\n \"And now, I'll turn it over to Greg.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Great. Thanks, Dave, and good morning, everybody.\",\n \"As many of you know, I've had the distinct pleasure of knowing Dave for a long time, and we're extremely lucky to have him in the chair helping us navigate through these challenging times and the path forward. I have a lot of respect for Dave and look forward to the continued partnership. And I can tell you, we are completely 100% aligned on our priorities and the path forward for our company.\",\n \"Let's now move to Slide 3 and we'll discuss our overall business environment. We continue to be operating in sizable sectors that are growing and backed by strong fundamentals with a combined market opportunity of $8.7 trillion over the next 10 years. We continue to see healthy global demand for our offerings in commercial, defense, space and services. However, we are starting to see some pressure, such as in the cargo market, that we will continue to monitor going forward. In commercial aviation, although we've seen some moderation in passenger traffic this year, we saw growth of a solid 4.2% through November. The fundamentals remain intact. However, the impact of the Coronavirus on near-term traffic growth is clearly a watch item this year. On the air cargo side, volumes have contracted due to challenging trading environment, and improvements in industrial production and global trade will be key to rebound the air traffic cargo market in 2020. We will continue to see steady utilization of global freighters, while carriers are placing incremental orders to support their fleet replacement needs, but this is definitely something we're keeping a close eye on.\",\n \"In the narrow-body segment, although the MAX grounding has presented us with near-term challenges, the depth and breadth of our backlog affords us the time to assess and mitigate the longer-term implications. Our 737 program has a backlog of approximately 4,400 aircraft and we continue to see these new airplanes creating capacity for growth and provide required replacements for older, less efficient aircraft. Clearly, our narrow-body delivery market share has been and will continue to be impacted by the MAX. Although we've not seen a direct impact on the value proposition of the 737 MAX in the marketplace, we will continue to monitor the market dynamics this creates. The limited production slot availability of aircraft from both Boeing and our competitor affords us ample time to double down on improving operating efficiency in order to mitigate some of these challenges the program is facing in the near term.\",\n \"With regards to the middle of the market aircraft, as Dave noted, we are reprioritizing and streamlining some of our investments. We've asked the team to step back and reassess our commercial product development strategy to determine what family of airplanes will be needed in the future. The team will build on the work we have done as part of the NMA design and production system analysis as we move forward. In the wide-body segment, we saw solid order activity in 2019 for the 787 and 777 families. However, as we mentioned before, in the near term, the global trade environment has presented challenges for our wide-body production plans, in particular the 787 program. As part of our process, we are continually assessing the environment to determine if any further rate adjustments are required.\",\n \"We previously announced that we will transition the 787 production rate from 14 per month to 12 per month in late '20. As we are in the planning window of a rate decision and to reduce risk in the '21 and 2022 skyline, we've decided to further reduce the rate to 10 per month in early '21 before returning to 12 per month in 2023. We are pleased with the recent announcement of the Phase 1 deal between the US and China, and we're proud that Boeing airplanes will continue to be part of this valued relationship. Progress on the trade deal is obviously very encouraging, and we will continue to work closely with our customer and awaiting details of access the implementation of our backlog and how this will fit into our skyline given production lead times. In the meantime, we think it's prudent to take more measured approach to our 787 future production rates. We will continue to maintain this disciplined rate management process going forward, taking into account a host of risks and opportunities. We will also continue to assess the demand environment and make adjustments as appropriate in the future.\",\n \"Turning to triple 777X, we successfully completed the 777X first flight last week. The test fleet, which began ground testing in Everett last year will, continue its rigorous test program over the coming months to demonstrate safety and reliability. This is a comprehensive series of testing conditions on the ground and in the air to evaluate flight controls, aerodynamic performance and cabin environmental controls among many others. We're currently expecting first delivery of the 777-9 to be in 2021. We continue to expect the 777 delivery rate to be approximately three per month in 2020. Progress on the 777X will be the primary driver of future delivery rate for the combined 777/777X program.\",\n \"We will take a measured approach to the 777X rate ramp and we will look to minimize the amount of change in corporation work by managing the number of aircraft produced prior to entry into service. On the 777, as I discussed earlier, we will continually closely monitor the cargo market and carefully manage our skyline. Finally, as we previously announced, we are in the process of starting to transition the 767 production rate from 2.5 to 3.0 per month.\",\n \"At Defense, Space & Security, we continue to see solid global demand for major platforms and programs. In addition, the FY '20 Enacted Budget provides support for a broad range of products, including procurement of the F-15EX. Our portfolio remains well positioned with proven world-class platforms to address current needs, and innovative capable and affordable new franchises to build the future. We are maintaining a sharp focus on our future franchise programs such as the MQ-25, the T-7A Red Hawk, and the MH-139A Grey Wolf, while working to ensure strong performance on existing platforms, especially our US Air Force KC-46 program and our space programs including Commercial Crew and Space Launch Systems. Last month marked a significant milestone for the Commercial Crew program with an uncrewed Orbital Flight Test of the CST-100 Starliner. However, as reported, this test was abbreviated due to anomalies experienced during the mission preventing the docking with the International Space Station. NASA is in the process of reviewing the data from our December 2019 mission and the uncrewed mission including docking to the space station became part of the company's contract with NASA. And NASA's approval is required to proceed with a flight test with astronauts on onboard. Given this obligation, we are provisioned for another uncrewed mission, and you'll see this crew impact reflected in BDS financial results.\",\n \"Turning to the services sector, the $3.1 trillion services market over the next 10 years is a significant opportunity for our company. We continue to see growth with expanded service offerings of our supply chain portfolio and our global digital solutions. The MAX grounding has had impact on BGS growth in 2019 by pushing back the timing of some service demand from our airline customers who have been impacted by the grounding. We expect much of this to be resolved over time. Given the backdrop of demand, the healthy supply chain ecosystem is critical to sustain production system stability. Some of the suppliers have had challenges with production rate changes in the past. And therefore, we are extremely engaged and especially as we navigate the current MAX grounding and production rate outlook. Suppliers' health and readiness will be critical as we assess production rates going forward.\",\n \"Let's now turn to Slide 4 for our full-year results. Our financial results continue to be impacted by the 737 MAX grounding. Revenue, earnings per share and operating cash were materially reduced. Our revenue of $76.6 billion reflects the 737 MAX impacts, partially offset by higher service volume. Core earnings per share was negative $3.47 for the full year, and operating cash was a negative $2.4 billion, again primarily due to the 737 MAX impacts.\",\n \"Let's now move to our quarterly results on Slide 5. During the quarter, we recorded revenue of $17.9 billion, core earnings per share of negative $2.33, and negative $2.2 billion of operating cash. Before we discuss segment performance, let me go over 737 MAX financials in more detail.\",\n \"Turning now to Slide 6. In preparation for our fourth quarter financial statements, we made certain assumptions including timing of resumption of delivery production, the production rate and ramp up profile. Again, let me reiterate, it is the FAA and the global regulators who will determine the timing and the conditions of return to service. We've assumed that the regulatory approval for the 737 MAX will enable deliveries to begin in mid-2020. We've also assume that as a condition of return to service, regulators will require 737 MAX pilots to undergo combination of computer and simulator training. We've assumed that we will resume 737 MAX aircraft production at low rates in 2020 as timing and conditions of return to service are better understood. And then we expect to gradually increase previously planned production rates over the next few years.\",\n \"We're also assuming that the 737 MAX airplanes produced and stored during the grounding will be delivered over several quarters with the majority of them delivered during the first year after resumption of deliveries. Any changes to these assumptions will require us to recognize additional financial impacts. In the fourth quarter, we added $2.6 billion of program cost to the 737 program. This is primarily to reflect current assumptions regarding timing of return to service and the timing planned production rates and reflect the additional time required to produce and complete undelivered aircraft in the accounting quantity. These additional cost will be spread across the undelivered aircraft in the accounting block of approximately 3,100 units, and therefore reduce the 737 program margin.\",\n \"Adding these to the program cost brings the total cumulative program impact to $6.3 billion. In addition, the suspension of the 737 MAX production means that some costs must be recorded as abnormal production costs under US GAAP. This includes costs related to our decision to maintain the 737 production infrastructure including labor during the suspension and low rate production. As you may recall, this decision is part of our efforts to sustain the gains in the production system and supply chain quality and health made over the last several months. We currently estimate these abnormal costs to be approximately $4 billion. These costs will be expensed as incurred primarily in 2020, and you'll see these flow through earnings as period expense starting in the first quarter. Since the portion of these costs deemed abnormal will be the largest when the production rate is zero and the rates are low, we expect expense to be front-end loaded.\",\n \"During the quarter, we also reassessed our estimate of potential concessions and other considerations to customers for disruptions related to the 737 MAX grounding and associated delivery delays. This reassessment included updating estimates that reflect our most recent assumptions as well as latest information based on engagement with 737 customers. Based on our assessment, we added $2.6 billion to the recorded liability in the quarter. This brings the total cumulative impacts to $8.3 billion net of insurance. As we've mentioned, we are addressing the impact individually customer by customer. We expect any concessions or other considerations to be provided over a number of years and we continue to see the cash impact to be more front-end loaded in the first few years, but of course will be dependent upon individual conversations with customers. In 2019, we reduced the liability balance by $1.4 billion through cash payments, but also other in kind considerations.\",\n \"Looking forward, the key drivers of financial impact related to the 737 will continue to be the return to service timeline and conditions, the delivery ramp up, which will be dependent on how fast we can deliver the aircraft once the fleet returns to service and how fast our customers can accept aircraft, and the duration of the 737 production suspension and rate ramp profile and discussions with customers regarding potential concessions and other considerations. We expect our financial results to continue to be adversely impacted until we safely return the 737 MAX to service, resume deliveries to customers, and ramp up production rates.\",\n \"We continue to perform detailed scenario planning around return to service and production rates including analyzing the implications on our supply chain, customer fleet and deliveries, to fully understand the range of financial outcomes. We're also taking actions to prudently manage our liquidity, increase our balance sheet flexibility, manage our spending and stay laser focused on productivity. I'll talk more about that a little later.\",\n \"Let's now move to Commercial Airplanes on Slide 7. Our Commercial Airplanes business revenue decreased to $7.5 billion during the quarter and operating margins declined to negative 38%, both reflecting 737 deliveries and additional $2.6 billion of estimated potential customer concessions and other considerations. BCA backlog includes 5,400 aircraft valued at $377 billion, equating to more than six years of production.\",\n \"Let's now move to Defense, Space & Security on Slide 8. Fourth quarter revenue decreased to $6 billion reflecting lower volume across the portfolio as well as impact of previously mentioned Commercial Crew charge, which affected revenue recognition on the program. BDS operating margin of 0.5% reflected $410 million pre-tax charge to provision for the additional uncrewed mission for the Commercial Crew program as well as several performance items, and the mix within the portfolio in the quarter. During the quarter, BDS won key contract awards worth $8 billion and our backlog now stands at $64 billion with 29% from outside the US.\",\n \"Let's now turn to Boeing Global Services results on Slide 9. In the fourth quarter, the global services revenue decreased to $4.6 billion, reflecting lower commercial service volume. Year-over-year growth of 8% is lower than we expected partially due to the impact of the 737 MAX grounding, which affected the timing of demand of some of our service offerings. BGS operating margin of 14.7% reflected non-cash charge related to the retirement of the Aviall brand as we consolidate our distribution businesses under the Boeing brand as well as mix of products and services in the quarter. We were partially offset by a one-time gain on the divestiture. During the quarter, BGS won key contract awards worth approximately $6 billion, which brings its backlog now to $23 billion.\",\n \"Let's now turn to cash flow on Slide 10. As I mentioned, operating cash flow in the fourth quarter was a negative $2.2 billion driven by lower 737 deliveries, lower advanced payments, higher inventories and timing of receipts and expenditures. We expect continued cash flow pressure from the MAX impacting until production stabilizes. Strong operating cash flow from other parts of the business and further balance sheet levers will help provide adequate liquidity during this time. We also continue to look at all aspects of spending to ensure we have the right prioritization and sharpen our focus on operational excellence, including closely assessing the timing of non-critical expenditures. Additionally, we are accelerating key working capital initiatives to help navigate this difficult period.\",\n \"During the fourth quarter, we paid $1.2 billion in dividends and our share repurchase program remains on pause. Near term, managing our liquidity and balance sheet leverage are top priorities, and we will continue to be, until the MAX deliveries resume, we execute the 737 production rate increases and see stability in the production system. But as Dave mentioned, we will also continue to make necessary investments in the business, in our people, new technology and better processes and tools. Our debt level has been elevated during the grounding and we are planning to immediately reduce it once our cash flow generation returns to more normalized levels. Again, we will continue to evaluate all available liquidity levers as we navigate the current challenges. Investing in our business and repaying debt will remain our cash deployment priority for the next few years.\",\n \"Let's now move to cash and debt balances on Slide 11. We ended the quarter with $10 billion of cash and marketable securities. We raised additional commercial paper in the quarter increasing the debt balance to $2.6 billion and helping shore up our liquidity position as we work through the current MAX challenges, our strategy of maintaining a strong balance sheet and providing us with substantial borrowing capacity through capital markets access of our credit facility of $9.6 billion. Additionally, we've received commitment from a syndicate of banks sufficient to enter into $12 billion term loan facility. Based on the strong demand, the size of the facility could exceed this amount when the transaction closes in February. We are mindful of the impacts the additional debt has on our credit ratings.\",\n \"Currently at A-minus, A3, we're confident we have the sufficient balance sheet flexibility and operational levers to navigate this challenging time. Our financials this year will continue to be negatively impacted by the MAX. Cash flow in particular will be more significantly impacted in 2020 than 2019. We expect the use of cash flow in 2020 to be greater than '19 primarily due to 737 MAX advance payments will be lower in 2019 based on our latest 737 delivery assumptions. As I mentioned previously, we are increasing our customer consideration liability and expect the cash impact to be higher this year. Also due to the additional 787 production rate reduction, as I discussed, as well as our current 777X entry into service assumptions, wide-body receipts will be a headwind in 2020.\",\n \"Keep in mind, we'll continue to see expenditures in the 777 program despite the production suspension, as we invest in the production system health to de-risk our future production rate. And these investment decisions including keeping our workforce in place and continuing to make payments to our supply chain for inventory are examples of our focus on long-term stability, but will require cash in the near term. Given these headwinds and our current assumptions on 737 MAX return to service, as well as future production and delivery rates, cash flow recovery is now expected to start until 2021. We are committed to providing you with additional updates on the MAX return to service progress and production rate plans as we have more information. Once we have further clarity, we will schedule a follow up investor and media conference call to discuss the financial implications and provide financial guidance, which will capture the puts and takes including the impact of the most recent wide-body changes.\",\n \"So with that, I'll turn it back over to Dave for some closing comments.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Greg, thanks.\",\n \"Thanks to everyone on the other end of this line. I want you to know I'm as excited as I can be about taking on this challenge. I wish the moment was different, but we can get through this moment and we will get through this moment. I'm confident in this airplane. The MAX is a sound airplane. We believe we're going to deliver the safest airplane in the sky and we're committed to do just that. And I know our regulator is as well.\",\n \"So with that, and again, open this line up to questions. And I want to thank Greg for the last time, since now we're partners. But at any rate, he has really stood tall in this big transition process and I appreciate it.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Thanks, Dave.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Thanks.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"I appreciate it.\"\n ]\n }\n]","isConversational":false},"questions_and_answers":{"kind":"list like","value":[{"name":"Operator","speech":["[Operator Instructions]","Our first question comes from the line of Carter Copeland from Melius Research. Please go ahead."]},{"name":"Carter Copeland","speech":["Thanks, gentlemen. Can you hear me?"]},{"name":"David L. Calhoun","speech":["Yes, we can, Carter. Good morning."]},{"name":"Carter Copeland","speech":["Okay, thanks. Good morning. I wonder if you might expand a little bit on the short comment you made about monitoring the market dynamic for the MAX and not having the value proposition change there. I guess are we referring to sold aircraft or unsold aircraft? And I guess more broadly, what's your level of confidence that longer-term MAX pricing won't be materially impacted by what you've seen? Or just can you expand on that comment for us? Thanks."]},{"name":"Greg Smith","speech":["Yeah, no. Carter, look, I think -- first go to the backlog and we got 4,400 aircraft in backlog, and this has been a very challenging time obviously for our customers. But folks want the airplane. And the value proposition the airplane brings into the market is unchanged. So look, we're in a grounded period and we realize the strain that's put on the customers. So we're monitoring that closely, but the value proposition of the franchise still remains intact. And like I said -- Dave said, the focus right now is safely get this thing back in the air. And we're going to do it one airplane at a time, as Dave has said, and ensure that we have this production system stable as we move up and delivering on our commitments to our customers."]},{"name":"David L. Calhoun","speech":["Yeah. In the next couple of weeks when I've talked with most of our large customers, they get to tell me whatever they want. They do still believe in the value prop of this airplane. They believe in everything about the airplane and it means a lot, but I've heard it first-hand."]},{"name":"Carter Copeland","speech":["Great, thank you, guys."]},{"name":"Greg Smith","speech":["Thank you."]},{"name":"Operator","speech":["Our next question is going to come from the line of -- one moment please.","And our next question comes from the line of Myles Walton from UBS. Please go ahead."]},{"name":"Myles Walton","speech":["SThanks, good morning. Hey Dave, you're coming to the table with a decade of experience seeing the company from the inside. And I just wonder how you've been able to step outside of that familiarity and take an orthogonal view, kind of a different view of what went wrong and reorient everything so that this isn't maybe just changing tone and/or repairing relationships, but maybe it is, or if there is something more needed, how you've been able to step out of that familiarity role?"]},{"name":"David L. Calhoun","speech":["Let me maybe answer that question a little differently, because I get a lot of media attention around the idea that I am somehow an insider. What if I changed that a little bit? What if I told you I simply had a front-row seat to everything you saw? And so all the things I read and see and hear, make no mistake, they all have an impact, they have an effect, and I get a front-row seat, and ultimately our Board took action as a result of it. And now I'm the one sitting in the operating seat. So I don't want to be lost on anybody. I know we've got things to work on and changes to make. I treasure my relationship across the industry with customers and with the regulators and others. And when they tell me something, I believe them. I always felt to believing them.","And so the work we have to do internally to restore all those confidences, and yes, modify our culture, you can bet. I'm working on it. I don't think I see it any differently than you probably do. I might put a nuance here and there, but I think I know the job at hand. And that's exactly what I'm going to do. I got to restore trust, confidence and faith in The Boeing Company."]},{"name":"Myles Walton","speech":["And from that orthogonal view, do you think there is a deficiency in your competitive narrow-body offering in the market?"]},{"name":"David L. Calhoun","speech":["Say that again."]},{"name":"Myles Walton","speech":["Do you think there is a deficiency in your competitive narrow-body offering in the market today?"]},{"name":"David L. Calhoun","speech":["Yeah, no, I don't. I know that in airplane type by type, sometimes you got a lead, sometimes you don't. But from the family and ultimately the performance of this MAX and the feedback I get from our customers, I'm not actually worried about that. All that said, we're in the airplane development business and we're going to stay in the airplane development business. So we're going to keep looking at what the next one needs to be. I want to make sure everyone understands that me not immediately signing up to the NMA is not -- is me not wanting to do new airplanes, We'll do one. And I don't want to even suggest or convey to you that it's anywhere near the narrow-body fleet we have today. I don't see big deficiencies there.","On the other hand, I'm going to -- I'm just simply going to listen to customers and markets. It's been over two years since we started that whole discussion. I'm going to refresh it every way I can think of along with my new commercial airplane leader. And then we'll get out with new news. But honestly right now, it's all about the MAX, getting it up. And yes, I believe in the product."]},{"name":"Myles Walton","speech":["Thank you."]},{"name":"Operator","speech":["Our next question comes from the line of Ronald Epstein from Bank of America. Please go ahead."]},{"name":"Ronald J. Epstein","speech":["Hey Dave, good morning."]},{"name":"David L. Calhoun","speech":["Hi Ron."]},{"name":"Ronald J. Epstein","speech":["Just maybe a big picture question for you. You've mentioned a couple of times in when you talk to the press before that you're focusing on the culture of the company. Right? And so my question is this. How do you change the culture of a big organization, particularly when you've got a workforce in some places that might be a bit to moralize given some of the effects and things that went around? Maybe that's something we can infer. And since you had this front-row seat on the Board of what happened, and this is a question I asked your predecessor that he never really answered, how did we get here?"]},{"name":"David L. Calhoun","speech":["Boy, is that a big question. Yeah. So first of all, let's go back to what happened. So the MCAS design failed to deal with the boundary condition in an environment we should have known something about. The regulators made the same mistake. There are engineering disciplines that you can and should apply to that question that I think can get fixed relatively quickly. I don't think culture contributed to that miss. I think simply discipline did.","The question with respect to training recommendations and the horrible IMs that people would like to thank all of Boeing rights, really was relegated to a relatively small group of folks, but it wasn't detected, the system didn't apparently listen or watch for things like that, and it didn't react appropriately. And I have to do everything in my power to make sure going forward that it does. Listening starts with leadership and it starts with me. And I think we need to do more of it. And then slowly, steadily you change culture. People want to believe in that and they will. They are all good engineers. They are all -- they all follow disciplined processes. And let's not mistake, flying this 777X tested more technology, tested our patience, tested our disciplines in every way you can think of. And we did it successfully on that first flight, and we will move it through a certification process that will be more rigorous than history has ever seen. And we'll get to that finish line we'll fly it.","And if you looked at that product and sat narrowed and or flu in it, you'd be impressed with everything about Boeing, I promise you. So this thing isn't entirely broken. Leaders have a massive role to play in setting culture, setting the stage for how to fix a culture, and I have to demonstrate that. One step at a time, every inch of the way. I don't have to convince anybody that safety is in the best interest of every stakeholder and including investors. It is. It's perfectly obvious to everyone. So I have no convincing to do on that front. I will have no competing priorities as we step forward. And so I hate to reduce it to things that simple, but I think that's what it's all about."]},{"name":"Ronald J. Epstein","speech":["Okay, thank you."]},{"name":"Operator","speech":["Thank you. We have a question from the line of Sheila Kahyaoglu from Jefferies. Please go ahead."]},{"name":"Sheila Kahyaoglu","speech":["Good morning, Dave. And thank you for your agenda, and Greg, as well. We talked about clearly a lot of challenges with the MAX grounding, the 787 rate cut and 777 potential delays. I guess, how do we think about the longer term implications of what the Commercial Airplanes segment looks like in 2022? Whether that's market dynamics touching on Carter's question impact of charges and some of that offset by manufacturing processes at Boeing? If you could maybe talk about what 2022 looks like?"]},{"name":"Greg Smith","speech":["Yeah. Well, I think on the wide-body side, we talked about where we see the rate profiles today. And I think as we said, I think it prudent considering the outlook and some of the global I'll say trade dynamics and the timing associated with taking a trade deal to a point of actually a delivery in a skyline, we still got some some steps to work our way through. So I think we're being prudent here and looking at the marketplace in that time and monitoring those rates. Now having said all that, there is still a great demand for the wide-body franchises and you see that in the backlog and you see that in the market outlook. So I think the potential there going forward continues to be strong.","On the narrow-body, 2022, under these assumptions we talked about, you're certainly getting back up in rate, but all these investments we've been making during this time of grounding, Sheila, and I think if you saw the line today versus what you saw even a year ago, there has been tremendous activity put in place in tools and processes to have stability for the long term that ultimately is going to help the overall franchise, our predictability on delivering to our customers on time and in a healthier supply chain as a result of it. So that's been a huge level of effort today. And let's face it, that's a long-term play, but it's a really critical one to get in place during this time. So we have that stability and predictability, again on our delivery profile and then ultimately on our financials.","And then during this, we mentioned, we're still making investments and we're making investments in the productivity as well as on the R&D side. So we're being prudent about it and we're being -- we're sharpening the pencils. But that again is really focusing on the long-term franchise that we have and the potential franchise to come."]},{"name":"Sheila Kahyaoglu","speech":["Thank you."]},{"name":"Greg Smith","speech":["Yeah, go ahead."]},{"name":"David L. Calhoun","speech":["Yeah. I'd like to just follow on. I like everything about the portfolio of products that we field, wide-body and narrow-body. The trade deal matters a lot. And I believe if it is what I think it is, and our Chinese customers come back and we rebuild the relationship we've always had and enjoyed with them. I think that is a major stimulus. Secondly, this industry has been supply chain limited and constrained. And I believe that some of the actions that have been taken on Boeing's side of that process during this pause, some of the readiness questions that we -- I believe are being fixed, I think that supply chain will begin to alleviate itself. And I don't think we'll be as supply constrained going forward as we have been to date. And now I'm trying to speak for the industry, not just for us. So I am optimistic from lots of angles, but I think those are the big ones."]},{"name":"Sheila Kahyaoglu","speech":["Great, thanks."]},{"name":"Operator","speech":["Our next question then will come from the line of Doug Harned from Bernstein. Please go ahead."]},{"name":"Douglas S. Harned","speech":["Good morning. Thanks."]},{"name":"David L. Calhoun","speech":["Hi Doug."]},{"name":"Douglas S. Harned","speech":["One thing I'm certain, Dave, is that is, a decade ago, we could not have predicted we'd be having this conversation. The thing I'd like to look at is the challenges you're looking at that BCA. And in the short term, as you said, you're spending time with regulators and customers to support MAX certification. And then over the course of the year, you've also got to deliver on the restart operationally of the MAX, improve efficiency on the 787 as rate comes down, progress on the 777X, and then as you talked about, decide on how Boeing is going to look at what it does next. And I would think you wouldn't want to wait too long to see how you want to compete against Airbus in the back half of the decade.","So with all of this on your plate, new leaders across BCA, how are you prioritizing your time? When we get to the end of the year, what would you consider a successful outcome line for the short, medium and long-term issues there?"]},{"name":"David L. Calhoun","speech":["Well, one -- Doug, so thanks for the question. As you said, I remember looking at this chess board all the way back in 2000. Didn't turn out actually as different with the exception of the MAX pickup as you might think. We are on a very long cycle world. Getting decisions right is way more important and getting them fast. So I make no mistake about that. The MAX itself has to be my priority over the course of this year. It's important from a lot of points of view. One, the economics of our institution rely in a significant way on it. Rebuilding the relationships with our customers and our regulator in the process of getting the MAX back up is also critically important. We will always dependent be dependent on those relationships.","And then finally, with respect to new airplane development, I don't think anybody will enjoy working on that more than I will. I just want to get exactly the right airplane for the market that's out there, and I want to refresh our view as to what it is. The last 2.5 years have been tumultuous. It has tested some of the -- in my view, some of the edges of demand on all types of airplanes. And so we have to learn from that. But I will not hesitate to move forward on it. And I think creating competitive advantage in that next airplane, I think I have more tools to work with than I've ever had in my previous life.","So at any rate, I have confidence in all of that. But I don't want to -- going back to your original question, I don't want to confuse anybody in the process. The fact that I will be focused on the MAX, the fact that I will talk about that almost exclusively across Boeing over the course of this coming year is not an indication that I'm going to starve anything going forward. It is simply a necessity for us. We got to get it out there and we have to get our confidence back, and get on the front of our feet. And so again, that's mostly what you'll hear from me. But don't get confused by it, please."]},{"name":"Douglas S. Harned","speech":["And if I can -- when you look at this year, certainly financially, this will be a rough year. But when you put all this together, do you have goals you're thinking of and how this should translate in the financial goals in 2021 or 2022? Or is it too early to think that way? How do you treat that?"]},{"name":"David L. Calhoun","speech":["Yeah. It's too early to think that way. While I might conjure up a notion here or there in my head, I'm going to listen to an awful lot of people before I do, and I'm also going to be certain that all the investments that are required to stand up our engineering function, have everybody regain their confidence, and again simply believe in the safety of every airplane that The Boeing Company puts forward. I don't want to -- I'm not going to jump to that conclusion now. I'm simply going to get through this moment, restore our confidence and then projections will follow."]},{"name":"Douglas S. Harned","speech":["Great, thank you."]},{"name":"Operator","speech":["Our next question then comes from the line of David Strauss from Barclays. Please go ahead."]},{"name":"David Strauss","speech":["Thanks for taking the question. Wanted to discuss the supply chain and how you're approaching the supply chain during this halt. Greg, you mentioned some of this $4 billion I guess is to support the supply chain during the halt. How overall are you approaching it? It doesn't sound like you're telling everyone to halt. Who are you not to halt? How much financial support are you going to provide to the supply chain, or do you think is needed for the supply chain during this?"]},{"name":"Greg Smith","speech":["Yeah, no. David, I would tell you, it's a one-on-one engagement. And not just them but there suppliers, and so I'll say kind of tear down suppliers and understanding the impact that this is having on them, and then, what levers do we all have in order to help get them through this. And again, with the objective that we're playing the long game and we want to come out of this healthier, quite frankly. So each one of them is a little bit different about how we're working and how we're engaging, and what type of assistance is needed. Everybody as you know, has been at a little bit of a different level of production through this. So there's different levels and inventory.","So I would tell you, if you went around supplier by supplier, you're going to get a variation of what their build rate is or where they are in inventory, but the engagement with them, I would say, has been very good by our supply chain folks and keeping them informed and trying to get ahead of this, and again, making smart decisions and assisting where we can assist. So yes, we've got some provisioning in here to help them, and we'll continue to do that again with the long-term objective. We need them to be healthy. We want them to be healthy. And we're plan this for the long term. So even some of these productivity things that we've talked about on the 37, the supply chain team has taken those into the supply chain that, again, ultimately will make them healthier, more stable, more predictable, which is going to be key to our production rates going forward."]},{"name":"David L. Calhoun","speech":["I might just add, their rate in return in these early months will be ahead of ours. And that's by design, simply because we want the protection in our factories so that we never travel work. That's actually an important discipline that we will reinstill with our MAX line, and they will be the beneficiaries of that, as they, as I said, accelerate at a faster rate."]},{"name":"David Strauss","speech":["Thanks. Can I ask one clarifying question, Dave? I think you mentioned that you see certification -- or for plane purposes, accounting purposes, certification and deliveries resuming in the middle of the year? Or is it started and then I assume some sort of lag between cert and then deliveries resuming?"]},{"name":"Greg Smith","speech":["Yeah, it's -- we've got it kind of timed in the mid-year time frame, David, but like we said, it's going to be a very moderated slow, I'll say prudent ramp up. And as we talked about priority one, once the grounding is lifted, will be to start getting those airplanes off the tarmac, the inventoried aircraft, and then slowly bringing in that line up in a very methodical way and monitoring stability each step of the way. And when we reach our objective of stability, then we'll make the next move. But that will kind of be the priority and the time frame associated with that.","Now we will -- currently, we're looking at starting the line earlier than the actual lifting of the grounding. But again think of that as a risk mitigator. We'll look at that during that period of time and our confidence level of getting the grounding lifted, and then we'll start to slowly bring resources back on to the program. Keep in mind that these lines are empty, they're going to be empty. They're emptying right now. And so we'll start in position one, but again very methodical, start bringing in the crews over, get stability and then slowly bring them back into play. But we'll make that decision as we get closer, return to service. But that's the game plan as we see it today."]},{"name":"David L. Calhoun","speech":["And if the question relates to this certificates by airplane, which of course is going to be a new and very I think tightly run process, of course that involves us and the FAA. And I think we've provided for plenty of room for that process to unfold methodically, and not with too much pressure on it. So that's important in the way we've laid out our timeline."]},{"name":"David Strauss","speech":["Great, thanks very much."]},{"name":"Greg Smith","speech":["Thank you."]},{"name":"Operator","speech":["We have a question from the line of Jon Raviv from Citi. Please go ahead."]},{"name":"Jonathan Raviv","speech":["Thank you. Good morning, everyone. In the context of cash being a bigger use in '20 versus '19, I certainly understand the moving pieces in BCA. Can you talk about perhaps some of the cash generation and the state of the businesses outside of Boeing Commercial,which I think is still a relevant topic here?"]},{"name":"Greg Smith","speech":["Yeah. On BDS, slightly lower than last year. And I'd say, a lot of that is timing. It's just around receipt timing and award timing, but outside of that from an operating -- core operating performance, pretty much on par. But we'll see a little bit of headwind this year. And on BGS a little bit of headwind, but less than BDS. And again a lot of that is just timing. It's nothing more than that. The core performance wise or the conversion earnings to cash, it remains pretty consistent with 2019. But again, the bulk of the variance in cash will be at BCA."]},{"name":"Operator","speech":["Thank you."]},{"name":"Greg Smith","speech":["You're welcome."]},{"name":"Operator","speech":["We have a question from Noah Poponak from Goldman Sachs. Please go ahead."]},{"name":"Noah Poponak","speech":["Hey, good morning, everyone."]},{"name":"Greg Smith","speech":["Good morning, Noah."]},{"name":"David L. Calhoun","speech":["Hi Noah."]},{"name":"Noah Poponak","speech":["I wanted to ask about 787 supply and demand, and then also the margins, given the changes there. Do you have visibility into the order pace stepping up into the kind of mid-100s per year for a while there, because even at the 12 a month or the 10 a month, you're still building over 100, but the order rate has been below 100. So I know China is an input but not -- I don't know if China is planning to order that many wide-bodies that would fill that gap sustainably. And then Greg, on the margin, on the cash margin, you've talked about being able to continue to increase just at a slower pace at 12 versus 14. Is that still true or not at 10?"]},{"name":"Greg Smith","speech":["Yeah. Obviously not the same -- I'll say slope as it was, but we still continue to see improved cash margin over the profile. For all the reasons we've discussed before between supply chain mix and our own productivity, that story is unchanged. But again the amount of growth over that period has moderated obviously under these lower rates. On the supply demand, China is a big deal. Don't mistake it. It's a big deal. And that's a big play in these production rates. Outside of that, as you've seen, when we've been going head to head with the 787, we've been winning in the marketplace. The airplane continues to bring great economics into the field. And the long-term market outlook continues. When you look at the 20-year forecast, there is still a lot of wide-bodies and more replacement in there. And the 787 family I think is extremely well suited to address that market.","And I'd say the one that is probably under-served at this point is the 787-10. I think as we see that replacement market, I'll say coming more within our skyline that we're going to continue to see more demand for the -10. It's just an incredible value proposition and machine for our customers, especially considering what it's going to be replacing in the market. So China, big watch item. Outside of that, do we have work to do on the skyline? Absolutely. And we're going to play that out one campaign at a time. And we'll continue to monitor again our lead times and make whatever adjustments are needed. But as we see it today, we think this a prudent thing to do and we have good confidence in the 10 to -- going to 12 a month."]},{"name":"Noah Poponak","speech":["Do we expect a China 787 order to come out of Phase 1 specifically, or do we need to get past Phase 1?"]},{"name":"Greg Smith","speech":["I don't know at this point. No, I know -- we know that airplanes are a part of the -- certainly a big part of the trade deal with China and we'll get into those details when -- between the government and our customers. But we are actively engaged with them, and when we get more clarity on that, then we'll provide it. But at this point, we're -- we don't have the model clarity."]},{"name":"David L. Calhoun","speech":["There is no reason to believe that it has to wait for Phase 2."]},{"name":"Noah Poponak","speech":["Okay, thanks so much."]},{"name":"Greg Smith","speech":["You're welcome."]},{"name":"Maurita Sutedja","speech":["Operator, we have time for one more question."]},{"name":"Operator","speech":["Okay. We have a question from line of Hunter Keay from Wolfe Research. Please go ahead."]},{"name":"Hunter K. Keay","speech":["Hi, thanks for getting me on. Appreciate it. Good morning."]},{"name":"David L. Calhoun","speech":["Good morning."]},{"name":"Hunter K. Keay","speech":["Good morning. So I realize obviously FAA is the decider here. You've made that very clear. But would you care to, in the spirit of transparency, would you care to share your accounting assumptions for the MAX rate ramp six and 12 months after recertification? And then the second part of the question is, how can you get comfortable potentially resuming production before certification, given all the head fakes that we've had over the last few months or so? Thanks so much."]},{"name":"Greg Smith","speech":["Yeah, well, maybe on that one, I'll just again put a finer point on what the game plan is as we see it. Don't think of that as just turning the line back on. We're going to slowly bring crews back, but we're going to have to have a confidence level, a higher confidence level in that exact time frame on return to service because obviously we don't want to build more airplanes and store them. So that's the game plan as it sits today.","But again, remember the line is empty. So it's going to be in the first position and that's going to take some time to slowly bring that up, but obviously will have cert flight behind us, which is a big milestone and that will give us more confidence in our I'll say kind of slow introduction of the production line. So that's the game plan on that. As far as rate increases going forward, Hunter, I would just say to you, look, we got to get this thing back, we got to start delivering on the -- off the ramp, and think of the rate increases as one step at a time, or as Dave has said to many of us, one airplane at a time. We're going to keep work in position and we're going to ensure we have stability, and equally if maybe not more important, the supply chain has stability, we'll make the next rate increase. So we've certainly made some assumptions in there, but we are going to do this one at a time.","And again really playing the long game here to ensure we've got stability that is, I'll say institutionalized, not just with us but all suppliers. And then that will ultimately have a much more predictable production, I'll say cadence to it and predictability in delivering to our customers. So we'll keep you posted on our rate plans going forward. But at this time, that's the game plan and we'll give you more clarity once we -- like I said, once we provide guidance and I'll say the moving pieces that will support that guidance."]},{"name":"David L. Calhoun","speech":["I just will reiterate because I think it does matter. That philosophy, one at a time, is reflected in what we have built into this set of financials and our expectations. So, I hope we can go one at a time at a rate that exceeds those expectations, but we're not going to think about it that way. We're simply going to get to every next airplane."]},{"name":"Hunter K. Keay","speech":["Thank you."]},{"name":"Greg Smith","speech":["You're welcome."]},{"name":"Operator","speech":["Please go ahead."]},{"name":"Maurita Sutedja","speech":["That concludes our question-and-answer session. Thank you for joining the call."]},{"name":"Operator","speech":["[Operator Closing Remarks]"]}],"string":"[\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"[Operator Instructions]\",\n \"Our first question comes from the line of Carter Copeland from Melius Research. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Thanks, gentlemen. Can you hear me?\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Yes, we can, Carter. Good morning.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Okay, thanks. Good morning. I wonder if you might expand a little bit on the short comment you made about monitoring the market dynamic for the MAX and not having the value proposition change there. I guess are we referring to sold aircraft or unsold aircraft? And I guess more broadly, what's your level of confidence that longer-term MAX pricing won't be materially impacted by what you've seen? Or just can you expand on that comment for us? Thanks.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah, no. Carter, look, I think -- first go to the backlog and we got 4,400 aircraft in backlog, and this has been a very challenging time obviously for our customers. But folks want the airplane. And the value proposition the airplane brings into the market is unchanged. So look, we're in a grounded period and we realize the strain that's put on the customers. So we're monitoring that closely, but the value proposition of the franchise still remains intact. And like I said -- Dave said, the focus right now is safely get this thing back in the air. And we're going to do it one airplane at a time, as Dave has said, and ensure that we have this production system stable as we move up and delivering on our commitments to our customers.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Yeah. In the next couple of weeks when I've talked with most of our large customers, they get to tell me whatever they want. They do still believe in the value prop of this airplane. They believe in everything about the airplane and it means a lot, but I've heard it first-hand.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Great, thank you, guys.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is going to come from the line of -- one moment please.\",\n \"And our next question comes from the line of Myles Walton from UBS. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"SThanks, good morning. Hey Dave, you're coming to the table with a decade of experience seeing the company from the inside. And I just wonder how you've been able to step outside of that familiarity and take an orthogonal view, kind of a different view of what went wrong and reorient everything so that this isn't maybe just changing tone and/or repairing relationships, but maybe it is, or if there is something more needed, how you've been able to step out of that familiarity role?\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Let me maybe answer that question a little differently, because I get a lot of media attention around the idea that I am somehow an insider. What if I changed that a little bit? What if I told you I simply had a front-row seat to everything you saw? And so all the things I read and see and hear, make no mistake, they all have an impact, they have an effect, and I get a front-row seat, and ultimately our Board took action as a result of it. And now I'm the one sitting in the operating seat. So I don't want to be lost on anybody. I know we've got things to work on and changes to make. I treasure my relationship across the industry with customers and with the regulators and others. And when they tell me something, I believe them. I always felt to believing them.\",\n \"And so the work we have to do internally to restore all those confidences, and yes, modify our culture, you can bet. I'm working on it. I don't think I see it any differently than you probably do. I might put a nuance here and there, but I think I know the job at hand. And that's exactly what I'm going to do. I got to restore trust, confidence and faith in The Boeing Company.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"And from that orthogonal view, do you think there is a deficiency in your competitive narrow-body offering in the market?\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Say that again.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"Do you think there is a deficiency in your competitive narrow-body offering in the market today?\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Yeah, no, I don't. I know that in airplane type by type, sometimes you got a lead, sometimes you don't. But from the family and ultimately the performance of this MAX and the feedback I get from our customers, I'm not actually worried about that. All that said, we're in the airplane development business and we're going to stay in the airplane development business. So we're going to keep looking at what the next one needs to be. I want to make sure everyone understands that me not immediately signing up to the NMA is not -- is me not wanting to do new airplanes, We'll do one. And I don't want to even suggest or convey to you that it's anywhere near the narrow-body fleet we have today. I don't see big deficiencies there.\",\n \"On the other hand, I'm going to -- I'm just simply going to listen to customers and markets. It's been over two years since we started that whole discussion. I'm going to refresh it every way I can think of along with my new commercial airplane leader. And then we'll get out with new news. But honestly right now, it's all about the MAX, getting it up. And yes, I believe in the product.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question comes from the line of Ronald Epstein from Bank of America. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Ronald J. Epstein\",\n \"speech\": [\n \"Hey Dave, good morning.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Hi Ron.\"\n ]\n },\n {\n \"name\": \"Ronald J. Epstein\",\n \"speech\": [\n \"Just maybe a big picture question for you. You've mentioned a couple of times in when you talk to the press before that you're focusing on the culture of the company. Right? And so my question is this. How do you change the culture of a big organization, particularly when you've got a workforce in some places that might be a bit to moralize given some of the effects and things that went around? Maybe that's something we can infer. And since you had this front-row seat on the Board of what happened, and this is a question I asked your predecessor that he never really answered, how did we get here?\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Boy, is that a big question. Yeah. So first of all, let's go back to what happened. So the MCAS design failed to deal with the boundary condition in an environment we should have known something about. The regulators made the same mistake. There are engineering disciplines that you can and should apply to that question that I think can get fixed relatively quickly. I don't think culture contributed to that miss. I think simply discipline did.\",\n \"The question with respect to training recommendations and the horrible IMs that people would like to thank all of Boeing rights, really was relegated to a relatively small group of folks, but it wasn't detected, the system didn't apparently listen or watch for things like that, and it didn't react appropriately. And I have to do everything in my power to make sure going forward that it does. Listening starts with leadership and it starts with me. And I think we need to do more of it. And then slowly, steadily you change culture. People want to believe in that and they will. They are all good engineers. They are all -- they all follow disciplined processes. And let's not mistake, flying this 777X tested more technology, tested our patience, tested our disciplines in every way you can think of. And we did it successfully on that first flight, and we will move it through a certification process that will be more rigorous than history has ever seen. And we'll get to that finish line we'll fly it.\",\n \"And if you looked at that product and sat narrowed and or flu in it, you'd be impressed with everything about Boeing, I promise you. So this thing isn't entirely broken. Leaders have a massive role to play in setting culture, setting the stage for how to fix a culture, and I have to demonstrate that. One step at a time, every inch of the way. I don't have to convince anybody that safety is in the best interest of every stakeholder and including investors. It is. It's perfectly obvious to everyone. So I have no convincing to do on that front. I will have no competing priorities as we step forward. And so I hate to reduce it to things that simple, but I think that's what it's all about.\"\n ]\n },\n {\n \"name\": \"Ronald J. Epstein\",\n \"speech\": [\n \"Okay, thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Thank you. We have a question from the line of Sheila Kahyaoglu from Jefferies. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Good morning, Dave. And thank you for your agenda, and Greg, as well. We talked about clearly a lot of challenges with the MAX grounding, the 787 rate cut and 777 potential delays. I guess, how do we think about the longer term implications of what the Commercial Airplanes segment looks like in 2022? Whether that's market dynamics touching on Carter's question impact of charges and some of that offset by manufacturing processes at Boeing? If you could maybe talk about what 2022 looks like?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah. Well, I think on the wide-body side, we talked about where we see the rate profiles today. And I think as we said, I think it prudent considering the outlook and some of the global I'll say trade dynamics and the timing associated with taking a trade deal to a point of actually a delivery in a skyline, we still got some some steps to work our way through. So I think we're being prudent here and looking at the marketplace in that time and monitoring those rates. Now having said all that, there is still a great demand for the wide-body franchises and you see that in the backlog and you see that in the market outlook. So I think the potential there going forward continues to be strong.\",\n \"On the narrow-body, 2022, under these assumptions we talked about, you're certainly getting back up in rate, but all these investments we've been making during this time of grounding, Sheila, and I think if you saw the line today versus what you saw even a year ago, there has been tremendous activity put in place in tools and processes to have stability for the long term that ultimately is going to help the overall franchise, our predictability on delivering to our customers on time and in a healthier supply chain as a result of it. So that's been a huge level of effort today. And let's face it, that's a long-term play, but it's a really critical one to get in place during this time. So we have that stability and predictability, again on our delivery profile and then ultimately on our financials.\",\n \"And then during this, we mentioned, we're still making investments and we're making investments in the productivity as well as on the R&D side. So we're being prudent about it and we're being -- we're sharpening the pencils. But that again is really focusing on the long-term franchise that we have and the potential franchise to come.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah, go ahead.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Yeah. I'd like to just follow on. I like everything about the portfolio of products that we field, wide-body and narrow-body. The trade deal matters a lot. And I believe if it is what I think it is, and our Chinese customers come back and we rebuild the relationship we've always had and enjoyed with them. I think that is a major stimulus. Secondly, this industry has been supply chain limited and constrained. And I believe that some of the actions that have been taken on Boeing's side of that process during this pause, some of the readiness questions that we -- I believe are being fixed, I think that supply chain will begin to alleviate itself. And I don't think we'll be as supply constrained going forward as we have been to date. And now I'm trying to speak for the industry, not just for us. So I am optimistic from lots of angles, but I think those are the big ones.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Great, thanks.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question then will come from the line of Doug Harned from Bernstein. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Douglas S. Harned\",\n \"speech\": [\n \"Good morning. Thanks.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Hi Doug.\"\n ]\n },\n {\n \"name\": \"Douglas S. Harned\",\n \"speech\": [\n \"One thing I'm certain, Dave, is that is, a decade ago, we could not have predicted we'd be having this conversation. The thing I'd like to look at is the challenges you're looking at that BCA. And in the short term, as you said, you're spending time with regulators and customers to support MAX certification. And then over the course of the year, you've also got to deliver on the restart operationally of the MAX, improve efficiency on the 787 as rate comes down, progress on the 777X, and then as you talked about, decide on how Boeing is going to look at what it does next. And I would think you wouldn't want to wait too long to see how you want to compete against Airbus in the back half of the decade.\",\n \"So with all of this on your plate, new leaders across BCA, how are you prioritizing your time? When we get to the end of the year, what would you consider a successful outcome line for the short, medium and long-term issues there?\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Well, one -- Doug, so thanks for the question. As you said, I remember looking at this chess board all the way back in 2000. Didn't turn out actually as different with the exception of the MAX pickup as you might think. We are on a very long cycle world. Getting decisions right is way more important and getting them fast. So I make no mistake about that. The MAX itself has to be my priority over the course of this year. It's important from a lot of points of view. One, the economics of our institution rely in a significant way on it. Rebuilding the relationships with our customers and our regulator in the process of getting the MAX back up is also critically important. We will always dependent be dependent on those relationships.\",\n \"And then finally, with respect to new airplane development, I don't think anybody will enjoy working on that more than I will. I just want to get exactly the right airplane for the market that's out there, and I want to refresh our view as to what it is. The last 2.5 years have been tumultuous. It has tested some of the -- in my view, some of the edges of demand on all types of airplanes. And so we have to learn from that. But I will not hesitate to move forward on it. And I think creating competitive advantage in that next airplane, I think I have more tools to work with than I've ever had in my previous life.\",\n \"So at any rate, I have confidence in all of that. But I don't want to -- going back to your original question, I don't want to confuse anybody in the process. The fact that I will be focused on the MAX, the fact that I will talk about that almost exclusively across Boeing over the course of this coming year is not an indication that I'm going to starve anything going forward. It is simply a necessity for us. We got to get it out there and we have to get our confidence back, and get on the front of our feet. And so again, that's mostly what you'll hear from me. But don't get confused by it, please.\"\n ]\n },\n {\n \"name\": \"Douglas S. Harned\",\n \"speech\": [\n \"And if I can -- when you look at this year, certainly financially, this will be a rough year. But when you put all this together, do you have goals you're thinking of and how this should translate in the financial goals in 2021 or 2022? Or is it too early to think that way? How do you treat that?\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Yeah. It's too early to think that way. While I might conjure up a notion here or there in my head, I'm going to listen to an awful lot of people before I do, and I'm also going to be certain that all the investments that are required to stand up our engineering function, have everybody regain their confidence, and again simply believe in the safety of every airplane that The Boeing Company puts forward. I don't want to -- I'm not going to jump to that conclusion now. I'm simply going to get through this moment, restore our confidence and then projections will follow.\"\n ]\n },\n {\n \"name\": \"Douglas S. Harned\",\n \"speech\": [\n \"Great, thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question then comes from the line of David Strauss from Barclays. Please go ahead.\"\n ]\n },\n {\n \"name\": \"David Strauss\",\n \"speech\": [\n \"Thanks for taking the question. Wanted to discuss the supply chain and how you're approaching the supply chain during this halt. Greg, you mentioned some of this $4 billion I guess is to support the supply chain during the halt. How overall are you approaching it? It doesn't sound like you're telling everyone to halt. Who are you not to halt? How much financial support are you going to provide to the supply chain, or do you think is needed for the supply chain during this?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah, no. David, I would tell you, it's a one-on-one engagement. And not just them but there suppliers, and so I'll say kind of tear down suppliers and understanding the impact that this is having on them, and then, what levers do we all have in order to help get them through this. And again, with the objective that we're playing the long game and we want to come out of this healthier, quite frankly. So each one of them is a little bit different about how we're working and how we're engaging, and what type of assistance is needed. Everybody as you know, has been at a little bit of a different level of production through this. So there's different levels and inventory.\",\n \"So I would tell you, if you went around supplier by supplier, you're going to get a variation of what their build rate is or where they are in inventory, but the engagement with them, I would say, has been very good by our supply chain folks and keeping them informed and trying to get ahead of this, and again, making smart decisions and assisting where we can assist. So yes, we've got some provisioning in here to help them, and we'll continue to do that again with the long-term objective. We need them to be healthy. We want them to be healthy. And we're plan this for the long term. So even some of these productivity things that we've talked about on the 37, the supply chain team has taken those into the supply chain that, again, ultimately will make them healthier, more stable, more predictable, which is going to be key to our production rates going forward.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"I might just add, their rate in return in these early months will be ahead of ours. And that's by design, simply because we want the protection in our factories so that we never travel work. That's actually an important discipline that we will reinstill with our MAX line, and they will be the beneficiaries of that, as they, as I said, accelerate at a faster rate.\"\n ]\n },\n {\n \"name\": \"David Strauss\",\n \"speech\": [\n \"Thanks. Can I ask one clarifying question, Dave? I think you mentioned that you see certification -- or for plane purposes, accounting purposes, certification and deliveries resuming in the middle of the year? Or is it started and then I assume some sort of lag between cert and then deliveries resuming?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah, it's -- we've got it kind of timed in the mid-year time frame, David, but like we said, it's going to be a very moderated slow, I'll say prudent ramp up. And as we talked about priority one, once the grounding is lifted, will be to start getting those airplanes off the tarmac, the inventoried aircraft, and then slowly bringing in that line up in a very methodical way and monitoring stability each step of the way. And when we reach our objective of stability, then we'll make the next move. But that will kind of be the priority and the time frame associated with that.\",\n \"Now we will -- currently, we're looking at starting the line earlier than the actual lifting of the grounding. But again think of that as a risk mitigator. We'll look at that during that period of time and our confidence level of getting the grounding lifted, and then we'll start to slowly bring resources back on to the program. Keep in mind that these lines are empty, they're going to be empty. They're emptying right now. And so we'll start in position one, but again very methodical, start bringing in the crews over, get stability and then slowly bring them back into play. But we'll make that decision as we get closer, return to service. But that's the game plan as we see it today.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"And if the question relates to this certificates by airplane, which of course is going to be a new and very I think tightly run process, of course that involves us and the FAA. And I think we've provided for plenty of room for that process to unfold methodically, and not with too much pressure on it. So that's important in the way we've laid out our timeline.\"\n ]\n },\n {\n \"name\": \"David Strauss\",\n \"speech\": [\n \"Great, thanks very much.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"We have a question from the line of Jon Raviv from Citi. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Jonathan Raviv\",\n \"speech\": [\n \"Thank you. Good morning, everyone. In the context of cash being a bigger use in '20 versus '19, I certainly understand the moving pieces in BCA. Can you talk about perhaps some of the cash generation and the state of the businesses outside of Boeing Commercial,which I think is still a relevant topic here?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah. On BDS, slightly lower than last year. And I'd say, a lot of that is timing. It's just around receipt timing and award timing, but outside of that from an operating -- core operating performance, pretty much on par. But we'll see a little bit of headwind this year. And on BGS a little bit of headwind, but less than BDS. And again a lot of that is just timing. It's nothing more than that. The core performance wise or the conversion earnings to cash, it remains pretty consistent with 2019. But again, the bulk of the variance in cash will be at BCA.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"You're welcome.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"We have a question from Noah Poponak from Goldman Sachs. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Noah Poponak\",\n \"speech\": [\n \"Hey, good morning, everyone.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Good morning, Noah.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Hi Noah.\"\n ]\n },\n {\n \"name\": \"Noah Poponak\",\n \"speech\": [\n \"I wanted to ask about 787 supply and demand, and then also the margins, given the changes there. Do you have visibility into the order pace stepping up into the kind of mid-100s per year for a while there, because even at the 12 a month or the 10 a month, you're still building over 100, but the order rate has been below 100. So I know China is an input but not -- I don't know if China is planning to order that many wide-bodies that would fill that gap sustainably. And then Greg, on the margin, on the cash margin, you've talked about being able to continue to increase just at a slower pace at 12 versus 14. Is that still true or not at 10?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah. Obviously not the same -- I'll say slope as it was, but we still continue to see improved cash margin over the profile. For all the reasons we've discussed before between supply chain mix and our own productivity, that story is unchanged. But again the amount of growth over that period has moderated obviously under these lower rates. On the supply demand, China is a big deal. Don't mistake it. It's a big deal. And that's a big play in these production rates. Outside of that, as you've seen, when we've been going head to head with the 787, we've been winning in the marketplace. The airplane continues to bring great economics into the field. And the long-term market outlook continues. When you look at the 20-year forecast, there is still a lot of wide-bodies and more replacement in there. And the 787 family I think is extremely well suited to address that market.\",\n \"And I'd say the one that is probably under-served at this point is the 787-10. I think as we see that replacement market, I'll say coming more within our skyline that we're going to continue to see more demand for the -10. It's just an incredible value proposition and machine for our customers, especially considering what it's going to be replacing in the market. So China, big watch item. Outside of that, do we have work to do on the skyline? Absolutely. And we're going to play that out one campaign at a time. And we'll continue to monitor again our lead times and make whatever adjustments are needed. But as we see it today, we think this a prudent thing to do and we have good confidence in the 10 to -- going to 12 a month.\"\n ]\n },\n {\n \"name\": \"Noah Poponak\",\n \"speech\": [\n \"Do we expect a China 787 order to come out of Phase 1 specifically, or do we need to get past Phase 1?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"I don't know at this point. No, I know -- we know that airplanes are a part of the -- certainly a big part of the trade deal with China and we'll get into those details when -- between the government and our customers. But we are actively engaged with them, and when we get more clarity on that, then we'll provide it. But at this point, we're -- we don't have the model clarity.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"There is no reason to believe that it has to wait for Phase 2.\"\n ]\n },\n {\n \"name\": \"Noah Poponak\",\n \"speech\": [\n \"Okay, thanks so much.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"You're welcome.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"Operator, we have time for one more question.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Okay. We have a question from line of Hunter Keay from Wolfe Research. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Hunter K. Keay\",\n \"speech\": [\n \"Hi, thanks for getting me on. Appreciate it. Good morning.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"Hunter K. Keay\",\n \"speech\": [\n \"Good morning. So I realize obviously FAA is the decider here. You've made that very clear. But would you care to, in the spirit of transparency, would you care to share your accounting assumptions for the MAX rate ramp six and 12 months after recertification? And then the second part of the question is, how can you get comfortable potentially resuming production before certification, given all the head fakes that we've had over the last few months or so? Thanks so much.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah, well, maybe on that one, I'll just again put a finer point on what the game plan is as we see it. Don't think of that as just turning the line back on. We're going to slowly bring crews back, but we're going to have to have a confidence level, a higher confidence level in that exact time frame on return to service because obviously we don't want to build more airplanes and store them. So that's the game plan as it sits today.\",\n \"But again, remember the line is empty. So it's going to be in the first position and that's going to take some time to slowly bring that up, but obviously will have cert flight behind us, which is a big milestone and that will give us more confidence in our I'll say kind of slow introduction of the production line. So that's the game plan on that. As far as rate increases going forward, Hunter, I would just say to you, look, we got to get this thing back, we got to start delivering on the -- off the ramp, and think of the rate increases as one step at a time, or as Dave has said to many of us, one airplane at a time. We're going to keep work in position and we're going to ensure we have stability, and equally if maybe not more important, the supply chain has stability, we'll make the next rate increase. So we've certainly made some assumptions in there, but we are going to do this one at a time.\",\n \"And again really playing the long game here to ensure we've got stability that is, I'll say institutionalized, not just with us but all suppliers. And then that will ultimately have a much more predictable production, I'll say cadence to it and predictability in delivering to our customers. So we'll keep you posted on our rate plans going forward. But at this time, that's the game plan and we'll give you more clarity once we -- like I said, once we provide guidance and I'll say the moving pieces that will support that guidance.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"I just will reiterate because I think it does matter. That philosophy, one at a time, is reflected in what we have built into this set of financials and our expectations. So, I hope we can go one at a time at a rate that exceeds those expectations, but we're not going to think about it that way. We're simply going to get to every next airplane.\"\n ]\n },\n {\n \"name\": \"Hunter K. Keay\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"You're welcome.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Please go ahead.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"That concludes our question-and-answer session. Thank you for joining the call.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"[Operator Closing Remarks]\"\n ]\n }\n]","isConversational":false}}},{"rowIdx":696,"cells":{"ticker":{"kind":"string","value":"BA"},"date":{"kind":"string","value":"2020-10-28"},"participants":{"kind":"list like","value":[{"description":"Vice President of Investor Relations","name":"Maurita Sutedja","position":"Executive"},{"description":"President and Chief Executive Officer","name":"Dave Calhoun","position":"Executive"},{"description":"Executive Vice President of Enterprise Operations and Chief Financial Officer","name":"Greg Smith","position":"Executive"},{"description":"Sanford C. Bernstein -- Analyst","name":"Doug Harned","position":"Analyst"},{"description":"Barclays -- Analyst","name":"David Strauss","position":"Analyst"},{"description":"Jefferies -- Analyst","name":"Sheila Kahyaoglu","position":"Analyst"},{"description":"Bank of America Merrill Lynch -- Analyst","name":"Ron Epstein","position":"Analyst"},{"description":"Melius Research -- Analyst","name":"Carter Copeland","position":"Analyst"},{"description":"Citi -- Analyst","name":"Jon Raviv","position":"Analyst"},{"description":"J.P. Morgan -- Analyst","name":"Seth Seifman","position":"Analyst"},{"description":"Credit Suisse -- Analyst","name":"Rob Spingarn","position":"Analyst"},{"description":"UBS -- Analyst","name":"Myles Walton","position":"Analyst"},{"description":"Morgan Stanley -- Analyst","name":"Kristine Liwag","position":"Analyst"},{"description":"Baird -- Analyst","name":"Peter Arment","position":"Analyst"}],"string":"[\n {\n \"description\": \"Vice President of Investor Relations\",\n \"name\": \"Maurita Sutedja\",\n \"position\": \"Executive\"\n },\n {\n \"description\": \"President and Chief Executive Officer\",\n \"name\": \"Dave Calhoun\",\n \"position\": \"Executive\"\n },\n {\n \"description\": \"Executive Vice President of Enterprise Operations and Chief Financial Officer\",\n \"name\": \"Greg Smith\",\n \"position\": \"Executive\"\n },\n {\n \"description\": \"Sanford C. Bernstein -- Analyst\",\n \"name\": \"Doug Harned\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Barclays -- Analyst\",\n \"name\": \"David Strauss\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Jefferies -- Analyst\",\n \"name\": \"Sheila Kahyaoglu\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Bank of America Merrill Lynch -- Analyst\",\n \"name\": \"Ron Epstein\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Melius Research -- Analyst\",\n \"name\": \"Carter Copeland\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Citi -- Analyst\",\n \"name\": \"Jon Raviv\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"J.P. Morgan -- Analyst\",\n \"name\": \"Seth Seifman\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Credit Suisse -- Analyst\",\n \"name\": \"Rob Spingarn\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"UBS -- Analyst\",\n \"name\": \"Myles Walton\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Morgan Stanley -- Analyst\",\n \"name\": \"Kristine Liwag\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Baird -- Analyst\",\n \"name\": \"Peter Arment\",\n \"position\": \"Analyst\"\n }\n]","isConversational":false},"prepared_remarks":{"kind":"list like","value":[{"name":"Operator","speech":["Thank you for standing by. Good day, everyone, and welcome to the Boeing Company's third-quarter 2020 earnings conference call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst question-and-answer session, are being broadcast live over the Internet.","[Operator instructions] At this time, for opening remarks and introductions, I am turning the call over to Ms. Maurita Sutedja, vice president of investor relations for the Boeing Company. Ms. Sutedja, please go ahead."]},{"name":"Maurita Sutedja","speech":["Thank you, John, and good morning. Welcome to Boeing's third-quarter 2020 earnings call. I'm Maurita Sutedja, and with me today are Dave Calhoun, Boeing's president and chief executive officer; and Greg Smith, Boeing's executive vice president of enterprise operations and chief financial officer. After management comments, we will conduct a question-and-answer session.","In fairness to others on the call, we ask that you please limit yourself to one question. As always, we have provided detailed financial information in our press release issued earlier today. And as a reminder, you can follow today's broadcast and slide presentation through our website at boeing.com. Before we begin, I need to remind you that any projections, estimates, and goals we include in our discussion this morning are likely to involve risks, which are detailed in our news release, in our various SEC filings, and in the forward-looking statement disclaimer at the end of this web presentation.","In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of certain non-GAAP measures. Now, I will turn the call over to Dave Calhoun."]},{"name":"Dave Calhoun","speech":["Thank you, Maurita, and good morning, everyone. Before I get started today, I want to take a moment to remember those who lost their lives on Lion Air flight 610 and Ethiopian Airlines flight 302. Tomorrow will mark the two-year anniversary of the Lion Air accident. Not a day goes by that we don't remember, reflect, rededicate ourselves to ensuring accidents like these never happen again.","Our deepest sympathies are with the family members and their loved ones today and every day. It's been about nine months since the onset of the COVID-19 pandemic. I hope you are all continuing to stay safe and healthy during these very challenging times. Let's turn to our business update on Slide 2.","The pandemic is having broad and deep impacts across the globe on health, on the economy, on global trade, and, of course, our travel industry. We're focused on the health and safety of our employees and our communities while working closely with our customers and suppliers to navigate through this global pandemic to rebuild stronger on the other side. There's no doubt that this moment is among the most difficult in our more than 100-year history. Through it all, I remain confident in Boeing's long-term future.","Let me start today by providing some key updates from across the business. As you know, the COVID-19 impacts on our commercial customers continue to be devastating, and airlines have cut back operations dramatically. We are engaged with our customers every day to understand their short-term, their medium-term and their long-term fleet needs so that we can align our supply and demand. We're also working together across the industry to enhance the safety and well-being of passengers and crews during the COVID-19 pandemic.","Through our Confident Travel initiative, we are collaborating industrywide to develop multiple layers of protection to minimize health risks for passengers and crew throughout the travel journey. Boeing aircraft are designed to maximize cabin air quality using high-efficiency particulate air or HEPA filters that trap 99.9% of particulates. And the air in an airplane is exchanged a minimum of 20 to 30 times per hour. That compares to 2 to 5 times per hour in a typical building environment.","As we further enhance health measures, we have also entered into patent and technology licenses with partners in this field to manufacture an ultraviolet, or UV wand, to better sanitize airplane interiors. Of course, in-cabin technologies like the HEPA filter and this UV wand also have to be combined with personal responsibility of passengers and crews, including wearing face masks and taking other precautions, all of which are critical to creating a safe travel experience. We're seeing encouraging industry data validating the safety of air travel. Recently, IATA published data outlining that of the over 1 billion people who have traveled by air this year, there have been fewer than 50 documented cases of transmission.","This research was reinforced by a recent study by the U.S. Transportation Command and United Airlines that found the risk of contracting COVID-19 while flying is very low. We know this will be top of mind for anyone traveling, and we're here to support our customers every step of the way. This period of reduced air travel underscores how fundamentally the aerospace industry is to the global economy, to global trade, and to global cooperation.","Our airline customers and suppliers not only employ millions of workers, they also serve as a connecting and driving force to the entire global economy. That's why we fully support our airline customers in their continued discussions with the U.S. and global governments on potential additional support during this pandemic. I'm certain leaders at every level of government understand the important role airlines serve in our country.","We're also doing everything we can to support our global suppliers, and their stability remains a very key watch item. It only takes one part of our -- one part to delay production of an aircraft or delay service delivery, so we have to work together as an industry to get through these difficult times. Internally, we're also taking tough but necessary action to adapt to the new market reality and transform our business to be sharper and more resilient for the long term. As we shared last quarter, we continue to resize and reshape our business to align with our smaller market.","COVID-19's continued impacts have had a more prolonged and deeper impact on our industry, and we'll have to further reduce our workforce. Each of our business units and functions will carefully make staffing decisions that prioritize natural attrition and stability in order to limit the impact on our people and our business. With this approach, we expect additional voluntary and involuntary reductions. Combined with natural attrition, these reductions will bring the size of our workforce to around 130,000 employees by the end of next year.","We will continue to assess our market and adjust our plans as appropriate. These decisions are not easy. They represent critical actions to ensure we're able to navigate through this global pandemic and be in a position to deliver for our customers on the other side. As we work through these challenging times, our focus on our values and our priorities has not and will not waver.","We are working tirelessly to strengthen our culture, to improve our transparency, rebuild trust, and ensure we are always delivering the highest safety and quality standard. We continue to implement a series of meaningful changes announced one year ago to strengthen the safety practices and culture of our company. As we've shared, we stood up our new product and services safety organization and brought together over 50,000 teammates into a single engineering organization. We're also making significant progress on our enhanced enterprise safety management system, with an initial focus on our Commercial Airplanes business.","We are working to ensure our system meets the regulators' tougher standards and reflects industry best practices, as well as lessons learned from a number of independent reviews that have taken place over the past 18 months. We've also developed a racial equity and inclusion action plan. This will raise the bar for progress on key measures of equity and inclusion for our people and hold us accountable for clearing that bar. We also remain focused on sustaining critical investments in our business, innovating, and operating to help make the world a better place for future generations.","This quarter, we appointed a chief sustainability officer, a leadership position dedicated to galvanizing and advancing our environmental, social, and our governance priorities. This is an important step as we continue to elevate our focus on sustainability in partnership with our customers, our suppliers, and our communities. In the face of tremendous challenges we are all confronting, I am incredibly proud of how our teams have remained focused on meeting our customers' commitments. Working closely with the FAA and other global regulators, we're continuing to make steady progress toward the safe return to service of our 737.","Over the past year and a half, there have been around 1,400 test and check flights, over 3,000 flight hours completed on the airplane. While we still have work ahead of us, we're encouraged by the rigorous certification and validation flights conducted by the FAA, by Transport Canada, and the European Union Aviation Safety Agency, EASA. The joint operational evaluation board featuring civil aviation authorities from the United States, from Canada, Brazil, and the European Union also conducted its evaluations of updating [Inaudible]. We also continue to work closely with other global regulators, including the Civil Aviation Administration of China, among others.","These are important milestones in the certification process as our global regulators progress through a comprehensive, robust, and transparent process, and we will continue to follow their lead in the steps ahead. Our assumption has not changed from last quarter. We continue to expect the necessary regulatory approvals to be obtained in time to support resumption of deliveries during the fourth quarter of this year. Of course, the actual time will ultimately be determined by the global regulators.","In addition to the 737, we're making progress across our commercial, defense, space, and services businesses, and I'll highlight a few. Our 777-9 flight test program progressed through this quarter as the final test airplane joined the fleet. The U.S. Air Force and Boeing team were awarded the Collier Trophy for aerospace excellence for the X-37B autonomous spaceplane.","Our Boeing defense systems team secured an important contract for eight F-15EX advanced fighter jets for the U.S. Air Force. And also in the quarter, our T-7A Red Hawk advanced trainer earned the first eSeries designator from the U.S. Air Force, given to an aircraft that is designed, engineered, built, and tested along a digital thread.","And our Global Services team signed an agreement with GE Capital Aviation Services for 11 Boeing converted freighters and secured a six-year support contract for Australian P-8As. On the 777X, we continue to work with the regulators on certification work scope, including reflecting the learnings from the 737 cert process. As with any development program, there are inherent risks that can affect schedule. While we continue to drive toward entry into service in 2022, this timing will ultimately be influenced by certification requirements defined by the regulators.","In addition to making progress across our programs, we're also taking action across the enterprise to transform our business and create additional competitive advantage. Greg will provide more details in his remarks. With that update in mind, let's turn to the next slide to discuss the industry environment. Earlier this month, we released our 2020 Boeing market outlook, which forecasts a total market value of $8.5 trillion over the next decade, down from $8.7 trillion a year ago due to the impact of the pandemic, most of the adjustment in the near term.","Overall, the defense and space market remains significant and relatively stable, and we continue to see solid, global demand for our major programs. Nonetheless, the scale of government spending on COVID-19 response has the potential to add pressure on global defense spending in the future. Broad support for our defense portfolio was underscored by the $5 billion of orders that BDS booked in the third quarter across key franchise programs. The market outlook for our government services business also remains stable, driven by both domestic and international military aircraft fleet expansions.","Our government services, defense, and space programs will help provide critical stability for us moving forward. Turning to the commercial market. While many of our key long-term fundamentals remain intact, we project near-term market pressure with COVID-19. Airlines globally have begun to recover from the trough of greater than 90% decline in passenger traffic and revenue earlier this year.","In fact, earlier this month, the TSA screened over 1 million passengers for the first time since mid-March. However, the overall recovery has been at a slower pace than we originally anticipated. As the domestic market recovery continues, the international markets remain at all-time lows. August domestic passenger traffic was 49% of 2019 levels, a 51% decline, whereas international passenger traffic was only 12% of the prior year, an 88% decline.","International passenger traffic recovery remains challenged by the absence of a coordinated global policy on cross-border entry protocols. IATA recently lowered its 2020 passenger traffic forecast to a 66% decline versus prior forecast of 63% based on lower fourth-quarter expectations and less international traffic. Regional dynamics continue to evolve with bright spots in China, where domestic traffic has returned to around 2019 levels, while recovery in other regions has pulled back as COVID cases reemerge and government travel restrictions remain fluid. Airlines are incrementally returning their parked fleet to service, with approximately three-quarters of their pre-crisis fleet now active.","At the same time, the active fleets are only seeing about 60% to 70% of their normal utilization rates, keeping global operations around half of pre-crisis levels. These mix trends will continue to drive an uneven recovery. The path ahead will be heavily dependent upon not only the virus but also wide-scale progress on rapid testing, coordinated policies to alleviate travel restrictions, and timing and availability of a vaccine. As we look to the medium and long term, we see our original prognosis, more or less, still holds.","Consistent with IATA and other industry groups, we still expect it will take around three years for travel to return to 2019 levels and a few years beyond that to return to long-term growth trends. Demand for narrow-body aircraft is expected to recover faster than wide-body demand as domestic and regional markets will outpace longer-haul international routes. Availability and wide distribution of a vaccine may help accelerate the demand improvement. However, in the near term, we expect continued uncertainties as the situation remains very dynamic with many variables.","Our 10-year commercial airplane market outlook is approximately 11% lower than what we assumed a year ago, with wide-bodies more significantly impacted than narrow-bodies. From a 20-year perspective, we still see the impact of COVID, but to a lesser extent as traffic reverts to long-term trends over time. Near term, we also anticipate accelerated retirements, driving replacement demand up to approximately 48% of deliveries over the next 20 years. That compares to 44% as previously projected.","As our customers focus on retiring their oldest and least efficient airplanes, new airplanes will allow the industry to reduce emissions and make future flying even more environmentally sustainable. Airplanes that we plan to deliver this year will be as much as 25% to 40% more fuel-efficient than the airplanes they're replacing. As we see airlines adapt to these market realities, price differentiation and versatility will be key. Our market-leading product line remains well-positioned to meet our customers' needs and supports airline plans to gain efficiencies as they reach for their emission goals.","Our attractive portfolio and the diversity of our backlog provides a strong foundation for long-term success. In the commercial services market, although we believe we've seen the low watermark in terms of demand, the recovery has been slow, and we continue to anticipate will take multiple years to reach previous demand levels. Accelerated retirements will also result in a newer fleet as we emerge from the pandemic impacts, which will reduce services demand and prolong its market recovery. Digital solutions are emerging as a critical enabler as customers focus on leaner operations.","Life cycle services and support will help customers scale their operations to meet efficiency and cost objectives aligned to market recovery trends. Our broad services portfolio and deep customer knowledge position us well to support these customer needs. Now, let's turn to commercial airplane production rates on Slide 4. We've maintained our prior assumptions regarding our production rate plans across all commercial airplane programs.","However, the market continues to be dynamic, and we will monitor as we prudently balance supply and demand. We're closely watching the international passenger traffic recovery, which, so far, has been weak, to assess downside risks to our wide-body program production rates, in particular, the 787. We still expect to produce the 737 at very low rates for the remainder of 2020 and gradually increase the rate to 31 by the beginning of 2022 and expect further gradual increases to correspond with market demand. We will continue to assess the delivery profile for 2021 as it will help inform if we need to adjust our 737 production rate ramp-up.","We will continue to keep our supply chain apprised of our plan. At the end of the third quarter, we have 3,400 aircraft in our 737 backlog. Although this remains an unprecedented and uncertain time, we are confident air travel will return, and when it does, we will be positioned to support our customers. And with that, let me turn it over to Greg."]},{"name":"Greg Smith","speech":["Great. Thanks, Dave, and good morning, everyone. Let's please turn to Slide 5. As Dave mentioned, this moment is among the most difficult in our company's 100-plus year history.","Since the beginning of the pandemic, we have taken prudent and decisive action in attempt to get ahead of this to preserve cash so that we can navigate this crisis and also reshape our business so that we can merge as a sharper, more resilient, and more competitive company. We are being and will continue to be proactive and look around corners to assess risk factors and take appropriate action. We've been focused on de-risking our business and a disciplined cash management for some time, and COVID-19 has accelerated these efforts further. I'll go through a quick timeline of our early actions we've taken in 2020 and then provide you with an update of our transformation efforts.","Starting back in the middle of March, as the potential risk of the virus escalated, we took a proactive step to fully draw down on our $13.8 billion delayed draw term loan. Given the uncertainty of the markets at that time, we understood that this was a prudent step to bring that cash on our balance sheet. Almost immediately thereafter, we suspended our dividend and terminated our share repurchase authorization. Even then, at the early stage, it was clear to us that liquidity would be critical through this pandemic.","These early decisive actions were critical and important. Next, in early April, we rolled out our first voluntary layoff program. We recognized the need to reduce our staffing levels, given the sharp reduction in commercial aircraft demand. And we took action to limit the impact on our teams as much as possible through voluntary opportunities first.","This was followed by involuntary layoff programs. By the first-quarter earnings, we announced additional actions, including reducing our commercial production rates, limiting discretionary spending, and lower overall staffing levels by about 10%. While difficult, all these steps were critical in the early days of this global crisis. Shortly thereafter, we went to the bond market and raised $25 billion, which has proven to be instrumental to helping us navigate this crisis.","The strong investor response reflected the confidence the overall market has in our future, as well as the swift action that the U.S. government took to support the credit markets. Throughout the spring and summer, we stayed very closely engaged with our customers and suppliers, working to understand the impacts of the pandemic so that we could recalibrate our industry while maintaining as much stability as possible. And by the second-quarter earnings, with a deeper understanding of the prolonged impact, we further reduced our commercial production rates and announced that we would further reduce our staffing levels.","As you'll also recall at that point, we formally rolled out our business transformation efforts to assess every aspect of our business across five key pillars of infrastructure, overhead, and organization, portfolio and investments, supply chain health, and operational excellence. I'll share more updates on these shortly. In August, we moved forward with our second voluntary layoff program, which was much broader than our initial program and included our executives, which are then followed by another involuntary layoff program. We managed this process very closely to ensure continuity where necessary, and to maintain confidence in our ability to deliver on our commitments to our customers.","Next, we rolled out a series of organizational realignments to streamline and simplify how we operate. Also, through our 787 study, it became evident that the consolidation to a single production location in South Carolina will make us more efficient and lower production and better positioned for the future. As a result, earlier this month, we made the decision to consolidate the 787 production in South Carolina by mid-'21. We are approaching these business transformation efforts with rigor and thoughtful evaluation at each step.","We have made notable progress across all five pillars of our business transformation efforts. We will utilize this time when we are at the lower production rate environment to reinvent and to improve our business processes. First, regarding our infrastructure pillar. We're assessing our overall facility and site footprint in light of the reduced demand.","The consolidation of the 787 production is an example of this. At the same time, we're also taking into account new flexible and virtual work opportunities. If you asked us eight to nine months ago if we thought a large portion of our workforce could work virtually while still being productive, you might have heard skepticism. But these last several months have shown us that we can be more flexible.","Building on the lessons of our experiences, we're studying an enterprise footprint optimization effort, utilizing flexible and virtual workplace planning. We're starting with a few pilot programs over the coming months, which will help determine our best path forward. At the same time, we're also looking to make more efficient use of our square footage, and in some cases, reduce the overall footprint. Through staffing reductions and our flexible workplace program, we anticipate a reduction of approximately 30% in office space needs compared to our current capacity.","We're reviewing every piece of real estate, every building, every lease, every warehouse, every site to look at how we can be more efficient, and we'll share our decisions as we make them. Turning to our overhead and organizational pillar. This is where we've been looking critically at our cost structure, at how Boeing operates and how we're organized, benchmarked to top-quartile standards, so we can simplify, reduce layers, reduce bureaucracy while ensuring we strengthen connections vital to safety, quality, and performance. As an example, we're studying how we organize our production and development programs better by reducing the layers between program leadership and the factory floor, increasing our management spans and control, and improving direct and indirect ratios.","These actions are aimed at enhancing communication, empowering our teams, and creating lasting efficiencies in how we do our work. Moving to our portfolio and investment pillar. We're shaping our portfolio and aligning our investments to focus on the core business, market opportunities, and sustainability efforts. In addition to the impact in demand on near term, COVID-19 will also impact the timing of new market opportunities.","Prior to the pandemic, we were investing in growth markets and growing business. But as the market conditions have changed, we have made swift decisions to adapt. You've seen us start to reprioritize our investments, and we will continue to do so and make prudent decisions going forward. We originally plan to invest over $6 billion this year.","Through prioritization, we have pared back these investments by approximately $2 billion. That said, we have and we will continue to invest in all lines of our business. In fact, we've invested more than $60 billion over the last 10 years in key strategic areas of our business. As we take action in this pillar, we will not lose sight of our future and the exciting technologies that will reshape the future of air travel.","Our guiding principle here is that every decision we make must help us navigate through this difficult period while also not diminishing our future competitiveness. Moving to supply chain pillars, Dave mentioned our suppliers are experiencing the same pressure that we are. Many of them are small businesses without our portfolio of diversity and scale. Our teams are actively talking to our suppliers every day.","We have to work together as an industry to get through this difficult time so that we can come out of this healthy on the other side. We have made enhancements of our supply chain risk assessments and are closely monitoring each supplier, mitigating issues, exploring financing solutions, and getting creative and supporting them in the best way we can. The reality is that our industry as a whole will simply build less over the coming years. And we have to help our industry partners recalibrate to that lower demand in the near term while maintaining stability as much as possible and positioning to return to growth in the medium to long term.","We're also transforming our transportation, warehouse, and logistics approach to streamline our warehousing network, set enterprise standards, and improve efficiencies. We're targeting a greater than 20% improvement to our internal material management costs while driving down our freight transportation spend and optimizing our warehousing operations. And we're also reducing our indirect and overhead spending on things like capital equipment, facility support, and enterprise services. We have an opportunity to significantly reduce our overall indirect spending, and we will be closely managing this process to ensure we continue to drive the highest levels of safety and quality.","Lastly, we're working diligently to accelerate operational excellence across the enterprise so that we can improve performance, enhance quality, safety, reduce rework, and associated costs. The enterprise operations team successfully launched the formation of four companywide process councils around supply chain, program management, quality, and manufacturing. These councils are already driving integration and accelerating efforts to enhance program performance. We have simplified our structure to allow the process councils to lead on driving accountability and decision-making closer to the work that's being performed.","When and where we identify issues at a program level, we're implementing thorough corrections, transparency, sharing information with our customers, and strengthening processes across the enterprise to enhance first-time quality in every program. These are just a few under way across the business. And over the coming weeks, months, and years, we'll keep you up to date on the transformation journey. Our focus here is clear.","We're taking comprehensive action to preserve liquidity, navigate the pandemic, adapt to our new markets, improve performance, and position our company for the future. As we take these actions, we're ensuring that every step only furthers our drive key efforts in safety, quality, and delivering on our commitments. These efforts are meant to create meaningful and lasting change to how we operate and our cost structure. The financial objectives we've established are measured in billions of dollars, and we expect them to be executed over a multiyear period.","In the current environment, we must take these actions to adapt to lower demand. What we're trying to achieve here are sustainable, structural, lasting improvements in our performance that lay the foundation for future margin expansion and cash flow generation as the market recovers. So with that, let's turn to Slide 6 for our third-quarter results. Our financial results continue to be significantly impacted by COVID-19 and the 737 MAX grounding.","Third-quarter revenue of $14.1 billion reflects lower Commercial Airplane deliveries and commercial services volume, primarily, again, due to COVID-19. Earnings in the quarter were also impacted by charges for BCA abnormal costs related to the 737 program and severance costs for the additional approximate 7,000 employees leaving the company through the end of '21. These impacts were partially offset by an income tax benefit related to the NOL carryback provision in the CARES Act, as well as the impact of pre-tax losses. Let's now move to Commercial Airplanes on Slide 7.","Revenue was $3.6 billion, reflecting lower Commercial Airplane deliveries due to the significant impacts of the pandemic, as well as 787 quality issues and associated rework. BCA third-quarter operating margins declined primarily due to lower delivery volume and a $590 million of abnormal costs related to the 737 program. Similar to prior period, in preparation for our third-quarter financial statements, we have made certain assumptions on production rates across all programs, as well as the 737 MAX delivery profile. As Dave mentioned, we've assumed that the timing of the regulatory approvals will enable 737 deliveries to resume during the fourth quarter of 2020.","We currently have approximately 450 737 MAX aircraft built and stored in inventory. We expect to have to remarket some of these aircraft and potentially reconfigure them, which will extend the delivery time frame. We now expect delivery of about half of the aircraft currently in storage by the end of next year and the majority of the remaining in the following year. Delivery from storage will continue to be our priority after assisting our customers with their return to service.","We expect the 737 MAX delivery timing, along with the production rate ramp-up profile to continue to be dynamic as they will ultimately be dictated by the pace of the commercial market recovery, which has been slow and remains uncertain. There is no material change in the estimate for the total abnormal cost of $5 billion, and we expect these costs will be expenses incurred over this year and next year. During the third quarter, we expensed $590 million of abnormal production costs, which brought the cumulative abnormal cost expense to date to $2.1 billion. Our assessment of the liability for the estimated potential concessions and other considerations to customers for disruptions related to the 737 MAX grounding and associated delivery delays did not change significantly in the third quarter.","Cumulatively, we've accrued a $9.1 billion liability for the estimated potential concessions and other considerations. To date, we've made $3.1 billion of payments to customers in cash and other forms of compensation, including $500 million we paid this quarter. We have settlement agreements covering approximately $2.6 billion of the remaining liability balance of $6 billion. We continue to address the impact individually customer by customer, including assessing the efforts that the MAX disruption is having on their operations in light of the COVID impact.","We also continue to expect any concessions or other considerations to be provided over a number of years with the cash impact to be more front-end loaded in the first few years. Any changes to these assumptions could require us to recognize additional financial impacts. Commercial Airplanes backlog includes more than 4,300 aircraft valued at $313 billion. The decline in backlog in the third quarter reflected the aircraft order cancellations and the removal of aircraft orders from our backlog due to ASC 606 accounting standards.","As you saw in the second and third quarter, our production has outpaced our delivery rate. And we expect this to continue in the near term, resulting in higher finished goods inventory. We have a large number of undelivered 787 aircraft in inventory, and we are working with our customers to facilitate their deliveries. The burndown of 787 inventory over the next few months will largely be influenced by the pace of delivery activities, which has been and expected to remain relatively slow due to the additional time we're taking to inspect and ensure each of our 787s are delivered to our highest quality standards.","We're also closely watching the international passenger traffic recovery, which so far has been weak and is more challenging than what we anticipated last quarter. The trend going forward is heavily dependent on the virus, testing, coordinated policies to alleviate travel restrictions, and timing and availability of a vaccine. We will continue to assess the downside risk of our production rates going forward. Let's now move to Defense, Space & Security on Slide 8.","Third-quarter revenue decreased slightly to $6.8 billion, reflecting derivative aircraft award timing, partially offset by higher fighter volume. Third-quarter operating margin decreased to 9.2%, primarily reflecting less favorable performance, including a $67 million KC-46A tanker charge due to continued COVID-19 disruptions and productivity inefficiencies. During the quarter, BDS won key contract awards worth $5 billion, including a contract extension for the International Space Station for NASA and a contract for nine additional Chinook Block II helicopters for the United States Army Special Ops. Our backlog now stands at $62 billion, with 30% from outside of the United States.","Let's now turn to Boeing Global Services results on Slide 9. In the third quarter, Global Services revenue declined to $3.7 billion, driven by lower commercial services volume due to COVID-19. This was partially offset by higher government service volume. Operating margin in the quarter reflected lower commercial services volume and additional severance costs.","During the quarter, BGS won key contracts worth approximately $3 billion, which brings its backlog now to $17 billion. Although we saw a slight uptick in service demand in the third quarter, we predict the recovery would take multiple years, and we continue to take action to position our services business for the future. This includes not only employment actions and inventory rightsizing, but also making sure we have the right product, right service solutions to help our customers and industry navigate the downturn and scale their operations as near-term demand trends upward. Let's now turn to cash flow on Slide 10.","The disruption caused by COVID-19 on our airlines and the global economy continues to put significant pressure on our cash receipts. Operating cash flow for the third quarter was negative $4.8 billion, driven by lower commercial airplane delivery volume, advanced payment timing, and commercial services volume. We achieved solid cash generation from our government programs and continue to expect future cash flow to be roughly in line with earnings from our government side of the business. The continued slow and uneven commercial market recovery is significantly impacting our cash flow and increasing pressure in the near term.","We currently expect 2021 cash flow to be much improved from 2020, driven mainly by deliveries and inventory burn down associated with 737 and 787 programs. And we anticipate the cash profile to continue to improve further from '21 to 2022. While we're still aiming to turn cash positive in late '21, the recovery and the continued elevated virus cases make the path much more challenging. Based on what we know today, it's looking more likely that we will be cash flow-positive in the 2022 time frame.","Our cash flow trajectory will clearly be dependent on the pace of commercial market recovery and how customer deliveries progress moving forward. Progress on testing protocols, government travel restrictions, and vaccine will be the pacing items. And we will continue to diligently work opportunities and monitor risk factors given the dynamic nature of this current environment. Let's move now to Slide 11, and we'll discuss our liquidity position.","We continue to proactively manage our cash and assess our liquidity daily through this challenging time. We ended the third quarter with strong liquidity, including $27.1 billion of cash and marketable securities on our balance sheet and access to our $9.5 billion bank credit facility, which remains undrawn, as well as continuing to assess the capital markets. Our debt balance at the end of the quarter was $61 billion. And through the end of the year, we have just under $4 billion of debt maturing.","To further bolster our liquidity as we work through the impacts of this pandemic, we may seek to refinance that maturing debt in the fourth quarter this year. In addition, we've decided to use Boeing's stock rather than cash to fund our company contribution to employees' 401(k) plans for the foreseeable future. This will preserve approximately $1 billion of cash gradually over the next 12 months. We also plan to make a discretionary contribution to our defined benefit pension plan in the fourth quarter, totaling $3 billion, which will also be funded by Boeing's stock.","This move will further strengthen the funded status of our retirement plans to benefit our employees and retirees while improving our balance sheet position and minimizing future cash outflows. As we mentioned previously, we expect our use of cash due to COVID-19 to continue for the remainder of this year and into '21. Therefore, proactively managing our liquidity and balance sheet leverage will continue to be top priorities as we navigate this challenging environment. Once cash flow generation returns to more normal levels, reducing our debt levels will be our key focus area.","These actions reflect our continued de-risking strategy and as part of our balanced approach to ensuring we proactively meet future obligations. We worked hard in the past to maintain disciplined cash management while seeking opportunities to strengthen our balance sheet, and we will continue these efforts. Let's just now turn to the last slide to summarize. We covered a lot today, but I want to provide you further clarity on our approach and our actions in addressing the profound impact the pandemic has had on our company and our industry.","Through this tough time, we have focused on the health and safety of our employees and communities while working closely with our customers and suppliers to navigate this global pandemic and rebuild stronger on the other side. We also remain focused on achieving our priorities in transforming our business to adapt to this new market reality. As we've outlined today, we took decisive early actions to adapt, and we will continue to do so going forward. We've got the right team in place.","They are focused. And we will continue to transform our business across the five pillars. As challenging as this situation has been and currently is, we continue to be confident in our long-term market outlook. The mission today is clear: stay laser-focused on the market dynamics, take proactive action across all aspects of our business with all eyes on liquidity, and emerge stronger and more resilient.","We're committed to executing on actions that position our company and our industry for the future. So with that, I'll turn it over to Dave for some closing comments."]},{"name":"Dave Calhoun","speech":["Yes. Greg, thanks. This has been a year unlike any other, and we're facing unprecedented challenges in our company, our industry, and our communities. I'm proud of our team, and I thank them for the tremendous work they've done through these difficult circumstances.","The long-term industry fundamentals remain strong. Air travel will recover. Our portfolio of products and technology is well positioned, and I'm confident in our future. With that, Greg and I will be happy to take your questions.","And I'll turn it back to Maurita. Thank you."]},{"name":"Maurita Sutedja","speech":["John, we're ready for the analyst question now."]}],"string":"[\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Thank you for standing by. Good day, everyone, and welcome to the Boeing Company's third-quarter 2020 earnings conference call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst question-and-answer session, are being broadcast live over the Internet.\",\n \"[Operator instructions] At this time, for opening remarks and introductions, I am turning the call over to Ms. Maurita Sutedja, vice president of investor relations for the Boeing Company. Ms. Sutedja, please go ahead.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"Thank you, John, and good morning. Welcome to Boeing's third-quarter 2020 earnings call. I'm Maurita Sutedja, and with me today are Dave Calhoun, Boeing's president and chief executive officer; and Greg Smith, Boeing's executive vice president of enterprise operations and chief financial officer. After management comments, we will conduct a question-and-answer session.\",\n \"In fairness to others on the call, we ask that you please limit yourself to one question. As always, we have provided detailed financial information in our press release issued earlier today. And as a reminder, you can follow today's broadcast and slide presentation through our website at boeing.com. Before we begin, I need to remind you that any projections, estimates, and goals we include in our discussion this morning are likely to involve risks, which are detailed in our news release, in our various SEC filings, and in the forward-looking statement disclaimer at the end of this web presentation.\",\n \"In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of certain non-GAAP measures. Now, I will turn the call over to Dave Calhoun.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Thank you, Maurita, and good morning, everyone. Before I get started today, I want to take a moment to remember those who lost their lives on Lion Air flight 610 and Ethiopian Airlines flight 302. Tomorrow will mark the two-year anniversary of the Lion Air accident. Not a day goes by that we don't remember, reflect, rededicate ourselves to ensuring accidents like these never happen again.\",\n \"Our deepest sympathies are with the family members and their loved ones today and every day. It's been about nine months since the onset of the COVID-19 pandemic. I hope you are all continuing to stay safe and healthy during these very challenging times. Let's turn to our business update on Slide 2.\",\n \"The pandemic is having broad and deep impacts across the globe on health, on the economy, on global trade, and, of course, our travel industry. We're focused on the health and safety of our employees and our communities while working closely with our customers and suppliers to navigate through this global pandemic to rebuild stronger on the other side. There's no doubt that this moment is among the most difficult in our more than 100-year history. Through it all, I remain confident in Boeing's long-term future.\",\n \"Let me start today by providing some key updates from across the business. As you know, the COVID-19 impacts on our commercial customers continue to be devastating, and airlines have cut back operations dramatically. We are engaged with our customers every day to understand their short-term, their medium-term and their long-term fleet needs so that we can align our supply and demand. We're also working together across the industry to enhance the safety and well-being of passengers and crews during the COVID-19 pandemic.\",\n \"Through our Confident Travel initiative, we are collaborating industrywide to develop multiple layers of protection to minimize health risks for passengers and crew throughout the travel journey. Boeing aircraft are designed to maximize cabin air quality using high-efficiency particulate air or HEPA filters that trap 99.9% of particulates. And the air in an airplane is exchanged a minimum of 20 to 30 times per hour. That compares to 2 to 5 times per hour in a typical building environment.\",\n \"As we further enhance health measures, we have also entered into patent and technology licenses with partners in this field to manufacture an ultraviolet, or UV wand, to better sanitize airplane interiors. Of course, in-cabin technologies like the HEPA filter and this UV wand also have to be combined with personal responsibility of passengers and crews, including wearing face masks and taking other precautions, all of which are critical to creating a safe travel experience. We're seeing encouraging industry data validating the safety of air travel. Recently, IATA published data outlining that of the over 1 billion people who have traveled by air this year, there have been fewer than 50 documented cases of transmission.\",\n \"This research was reinforced by a recent study by the U.S. Transportation Command and United Airlines that found the risk of contracting COVID-19 while flying is very low. We know this will be top of mind for anyone traveling, and we're here to support our customers every step of the way. This period of reduced air travel underscores how fundamentally the aerospace industry is to the global economy, to global trade, and to global cooperation.\",\n \"Our airline customers and suppliers not only employ millions of workers, they also serve as a connecting and driving force to the entire global economy. That's why we fully support our airline customers in their continued discussions with the U.S. and global governments on potential additional support during this pandemic. I'm certain leaders at every level of government understand the important role airlines serve in our country.\",\n \"We're also doing everything we can to support our global suppliers, and their stability remains a very key watch item. It only takes one part of our -- one part to delay production of an aircraft or delay service delivery, so we have to work together as an industry to get through these difficult times. Internally, we're also taking tough but necessary action to adapt to the new market reality and transform our business to be sharper and more resilient for the long term. As we shared last quarter, we continue to resize and reshape our business to align with our smaller market.\",\n \"COVID-19's continued impacts have had a more prolonged and deeper impact on our industry, and we'll have to further reduce our workforce. Each of our business units and functions will carefully make staffing decisions that prioritize natural attrition and stability in order to limit the impact on our people and our business. With this approach, we expect additional voluntary and involuntary reductions. Combined with natural attrition, these reductions will bring the size of our workforce to around 130,000 employees by the end of next year.\",\n \"We will continue to assess our market and adjust our plans as appropriate. These decisions are not easy. They represent critical actions to ensure we're able to navigate through this global pandemic and be in a position to deliver for our customers on the other side. As we work through these challenging times, our focus on our values and our priorities has not and will not waver.\",\n \"We are working tirelessly to strengthen our culture, to improve our transparency, rebuild trust, and ensure we are always delivering the highest safety and quality standard. We continue to implement a series of meaningful changes announced one year ago to strengthen the safety practices and culture of our company. As we've shared, we stood up our new product and services safety organization and brought together over 50,000 teammates into a single engineering organization. We're also making significant progress on our enhanced enterprise safety management system, with an initial focus on our Commercial Airplanes business.\",\n \"We are working to ensure our system meets the regulators' tougher standards and reflects industry best practices, as well as lessons learned from a number of independent reviews that have taken place over the past 18 months. We've also developed a racial equity and inclusion action plan. This will raise the bar for progress on key measures of equity and inclusion for our people and hold us accountable for clearing that bar. We also remain focused on sustaining critical investments in our business, innovating, and operating to help make the world a better place for future generations.\",\n \"This quarter, we appointed a chief sustainability officer, a leadership position dedicated to galvanizing and advancing our environmental, social, and our governance priorities. This is an important step as we continue to elevate our focus on sustainability in partnership with our customers, our suppliers, and our communities. In the face of tremendous challenges we are all confronting, I am incredibly proud of how our teams have remained focused on meeting our customers' commitments. Working closely with the FAA and other global regulators, we're continuing to make steady progress toward the safe return to service of our 737.\",\n \"Over the past year and a half, there have been around 1,400 test and check flights, over 3,000 flight hours completed on the airplane. While we still have work ahead of us, we're encouraged by the rigorous certification and validation flights conducted by the FAA, by Transport Canada, and the European Union Aviation Safety Agency, EASA. The joint operational evaluation board featuring civil aviation authorities from the United States, from Canada, Brazil, and the European Union also conducted its evaluations of updating [Inaudible]. We also continue to work closely with other global regulators, including the Civil Aviation Administration of China, among others.\",\n \"These are important milestones in the certification process as our global regulators progress through a comprehensive, robust, and transparent process, and we will continue to follow their lead in the steps ahead. Our assumption has not changed from last quarter. We continue to expect the necessary regulatory approvals to be obtained in time to support resumption of deliveries during the fourth quarter of this year. Of course, the actual time will ultimately be determined by the global regulators.\",\n \"In addition to the 737, we're making progress across our commercial, defense, space, and services businesses, and I'll highlight a few. Our 777-9 flight test program progressed through this quarter as the final test airplane joined the fleet. The U.S. Air Force and Boeing team were awarded the Collier Trophy for aerospace excellence for the X-37B autonomous spaceplane.\",\n \"Our Boeing defense systems team secured an important contract for eight F-15EX advanced fighter jets for the U.S. Air Force. And also in the quarter, our T-7A Red Hawk advanced trainer earned the first eSeries designator from the U.S. Air Force, given to an aircraft that is designed, engineered, built, and tested along a digital thread.\",\n \"And our Global Services team signed an agreement with GE Capital Aviation Services for 11 Boeing converted freighters and secured a six-year support contract for Australian P-8As. On the 777X, we continue to work with the regulators on certification work scope, including reflecting the learnings from the 737 cert process. As with any development program, there are inherent risks that can affect schedule. While we continue to drive toward entry into service in 2022, this timing will ultimately be influenced by certification requirements defined by the regulators.\",\n \"In addition to making progress across our programs, we're also taking action across the enterprise to transform our business and create additional competitive advantage. Greg will provide more details in his remarks. With that update in mind, let's turn to the next slide to discuss the industry environment. Earlier this month, we released our 2020 Boeing market outlook, which forecasts a total market value of $8.5 trillion over the next decade, down from $8.7 trillion a year ago due to the impact of the pandemic, most of the adjustment in the near term.\",\n \"Overall, the defense and space market remains significant and relatively stable, and we continue to see solid, global demand for our major programs. Nonetheless, the scale of government spending on COVID-19 response has the potential to add pressure on global defense spending in the future. Broad support for our defense portfolio was underscored by the $5 billion of orders that BDS booked in the third quarter across key franchise programs. The market outlook for our government services business also remains stable, driven by both domestic and international military aircraft fleet expansions.\",\n \"Our government services, defense, and space programs will help provide critical stability for us moving forward. Turning to the commercial market. While many of our key long-term fundamentals remain intact, we project near-term market pressure with COVID-19. Airlines globally have begun to recover from the trough of greater than 90% decline in passenger traffic and revenue earlier this year.\",\n \"In fact, earlier this month, the TSA screened over 1 million passengers for the first time since mid-March. However, the overall recovery has been at a slower pace than we originally anticipated. As the domestic market recovery continues, the international markets remain at all-time lows. August domestic passenger traffic was 49% of 2019 levels, a 51% decline, whereas international passenger traffic was only 12% of the prior year, an 88% decline.\",\n \"International passenger traffic recovery remains challenged by the absence of a coordinated global policy on cross-border entry protocols. IATA recently lowered its 2020 passenger traffic forecast to a 66% decline versus prior forecast of 63% based on lower fourth-quarter expectations and less international traffic. Regional dynamics continue to evolve with bright spots in China, where domestic traffic has returned to around 2019 levels, while recovery in other regions has pulled back as COVID cases reemerge and government travel restrictions remain fluid. Airlines are incrementally returning their parked fleet to service, with approximately three-quarters of their pre-crisis fleet now active.\",\n \"At the same time, the active fleets are only seeing about 60% to 70% of their normal utilization rates, keeping global operations around half of pre-crisis levels. These mix trends will continue to drive an uneven recovery. The path ahead will be heavily dependent upon not only the virus but also wide-scale progress on rapid testing, coordinated policies to alleviate travel restrictions, and timing and availability of a vaccine. As we look to the medium and long term, we see our original prognosis, more or less, still holds.\",\n \"Consistent with IATA and other industry groups, we still expect it will take around three years for travel to return to 2019 levels and a few years beyond that to return to long-term growth trends. Demand for narrow-body aircraft is expected to recover faster than wide-body demand as domestic and regional markets will outpace longer-haul international routes. Availability and wide distribution of a vaccine may help accelerate the demand improvement. However, in the near term, we expect continued uncertainties as the situation remains very dynamic with many variables.\",\n \"Our 10-year commercial airplane market outlook is approximately 11% lower than what we assumed a year ago, with wide-bodies more significantly impacted than narrow-bodies. From a 20-year perspective, we still see the impact of COVID, but to a lesser extent as traffic reverts to long-term trends over time. Near term, we also anticipate accelerated retirements, driving replacement demand up to approximately 48% of deliveries over the next 20 years. That compares to 44% as previously projected.\",\n \"As our customers focus on retiring their oldest and least efficient airplanes, new airplanes will allow the industry to reduce emissions and make future flying even more environmentally sustainable. Airplanes that we plan to deliver this year will be as much as 25% to 40% more fuel-efficient than the airplanes they're replacing. As we see airlines adapt to these market realities, price differentiation and versatility will be key. Our market-leading product line remains well-positioned to meet our customers' needs and supports airline plans to gain efficiencies as they reach for their emission goals.\",\n \"Our attractive portfolio and the diversity of our backlog provides a strong foundation for long-term success. In the commercial services market, although we believe we've seen the low watermark in terms of demand, the recovery has been slow, and we continue to anticipate will take multiple years to reach previous demand levels. Accelerated retirements will also result in a newer fleet as we emerge from the pandemic impacts, which will reduce services demand and prolong its market recovery. Digital solutions are emerging as a critical enabler as customers focus on leaner operations.\",\n \"Life cycle services and support will help customers scale their operations to meet efficiency and cost objectives aligned to market recovery trends. Our broad services portfolio and deep customer knowledge position us well to support these customer needs. Now, let's turn to commercial airplane production rates on Slide 4. We've maintained our prior assumptions regarding our production rate plans across all commercial airplane programs.\",\n \"However, the market continues to be dynamic, and we will monitor as we prudently balance supply and demand. We're closely watching the international passenger traffic recovery, which, so far, has been weak, to assess downside risks to our wide-body program production rates, in particular, the 787. We still expect to produce the 737 at very low rates for the remainder of 2020 and gradually increase the rate to 31 by the beginning of 2022 and expect further gradual increases to correspond with market demand. We will continue to assess the delivery profile for 2021 as it will help inform if we need to adjust our 737 production rate ramp-up.\",\n \"We will continue to keep our supply chain apprised of our plan. At the end of the third quarter, we have 3,400 aircraft in our 737 backlog. Although this remains an unprecedented and uncertain time, we are confident air travel will return, and when it does, we will be positioned to support our customers. And with that, let me turn it over to Greg.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Great. Thanks, Dave, and good morning, everyone. Let's please turn to Slide 5. As Dave mentioned, this moment is among the most difficult in our company's 100-plus year history.\",\n \"Since the beginning of the pandemic, we have taken prudent and decisive action in attempt to get ahead of this to preserve cash so that we can navigate this crisis and also reshape our business so that we can merge as a sharper, more resilient, and more competitive company. We are being and will continue to be proactive and look around corners to assess risk factors and take appropriate action. We've been focused on de-risking our business and a disciplined cash management for some time, and COVID-19 has accelerated these efforts further. I'll go through a quick timeline of our early actions we've taken in 2020 and then provide you with an update of our transformation efforts.\",\n \"Starting back in the middle of March, as the potential risk of the virus escalated, we took a proactive step to fully draw down on our $13.8 billion delayed draw term loan. Given the uncertainty of the markets at that time, we understood that this was a prudent step to bring that cash on our balance sheet. Almost immediately thereafter, we suspended our dividend and terminated our share repurchase authorization. Even then, at the early stage, it was clear to us that liquidity would be critical through this pandemic.\",\n \"These early decisive actions were critical and important. Next, in early April, we rolled out our first voluntary layoff program. We recognized the need to reduce our staffing levels, given the sharp reduction in commercial aircraft demand. And we took action to limit the impact on our teams as much as possible through voluntary opportunities first.\",\n \"This was followed by involuntary layoff programs. By the first-quarter earnings, we announced additional actions, including reducing our commercial production rates, limiting discretionary spending, and lower overall staffing levels by about 10%. While difficult, all these steps were critical in the early days of this global crisis. Shortly thereafter, we went to the bond market and raised $25 billion, which has proven to be instrumental to helping us navigate this crisis.\",\n \"The strong investor response reflected the confidence the overall market has in our future, as well as the swift action that the U.S. government took to support the credit markets. Throughout the spring and summer, we stayed very closely engaged with our customers and suppliers, working to understand the impacts of the pandemic so that we could recalibrate our industry while maintaining as much stability as possible. And by the second-quarter earnings, with a deeper understanding of the prolonged impact, we further reduced our commercial production rates and announced that we would further reduce our staffing levels.\",\n \"As you'll also recall at that point, we formally rolled out our business transformation efforts to assess every aspect of our business across five key pillars of infrastructure, overhead, and organization, portfolio and investments, supply chain health, and operational excellence. I'll share more updates on these shortly. In August, we moved forward with our second voluntary layoff program, which was much broader than our initial program and included our executives, which are then followed by another involuntary layoff program. We managed this process very closely to ensure continuity where necessary, and to maintain confidence in our ability to deliver on our commitments to our customers.\",\n \"Next, we rolled out a series of organizational realignments to streamline and simplify how we operate. Also, through our 787 study, it became evident that the consolidation to a single production location in South Carolina will make us more efficient and lower production and better positioned for the future. As a result, earlier this month, we made the decision to consolidate the 787 production in South Carolina by mid-'21. We are approaching these business transformation efforts with rigor and thoughtful evaluation at each step.\",\n \"We have made notable progress across all five pillars of our business transformation efforts. We will utilize this time when we are at the lower production rate environment to reinvent and to improve our business processes. First, regarding our infrastructure pillar. We're assessing our overall facility and site footprint in light of the reduced demand.\",\n \"The consolidation of the 787 production is an example of this. At the same time, we're also taking into account new flexible and virtual work opportunities. If you asked us eight to nine months ago if we thought a large portion of our workforce could work virtually while still being productive, you might have heard skepticism. But these last several months have shown us that we can be more flexible.\",\n \"Building on the lessons of our experiences, we're studying an enterprise footprint optimization effort, utilizing flexible and virtual workplace planning. We're starting with a few pilot programs over the coming months, which will help determine our best path forward. At the same time, we're also looking to make more efficient use of our square footage, and in some cases, reduce the overall footprint. Through staffing reductions and our flexible workplace program, we anticipate a reduction of approximately 30% in office space needs compared to our current capacity.\",\n \"We're reviewing every piece of real estate, every building, every lease, every warehouse, every site to look at how we can be more efficient, and we'll share our decisions as we make them. Turning to our overhead and organizational pillar. This is where we've been looking critically at our cost structure, at how Boeing operates and how we're organized, benchmarked to top-quartile standards, so we can simplify, reduce layers, reduce bureaucracy while ensuring we strengthen connections vital to safety, quality, and performance. As an example, we're studying how we organize our production and development programs better by reducing the layers between program leadership and the factory floor, increasing our management spans and control, and improving direct and indirect ratios.\",\n \"These actions are aimed at enhancing communication, empowering our teams, and creating lasting efficiencies in how we do our work. Moving to our portfolio and investment pillar. We're shaping our portfolio and aligning our investments to focus on the core business, market opportunities, and sustainability efforts. In addition to the impact in demand on near term, COVID-19 will also impact the timing of new market opportunities.\",\n \"Prior to the pandemic, we were investing in growth markets and growing business. But as the market conditions have changed, we have made swift decisions to adapt. You've seen us start to reprioritize our investments, and we will continue to do so and make prudent decisions going forward. We originally plan to invest over $6 billion this year.\",\n \"Through prioritization, we have pared back these investments by approximately $2 billion. That said, we have and we will continue to invest in all lines of our business. In fact, we've invested more than $60 billion over the last 10 years in key strategic areas of our business. As we take action in this pillar, we will not lose sight of our future and the exciting technologies that will reshape the future of air travel.\",\n \"Our guiding principle here is that every decision we make must help us navigate through this difficult period while also not diminishing our future competitiveness. Moving to supply chain pillars, Dave mentioned our suppliers are experiencing the same pressure that we are. Many of them are small businesses without our portfolio of diversity and scale. Our teams are actively talking to our suppliers every day.\",\n \"We have to work together as an industry to get through this difficult time so that we can come out of this healthy on the other side. We have made enhancements of our supply chain risk assessments and are closely monitoring each supplier, mitigating issues, exploring financing solutions, and getting creative and supporting them in the best way we can. The reality is that our industry as a whole will simply build less over the coming years. And we have to help our industry partners recalibrate to that lower demand in the near term while maintaining stability as much as possible and positioning to return to growth in the medium to long term.\",\n \"We're also transforming our transportation, warehouse, and logistics approach to streamline our warehousing network, set enterprise standards, and improve efficiencies. We're targeting a greater than 20% improvement to our internal material management costs while driving down our freight transportation spend and optimizing our warehousing operations. And we're also reducing our indirect and overhead spending on things like capital equipment, facility support, and enterprise services. We have an opportunity to significantly reduce our overall indirect spending, and we will be closely managing this process to ensure we continue to drive the highest levels of safety and quality.\",\n \"Lastly, we're working diligently to accelerate operational excellence across the enterprise so that we can improve performance, enhance quality, safety, reduce rework, and associated costs. The enterprise operations team successfully launched the formation of four companywide process councils around supply chain, program management, quality, and manufacturing. These councils are already driving integration and accelerating efforts to enhance program performance. We have simplified our structure to allow the process councils to lead on driving accountability and decision-making closer to the work that's being performed.\",\n \"When and where we identify issues at a program level, we're implementing thorough corrections, transparency, sharing information with our customers, and strengthening processes across the enterprise to enhance first-time quality in every program. These are just a few under way across the business. And over the coming weeks, months, and years, we'll keep you up to date on the transformation journey. Our focus here is clear.\",\n \"We're taking comprehensive action to preserve liquidity, navigate the pandemic, adapt to our new markets, improve performance, and position our company for the future. As we take these actions, we're ensuring that every step only furthers our drive key efforts in safety, quality, and delivering on our commitments. These efforts are meant to create meaningful and lasting change to how we operate and our cost structure. The financial objectives we've established are measured in billions of dollars, and we expect them to be executed over a multiyear period.\",\n \"In the current environment, we must take these actions to adapt to lower demand. What we're trying to achieve here are sustainable, structural, lasting improvements in our performance that lay the foundation for future margin expansion and cash flow generation as the market recovers. So with that, let's turn to Slide 6 for our third-quarter results. Our financial results continue to be significantly impacted by COVID-19 and the 737 MAX grounding.\",\n \"Third-quarter revenue of $14.1 billion reflects lower Commercial Airplane deliveries and commercial services volume, primarily, again, due to COVID-19. Earnings in the quarter were also impacted by charges for BCA abnormal costs related to the 737 program and severance costs for the additional approximate 7,000 employees leaving the company through the end of '21. These impacts were partially offset by an income tax benefit related to the NOL carryback provision in the CARES Act, as well as the impact of pre-tax losses. Let's now move to Commercial Airplanes on Slide 7.\",\n \"Revenue was $3.6 billion, reflecting lower Commercial Airplane deliveries due to the significant impacts of the pandemic, as well as 787 quality issues and associated rework. BCA third-quarter operating margins declined primarily due to lower delivery volume and a $590 million of abnormal costs related to the 737 program. Similar to prior period, in preparation for our third-quarter financial statements, we have made certain assumptions on production rates across all programs, as well as the 737 MAX delivery profile. As Dave mentioned, we've assumed that the timing of the regulatory approvals will enable 737 deliveries to resume during the fourth quarter of 2020.\",\n \"We currently have approximately 450 737 MAX aircraft built and stored in inventory. We expect to have to remarket some of these aircraft and potentially reconfigure them, which will extend the delivery time frame. We now expect delivery of about half of the aircraft currently in storage by the end of next year and the majority of the remaining in the following year. Delivery from storage will continue to be our priority after assisting our customers with their return to service.\",\n \"We expect the 737 MAX delivery timing, along with the production rate ramp-up profile to continue to be dynamic as they will ultimately be dictated by the pace of the commercial market recovery, which has been slow and remains uncertain. There is no material change in the estimate for the total abnormal cost of $5 billion, and we expect these costs will be expenses incurred over this year and next year. During the third quarter, we expensed $590 million of abnormal production costs, which brought the cumulative abnormal cost expense to date to $2.1 billion. Our assessment of the liability for the estimated potential concessions and other considerations to customers for disruptions related to the 737 MAX grounding and associated delivery delays did not change significantly in the third quarter.\",\n \"Cumulatively, we've accrued a $9.1 billion liability for the estimated potential concessions and other considerations. To date, we've made $3.1 billion of payments to customers in cash and other forms of compensation, including $500 million we paid this quarter. We have settlement agreements covering approximately $2.6 billion of the remaining liability balance of $6 billion. We continue to address the impact individually customer by customer, including assessing the efforts that the MAX disruption is having on their operations in light of the COVID impact.\",\n \"We also continue to expect any concessions or other considerations to be provided over a number of years with the cash impact to be more front-end loaded in the first few years. Any changes to these assumptions could require us to recognize additional financial impacts. Commercial Airplanes backlog includes more than 4,300 aircraft valued at $313 billion. The decline in backlog in the third quarter reflected the aircraft order cancellations and the removal of aircraft orders from our backlog due to ASC 606 accounting standards.\",\n \"As you saw in the second and third quarter, our production has outpaced our delivery rate. And we expect this to continue in the near term, resulting in higher finished goods inventory. We have a large number of undelivered 787 aircraft in inventory, and we are working with our customers to facilitate their deliveries. The burndown of 787 inventory over the next few months will largely be influenced by the pace of delivery activities, which has been and expected to remain relatively slow due to the additional time we're taking to inspect and ensure each of our 787s are delivered to our highest quality standards.\",\n \"We're also closely watching the international passenger traffic recovery, which so far has been weak and is more challenging than what we anticipated last quarter. The trend going forward is heavily dependent on the virus, testing, coordinated policies to alleviate travel restrictions, and timing and availability of a vaccine. We will continue to assess the downside risk of our production rates going forward. Let's now move to Defense, Space & Security on Slide 8.\",\n \"Third-quarter revenue decreased slightly to $6.8 billion, reflecting derivative aircraft award timing, partially offset by higher fighter volume. Third-quarter operating margin decreased to 9.2%, primarily reflecting less favorable performance, including a $67 million KC-46A tanker charge due to continued COVID-19 disruptions and productivity inefficiencies. During the quarter, BDS won key contract awards worth $5 billion, including a contract extension for the International Space Station for NASA and a contract for nine additional Chinook Block II helicopters for the United States Army Special Ops. Our backlog now stands at $62 billion, with 30% from outside of the United States.\",\n \"Let's now turn to Boeing Global Services results on Slide 9. In the third quarter, Global Services revenue declined to $3.7 billion, driven by lower commercial services volume due to COVID-19. This was partially offset by higher government service volume. Operating margin in the quarter reflected lower commercial services volume and additional severance costs.\",\n \"During the quarter, BGS won key contracts worth approximately $3 billion, which brings its backlog now to $17 billion. Although we saw a slight uptick in service demand in the third quarter, we predict the recovery would take multiple years, and we continue to take action to position our services business for the future. This includes not only employment actions and inventory rightsizing, but also making sure we have the right product, right service solutions to help our customers and industry navigate the downturn and scale their operations as near-term demand trends upward. Let's now turn to cash flow on Slide 10.\",\n \"The disruption caused by COVID-19 on our airlines and the global economy continues to put significant pressure on our cash receipts. Operating cash flow for the third quarter was negative $4.8 billion, driven by lower commercial airplane delivery volume, advanced payment timing, and commercial services volume. We achieved solid cash generation from our government programs and continue to expect future cash flow to be roughly in line with earnings from our government side of the business. The continued slow and uneven commercial market recovery is significantly impacting our cash flow and increasing pressure in the near term.\",\n \"We currently expect 2021 cash flow to be much improved from 2020, driven mainly by deliveries and inventory burn down associated with 737 and 787 programs. And we anticipate the cash profile to continue to improve further from '21 to 2022. While we're still aiming to turn cash positive in late '21, the recovery and the continued elevated virus cases make the path much more challenging. Based on what we know today, it's looking more likely that we will be cash flow-positive in the 2022 time frame.\",\n \"Our cash flow trajectory will clearly be dependent on the pace of commercial market recovery and how customer deliveries progress moving forward. Progress on testing protocols, government travel restrictions, and vaccine will be the pacing items. And we will continue to diligently work opportunities and monitor risk factors given the dynamic nature of this current environment. Let's move now to Slide 11, and we'll discuss our liquidity position.\",\n \"We continue to proactively manage our cash and assess our liquidity daily through this challenging time. We ended the third quarter with strong liquidity, including $27.1 billion of cash and marketable securities on our balance sheet and access to our $9.5 billion bank credit facility, which remains undrawn, as well as continuing to assess the capital markets. Our debt balance at the end of the quarter was $61 billion. And through the end of the year, we have just under $4 billion of debt maturing.\",\n \"To further bolster our liquidity as we work through the impacts of this pandemic, we may seek to refinance that maturing debt in the fourth quarter this year. In addition, we've decided to use Boeing's stock rather than cash to fund our company contribution to employees' 401(k) plans for the foreseeable future. This will preserve approximately $1 billion of cash gradually over the next 12 months. We also plan to make a discretionary contribution to our defined benefit pension plan in the fourth quarter, totaling $3 billion, which will also be funded by Boeing's stock.\",\n \"This move will further strengthen the funded status of our retirement plans to benefit our employees and retirees while improving our balance sheet position and minimizing future cash outflows. As we mentioned previously, we expect our use of cash due to COVID-19 to continue for the remainder of this year and into '21. Therefore, proactively managing our liquidity and balance sheet leverage will continue to be top priorities as we navigate this challenging environment. Once cash flow generation returns to more normal levels, reducing our debt levels will be our key focus area.\",\n \"These actions reflect our continued de-risking strategy and as part of our balanced approach to ensuring we proactively meet future obligations. We worked hard in the past to maintain disciplined cash management while seeking opportunities to strengthen our balance sheet, and we will continue these efforts. Let's just now turn to the last slide to summarize. We covered a lot today, but I want to provide you further clarity on our approach and our actions in addressing the profound impact the pandemic has had on our company and our industry.\",\n \"Through this tough time, we have focused on the health and safety of our employees and communities while working closely with our customers and suppliers to navigate this global pandemic and rebuild stronger on the other side. We also remain focused on achieving our priorities in transforming our business to adapt to this new market reality. As we've outlined today, we took decisive early actions to adapt, and we will continue to do so going forward. We've got the right team in place.\",\n \"They are focused. And we will continue to transform our business across the five pillars. As challenging as this situation has been and currently is, we continue to be confident in our long-term market outlook. The mission today is clear: stay laser-focused on the market dynamics, take proactive action across all aspects of our business with all eyes on liquidity, and emerge stronger and more resilient.\",\n \"We're committed to executing on actions that position our company and our industry for the future. So with that, I'll turn it over to Dave for some closing comments.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yes. Greg, thanks. This has been a year unlike any other, and we're facing unprecedented challenges in our company, our industry, and our communities. I'm proud of our team, and I thank them for the tremendous work they've done through these difficult circumstances.\",\n \"The long-term industry fundamentals remain strong. Air travel will recover. Our portfolio of products and technology is well positioned, and I'm confident in our future. With that, Greg and I will be happy to take your questions.\",\n \"And I'll turn it back to Maurita. Thank you.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"John, we're ready for the analyst question now.\"\n ]\n }\n]","isConversational":false},"questions_and_answers":{"kind":"list like","value":[{"name":"Operator","speech":["Certainly. [Operator instructions] Our first question comes from Doug Harned with Bernstein. Please go ahead."]},{"name":"Doug Harned","speech":["Good morning. Thank you."]},{"name":"Greg Smith","speech":["Good morning, Doug."]},{"name":"Dave Calhoun","speech":["Hi, Doug."]},{"name":"Doug Harned","speech":["Hi. I'd like to understand more about the path back on MAX deliveries once we've got ungrounding, which hopefully will not be in too long. And as we look at it, you've got some number, about 450 airplanes parked, with production on a slow ramp. But there are a number of issues.","Like modifications will be needed to these airplanes for recertification. You have an FAA inspection process that we think would affect delivery timing. And many of these parked airplanes will need to be reconfigured for other customers. So how do you think about the start-up of deliveries once ungrounding happens given these issues? And then lastly, given the demand challenges out there due to COVID, what will ultimately be the governing factors for the timing of your ramp in deliveries over the next year or so?"]},{"name":"Dave Calhoun","speech":["Yeah. So there's a lot embedded, of course, in answering that question. But remember, this RTS, return to service, we've been working on this for a very, very long time. So we're confident airplanes are ready, and they will be delivered.","And the cert process itself, as in ticketing each airplane, while that's somewhat new, that's a process that has been rehearsed and rehearsed and rehearsed between us and our regulator. It doesn't mean it's going to fly through. On the other hand, I don't actually expect much delay in that process. I think we've provisioned for that.","And our guess about how quickly we return these deliveries here in December, I think it's going to be fairly conservatively planned. And I think we can do better than that. But with respect to midterm, all of the early deliveries of 737s will be, of course, to the customers who are on contract and where we will not have to do mods, etc. And then as we begin to think about the longer -- or the end of that stream of inventoried airplanes which do not yet have homes, we think we're going to be able to do, within cycle times, all of the reconfigurations that are going to be required.","And we have to be ready for that, and our teams have positioned themselves to be ready for that. And then the final thing I would just suggest is that what will be hostage to the movement of those airplanes will be our production rate. We're determined not to create a bigger problem than we started with. And so that production rate will stay low until the movement of those airplanes and then those that need mods are scheduled and work scope is in place such that we can predict their delivery and then, therefore, begin to inch up our production rates again.","So that's going to be pretty fluid. Your question suggests that, and my answer suggests that. But I am confident that that all happens. And then there is a moment, honestly, somewhere in the middle of next year when maybe we're over the second wave, and maybe there's a vaccine, and maybe it's being distributed.","And then all of a sudden, everyone's waking up to renewed schedules. And the psychology will lend itself, in my opinion, to a little bit of a run on the bank with respect to narrow-body airplanes. And we'll see about that. I may be dead wrong.","But frankly, that's as much of my worry as just moving the airplanes we've got; it's going to be the response when the recovery really does come. I want to make sure we're stable and ready for that."]},{"name":"Operator","speech":["Our next question is from David Strauss with Barclays. Please go ahead."]},{"name":"David Strauss","speech":["Thanks. Good morning, everyone."]},{"name":"Greg Smith","speech":["Good morning."]},{"name":"Dave Calhoun","speech":["Good morning."]},{"name":"David Strauss","speech":["Yeah. I wanted to ask, I guess, first of all, on the MAX, the 450 or so that you have in storage, what proportion of your customers have actually reaffirmed that they want to take aircraft in either '21 or '22? Because it seems like pretty much, everyone's come out and said that they want very few airplanes. And then on the 87, why not take the rate down earlier, given how much inventory you've already built on that aircraft? I think you have somewhere around 50 airplanes in storage. Thanks."]},{"name":"Greg Smith","speech":["Yeah. Look, on the 787, David, most of the inventory that we have is the result of the quality assessment that we've been doing and the rework associated with it. It's more heavily weighted there than it is customers not able to take the aircraft. So as I mentioned, we're going to have a big fourth quarter on deliveries here and, again, paced by our inspections and quality effort.","And then that will pick up in '21. But as Dave said and I think I reiterated, that we're continuing to assess the wide-body market on a day-to-day basis and particularly linked to how we're seeing international coming back. So we're being, I think, very clear-eyed around who we've got in the backlog, the probability of delivery, the time frame, the potential movements of aircraft. And then where we've got unsold positions, what's the real probability there and risk assessing that.","So that's going to continue to be our discipline, but we're, again, very diligently focused on it. And if we have to make further adjustments down, then we certainly will to match the demand. And maybe I'll just jump on the 37 and then hand it back to Dave. But look, on the profile around the 37s that we've got parked, really, three major kind of, I'd say, kind of ways we look at it.","Obviously, you've seen the cancellations and contractual changes, and sometimes, those contractual changes are recontracting the airplanes to move out to further time frames. We're assessing the financial conditions of every customer and assessing that health, and then just other, I'll say, potential delivery risks, which is really tied to the recovery and the challenges across the globe with the pandemic. So all those taken into account, we go through a pretty thorough risk assessment over that profile, including, obviously, day-to-day contact with our customers and their ability to take the aircraft in certain time frames. But, look, I'll tell you, it's dynamic.","It moves around. We've got a team that's dedicated to that skyline and engaging with those customers, and we're making adjustments real time. But at the same time, doing our own risk assessment. And that is a clear eye toward liquidity.","If we see more risk, how do we bolster our liquidity? If that risk does not materialize, then it's upside for us. But we're doing that to really kind of understand, I'll say, the band of risk from the baseline plan that we have in place. I don't know, Dave, if you had anything you want to add."]},{"name":"Dave Calhoun","speech":["Yeah. No. I mean, it's as fluid as anything you could imagine. So again, I don't want to suggest that we know everything about everything.","I will suggest, in light of what we have to do for the accountants and for ourselves, we tend to be more conservative than our customers are with respect to their intentions. So, yes, probably more than half are, in fact, planned for customers have already been through adjustments, and we're ready to go do what we're going to do. But we tend to be more conservative than they are on this front because we have to be. Anyway, it's not a perfect world.","We'll continue to update it each and every week and month, and we'll keep you informed. But we are where we are now."]},{"name":"Operator","speech":["Our next question is from Sheila Kahyaoglu with Jefferies. Please go ahead."]},{"name":"Sheila Kahyaoglu","speech":["Thank you and good morning, Dave and Greg."]},{"name":"Dave Calhoun","speech":["Good morning."]},{"name":"Sheila Kahyaoglu","speech":["Greg, I think you mentioned you're unlikely to be cash positive in 2021. Can you help us square that, especially in light of some of the MAX production comments on 31 a month in 2022, which would lead us to believe some inventory unwind? And you haven't really changed production rates quarter over quarter. So what are the biggest drags on 2021 cash, whether it's BCA profitability, inventory, or PDPs, or concessions?"]},{"name":"Greg Smith","speech":["Yeah. Probably a little bit of everything, Sheila, around that. I mean, certainly, it's become more challenging just as we've seen continued elevations of the virus, and then, therefore, the customer dialogues around the specific timing around, in particular, delivery. So all of that backdrop has made '21 more challenging.","I'd say key drivers from '20 to '21, which we expect, again, '21 to be better than '20, it's the same elements. It's certainly the 737 return to service and that ramp up, in particular, near-term focus on the parked fleet. And then the 787 inventory build, as you mentioned, that timing of the transition between this year and next year will give us some cash headwind. But overall, it's just gotten a little more challenging, specifically around whether it's PPs or actually delivery slots that's made '21.","Again, we're still shooting for it. But having said that, based on everything we know today, it really is looking more likely that cash flow positive is going to be in the '22 time frame. But like I said, we'll continue to work it, but that's how we see it today."]},{"name":"Sheila Kahyaoglu","speech":["Thank you."]},{"name":"Greg Smith","speech":["You're welcome."]},{"name":"Operator","speech":["And next, we'll go to Ron Epstein with Bank of America. Please go ahead."]},{"name":"Ron Epstein","speech":["Yeah. Hey. Good morning, guys."]},{"name":"Dave Calhoun","speech":["Good morning, Ron."]},{"name":"Ron Epstein","speech":["Thank you for all the detail and color on the call. Maybe a bigger picture question for both of you. It really does seem in the narrow-body market like Boeing is [Inaudible] at this point is losing share to Airbus. I guess my question for both of you is, one, do you see it as a problem? And if you do, how can you address it given all the constraints that confront the company today?"]},{"name":"Dave Calhoun","speech":["Yes. So let me take this one. Market share, without a doubt, we've lost some share. When you don't produce an airplane for a year and the other guy does, by definition, you take a big hit with respect to share.","With respect to future competitions and our airplane competing against their airplane, I'm not going to give up any ground, and I don't believe we will. I don't think our airplane will. They have a particular part of their narrow-body fleet, the 321, that's got advantages for certain routes, without a doubt. Our airplane, in the middle part of that route, with respect to efficiency and environmental performance, frankly, and seat cost, gives us an advantage.","And I'm not sure how the mix of the market is going to ultimately play out with respect to the number of routes in each. But I'm not worried about the 737 family competing against the A320 family. And then with respect to wide-bodies, of course, I think we enjoy a big advantage, and I think we will continue that advantage despite the fact that the market's going to have a rough time. And it's going to take a while to get back.","So, no, I'm not sitting around, sucking my thumb that we're disadvantaged with respect to our product offering. And then the next product's going to come along. We have some incredible underlying technologies that are going to support the point design of that next airplane. We're going to assess this market based on everything that's happened in the last year and probably the next year.","And I think we'll be able to call out that point design and pull these underlying technologies that we think will create a winning airplane. So we're not out of the development business. We're still in it. This time -- or I will call it deferral of the NMA or whatever that slot was, this is actually going to advantage us in determining the point design based on what I think are some changing market conditions.","But we never let up on the underlying technologies, and we will not let up. And our spending today covers those things. So yes, I believe we've got a very competitive product line, and I'm not in any way going to give up any room with respect to our competitor on that front."]},{"name":"Ron Epstein","speech":["Thank you."]},{"name":"Operator","speech":["Our next question is from Carter Copeland with Melius Research. Please go ahead."]},{"name":"Carter Copeland","speech":["Hey. Good morning, gentlemen."]},{"name":"Greg Smith","speech":["Good morning, Carter."]},{"name":"Dave Calhoun","speech":["Good morning."]},{"name":"Carter Copeland","speech":["Greg, I wondered, could you speak to whether there were any changes in your program margin assumptions across the portfolio? Obviously, the big decision on the South Carolina consolidation, and that was a pretty low program margin for the last quarter Q. But just in general, all these cost-out actions and the impact of those and what that means for your assumptions around cost and profit, whatnot, any color you could give us would be helpful. Thanks."]},{"name":"Greg Smith","speech":["Yes. I'd say not significant change within the quarter on the booking rates, Carter. 777 was up a little bit. 87 was up a little bit.","And then we were down slightly on 37 and 47 a little bit on 67. Some of that is, as you said, customer mix. Some of it's cost, and some of it's escalation. So not a lot of movement within the quarter on program."]},{"name":"Carter Copeland","speech":["OK. And with respect to the comments you had on the skyline and managing the skyline, are there any kind of broader observations or themes in how that skyline is settling out from a customer-type or regional standpoint, where those planes are going, or how that process is evolving? Thanks."]},{"name":"Greg Smith","speech":["Yeah. I can't sit here and say there's any specific themes. I know it's probably an overused term, but it's dynamic. So in each situation where the customer is different.","It's different considering their own liquidity, access to liquidity, what their planned fleets are, what they were, and what's happening within their region with regards to any government restrictions on travel. So it really varies by customer and then within time frames because some customers want to remain and have remained committed to taking deliveries but needed to move them out to the right for a variety of reasons. So you can imagine, again, this is tail-by-tail, customer-by-customer weekly assessments by the teams that are engaging with customers. So we have a good line of sight, but recognizing we've got to be agile in it's dynamic.","But then again, applying our own risk assessment to just look at it through a liquidity and cash lens to ensure that if we do see any risk building, how do we stay ahead of it? And that's the action, certainly, that we've been taking to date, and that relates to my comments around the debt maturing that we may seek to refinance in the fourth quarter, as well as the actions we're taking with the pension and the 401(k). So I can't say if there's anything specific that comes to mind as a common thread throughout other than, obviously, the significant impact the pandemic is having on everybody."]},{"name":"Carter Copeland","speech":["Great. Thanks for the color."]},{"name":"Greg Smith","speech":["Thank you."]},{"name":"Operator","speech":["And next, we go to Jon Raviv with Citi. Please go ahead."]},{"name":"Jon Raviv","speech":["Hey. Thanks. Good morning, everyone. So just talking about defense for a moment, I think it's a pretty important part of the cash flow generation story here.","But when you look at it, it doesn't seem to be growing much this year. The margins are a bit lumpy. Backlog's really kind of in the 1 times, below 1 times area. So what's going on there? And maybe you can give us a full picture, including BGS government.","And how do you see the future of the total defense enterprise developing over the next few years? Everyone is seeing decelerating growth next year. Can you guys sort of change that dynamic?"]},{"name":"Greg Smith","speech":["Maybe I'll take a shot on the top line and the margin, and then I'll hand it over to Dave. But this is a year -- certainly, if you take the production programs, steady production across, whether it's the fighter business or in the rotorcraft business. But this is a year of transition, in particular, for the development programs on the T-7A and the MQ-25 and residential aircraft. So obviously, once those get out of development and start to move their way into production, you'll see the, I'll say, the modest growth associated with that.","I think, Jon, domestically, we're continuing to see good support for our core programs. But at the same time, I mean, we're competing to win there. So all this transformation effort doesn't just apply to commercial, it's really coming off the heels of what a lot of the effort we do at BDS for some time. But that mix of portfolio, Jon, on the development side is certainly impacting the margin here near term.","And then as we've seen, we've had COVID impact on the defense business, and it's been disruptive that we're experiencing on KC-46 and we've experienced on a couple of other programs this year. But outside of that, I think, again, once we move into production on the development programs, and there's no question that we've got to improve our performance on overall development programs, we expect to see a more stable, growing margin there as well. I don't know, Dave, if you have anything to add."]},{"name":"Dave Calhoun","speech":["Yeah. The only thing I would comment on is, one, I feel great about the franchise broadly. In our services business broadly, government now is the majority of that business. And it continues to go quite well.","So I do expect some growth in that. Two, our resource planning has not, in any way, tried to strangle government. In fact, it's been the opposite. So almost all of the reductions net that we've described across the company have been applied against our commercial franchise so that we're not starving something in our defense business as a result of the difficulties we're having in our commercial business.","And finally, the tanker. The tanker has been a drag on us for like three or four years in every way you can think of with respect to investors. But we are beginning to clear the hurdle with our customer with respect to its performance in their fleet and then their need for that tanker. So that whole relationship, I believe, will begin to transition next year.","And as opposed to being a drag on our franchise it's been, I believe it will become a strength in our franchise. So I think in combination with what Greg said, I think that's the situation. I will say, and I said it this morning, we're not planning on defense spending to go up in any appreciable way. In fact, we believe there will be pressure on defense spending as a result of all the COVID-related spending that governments around the world have been experiencing.","So I don't think we're looking at that world through rose-colored glasses. I expect real pressure on that market."]},{"name":"Operator","speech":["Our next question is from Seth Seifman with JP Morgan. Please go ahead."]},{"name":"Seth Seifman","speech":["Thanks very much and good morning."]},{"name":"Greg Smith","speech":["Good morning, Seth."]},{"name":"Seth Seifman","speech":["Kind of a two-part question on China, one kind of specific and one bigger picture. I mean, specifically, when you think about your production and delivery expectations for 737, what are you assuming in terms of when you get certification from Chinese authorities? And then second of all, when we look at the 20-year forecast, and we see China is such a big market for new aircraft, and we think about increasingly explicit strategic competition between the two countries and their efforts over that 20-year time frame to break into the market, how do you plan for that over time? And how do you see it potentially eroding the market?"]},{"name":"Dave Calhoun","speech":["Yeah. So there's a narrow question and a giant question together. So let me start with the narrow one with respect to our narrow-body deliveries. We attempted quite a while ago to de-risk our delivery stream on the inventoried airplanes such that we pushed out the Chinese airplanes for later delivery.","And at the same time, we've had a team on the field with the CAAC, the certification body in China, for probably a better part of two months. And they are working through that process just like the FAA and the EASA did here in Europe. And it's been going quite well and productively, and all the technical people are lined up, etc. So I'm confident that that process will happen, and then ultimately, we can get back to deliveries.","And as everyone knows, China is back in business. And the airlines need this kind of lift, and we happen to be one of two people in the world that can deliver it. And that will be that way for quite a while. So we've had great relationships.","We continue to have them. We're going to continue to manage it, and we know that there is going to be, over time, a competitive threat there. We're not afraid of it. We're going to continue to do what's right for our customers.","When that threat shows up, what form it takes, ultimately, how it wants to compete around the world, we'll be up for that round of competition. I don't think that is for quite a while. And I've been around that discussion since the year 2000. So anyway, I have great respect for China and what they want to accomplish here.","But the long view is still going to have to remain a constructive view with respect to Boeing and China, and that's where we're positioned."]},{"name":"Seth Seifman","speech":["Thank you."]},{"name":"Operator","speech":["Next, we'll go to Rob Spingarn with Credit Suisse. Please go ahead."]},{"name":"Rob Spingarn","speech":["Hi. Good morning."]},{"name":"Dave Calhoun","speech":["Hi, Rob."]},{"name":"Rob Spingarn","speech":["Greg, I wanted to ask you a little further on cost. You talked about reducing the footprint and is laser-focused on cost. I wanted to just explore how we think about the excess capacity that gets created in Everett with the 787 leaving and the 747 concluding. I mean, would you think about moving MAX up there at some point? Or does this next aircraft that Dave alluded to go there? How do we think about that?"]},{"name":"Greg Smith","speech":["Yes. Maybe just stepping back, as I mentioned in the remarks, I mean, we're looking at all of our space around the globe, Rob, and looking for ways to be more efficient. And that's certainly as we see it today with the work that's in there, but as Dave said in his response to some of the BDS question, we're looking forward as well. So we're trying to take all of that into consideration and be strategic about it.","But the fact is that all of our facilities are not fully utilized, and we need to get them fully utilized. And we got to do that in a very methodical way and do it as a company and doing it together about how do we think about strategically, how do we get our utilization improved, and overall efficiency. So it doesn't really just center around one site. I mean, that's certainly an important part of it.","But it's every building, every lease, every office space, looking at current near-term demands, but also kind of future potential opportunities and so on. And every one of our decisions is going to be looking through all those lenses before we make it. But make no mistake about it. It's all about being more efficient and having improved utilization.","As I mentioned, just in office space alone, we're targeting something like a 30% reduction there, and we'll continue to do so. And like I said, it's across all aspects of real estate. So more to come on it."]},{"name":"Rob Spingarn","speech":["Right. So you're not ruling out big changes?"]},{"name":"Dave Calhoun","speech":["We're not ruling out -- no, we're not ruling out big changes. But just by way of how we think about it, that Everett space that's freed up, I mean, we're going to line it off for quite a while because I don't want to move lines from one place to another just because it's available. And for the most part, our reinvigoration of all things lean in Boeing, and this is really related to workflow and the use of the capacity that we have, will suggest that we can actually produce a lot more in the same or even smaller footprint than we do today. So we're going to stay on that program, and we're going to line off the things that get freed up as a result of decisions like the 787 and the 47, etc.","And we're not going to just try to fill it. We also need the market to return. We need to see where all the demands really ultimately play out and where that next footprint really needs to sit. We know we have some great skills in that area, there's no doubt.","And that matters a lot, and that will factor. But we're not just going to try to fill empty space. That would not be in our best interest."]},{"name":"Rob Spingarn","speech":["Thank you."]},{"name":"Operator","speech":["Our next question is from Myles Walton with UBS. Please go ahead."]},{"name":"Myles Walton","speech":["Thanks. Good morning, almost afternoon. The question I had was really a clarification leading to a question. So the clarification on the $1 billion of equity sale stock toward the 401(k) sort of on an annual basis, I guess, on a go-forward basis, and then the $3 billion to the pension plan.","Is that $3 billion prefund for a number of years, such that it's sort of a one-and-done for a few years? And then is the 401(k) more of an ongoing? And then, Greg, the question, obviously, to a broader equity issuance to rebalance the portfolio -- the balance sheet, rather, above and beyond what this is. What would make you consider that?"]},{"name":"Greg Smith","speech":["Yeah. No. I mean, well, first of all, the way you're thinking about the 401(k) and pension is right. So the pension will be -- like I said, it's an attempt to really minimize the outflow over the next several years.","So as we see it today, contributing the stock at an amount of $3 billion really takes that risk off the table. So ultimately, it should help our cash flow profile going forward. And like I said, the 401(k) is, yes, it's more of kind of an annual approach to that. But the whole idea on the balance sheet between debt and equity and so on, I mean, we're, again, diligently focused on what levers we have, how do we de-risk.","Certainly, our credit rating is significantly important to us, and our overall balance sheet health. So it's a balance. It's a continuous balance of the two. And we think between what we've done and what we are doing internally, combined with the debt and the bank drawdown, and now, with this, think of that, again, as just a continuous balanced approach of looking through each one of these areas and trying to find the right mix.","As I did mention, too, we've got $4 billion of debt maturing over the next year. So we'll again look at that and look at potentially refinancing that. So again, it's a very balanced approach in understanding the second, third-order effect of each of them. But the objective here, again, is just to try to stay ahead and manage our liquidity as we have on a day-to-day basis.","But again, looking beyond our baseline plan around the possibilities with some of the near-term challenges and pulling the appropriate levels at the appropriate time. And this 401(k) and pension, we believe, fits right into that category."]},{"name":"Myles Walton","speech":["OK. Thank you."]},{"name":"Operator","speech":["And next, we'll go to Kristine Liwag with Morgan Stanley. Please go ahead."]},{"name":"Kristine Liwag","speech":["HI. Good morning, Dave and Greg."]},{"name":"Greg Smith","speech":["Good morning."]},{"name":"Dave Calhoun","speech":["Hi, Kristine."]},{"name":"Kristine Liwag","speech":["Hi. With your decision to fund the pension with Boeing stock, I guess I would have thought that free cash flow in 2021 would have been incrementally positive. So first, were you initially expecting to fund the pension in 2021, and were you expecting to do that with stock? And then also second, can you provide a little bit more color on the moving parts and operating cash flow in 2021 and any one-time items, so we can bridge to your positive outlook in 2022?"]},{"name":"Greg Smith","speech":["Yeah. So, Kristine, the pension funding or -- as you know, it all depends on the rates and the discount rate. But as we kind of modeled it, we started to see in the '22 time frame and beyond some incremental funding requirements. So we essentially, like I said, pulled that forward.","We didn't see a significant amount of funding required in '21, but we did start to see some of it in the years beyond that. So this was again an opportunity to pull that forward and utilize our stock and improve the cash profile going forward. So net-net, as you know, we've done it before, and we know how to do it. And we think it was, again, a prudent thing to do.","All part of just consistently reviewing the capital structure strategy and balancing the funding approach to the pension, in particular. As far as '20, I'll say, kind of '20 to '21, again, I'd say the key elements are very similar to what we talked last time, but the level of contribution is evolving and changing year over year. So as you bridge to an improved cash flow, which it will be, as we see it today in '21 over '20, 737 MAX is the single biggest contributor. So getting return to service, starting to deliver off the ramp, and then as Dave said, informing our production rates, and then ultimately, the marketplace and what the recovery looks like, that's going to be the single biggest driver.","Outside of that, the next one is the 787. As I said, we're building inventory, and we'll have that inventory and delivery profile aligned into '21, and that will be your second largest contributor to '20 over '21 as it sits today. Those are the two single biggest. If you look at year over year, as we see it today with services or defense, it's pretty much in line with how we think we're going to finish this year.","So it really does narrow down to those two product lines, in particular, with the 737 being the biggest contributor."]},{"name":"Kristine Liwag","speech":["Thank you very much."]},{"name":"Greg Smith","speech":["You're welcome."]},{"name":"Maurita Sutedja","speech":["All right. John, we have time for one last question."]},{"name":"Operator","speech":["Great. And that will be from Peter Arment with Baird. Please go ahead."]},{"name":"Peter Arment","speech":["Yeah, thanks. Thanks for squeezing me in. Good morning, Dave, Greg."]},{"name":"Dave Calhoun","speech":["Hi, Peter."]},{"name":"Peter Arment","speech":["Hey, Greg, just on the 787, the consolidation move final assembly to one facility in South Carolina, maybe you can just talk through how you're thinking about -- does that change any kind of outlook on the times of the profitability of the overall program? Or how you're thinking about the kind of the productivity gains that you'll be able to achieve at one facility? Thanks."]},{"name":"Greg Smith","speech":["Yeah. I think, as you know, Peter, it really kind of starts with the market outlook that we had, and then looking at efficiencies, and then, ultimately, how do we become more competitive. And this is certainly a key contributor to that. As far as a program margin perspective, it won't have a significant impact on that certainly near term.","But as Dave said earlier, we're looking beyond the current rate and looking at rates beyond where the marketplace is today. And that's ultimately where we'll see much more efficiencies, and particularly around logistics, going from the mid and half body right over into final assembly and not having the transportation logistics associated with that and having the dedicated crews and the cycling, again, we'll see the efficiencies. But really, we'll capture it more at the higher production rates."]},{"name":"Peter Arment","speech":["Appreciate all the detail. Thanks, guys."]},{"name":"Dave Calhoun","speech":["Yeah."]},{"name":"Maurita Sutedja","speech":["All right. Thank you all. That completes the Boeing Company's third-quarter 2020 earnings conference call. Thank you for joining."]},{"name":"Dave Calhoun","speech":["Thank you, everyone."]}],"string":"[\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Certainly. [Operator instructions] Our first question comes from Doug Harned with Bernstein. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Doug Harned\",\n \"speech\": [\n \"Good morning. Thank you.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Good morning, Doug.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Hi, Doug.\"\n ]\n },\n {\n \"name\": \"Doug Harned\",\n \"speech\": [\n \"Hi. I'd like to understand more about the path back on MAX deliveries once we've got ungrounding, which hopefully will not be in too long. And as we look at it, you've got some number, about 450 airplanes parked, with production on a slow ramp. But there are a number of issues.\",\n \"Like modifications will be needed to these airplanes for recertification. You have an FAA inspection process that we think would affect delivery timing. And many of these parked airplanes will need to be reconfigured for other customers. So how do you think about the start-up of deliveries once ungrounding happens given these issues? And then lastly, given the demand challenges out there due to COVID, what will ultimately be the governing factors for the timing of your ramp in deliveries over the next year or so?\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah. So there's a lot embedded, of course, in answering that question. But remember, this RTS, return to service, we've been working on this for a very, very long time. So we're confident airplanes are ready, and they will be delivered.\",\n \"And the cert process itself, as in ticketing each airplane, while that's somewhat new, that's a process that has been rehearsed and rehearsed and rehearsed between us and our regulator. It doesn't mean it's going to fly through. On the other hand, I don't actually expect much delay in that process. I think we've provisioned for that.\",\n \"And our guess about how quickly we return these deliveries here in December, I think it's going to be fairly conservatively planned. And I think we can do better than that. But with respect to midterm, all of the early deliveries of 737s will be, of course, to the customers who are on contract and where we will not have to do mods, etc. And then as we begin to think about the longer -- or the end of that stream of inventoried airplanes which do not yet have homes, we think we're going to be able to do, within cycle times, all of the reconfigurations that are going to be required.\",\n \"And we have to be ready for that, and our teams have positioned themselves to be ready for that. And then the final thing I would just suggest is that what will be hostage to the movement of those airplanes will be our production rate. We're determined not to create a bigger problem than we started with. And so that production rate will stay low until the movement of those airplanes and then those that need mods are scheduled and work scope is in place such that we can predict their delivery and then, therefore, begin to inch up our production rates again.\",\n \"So that's going to be pretty fluid. Your question suggests that, and my answer suggests that. But I am confident that that all happens. And then there is a moment, honestly, somewhere in the middle of next year when maybe we're over the second wave, and maybe there's a vaccine, and maybe it's being distributed.\",\n \"And then all of a sudden, everyone's waking up to renewed schedules. And the psychology will lend itself, in my opinion, to a little bit of a run on the bank with respect to narrow-body airplanes. And we'll see about that. I may be dead wrong.\",\n \"But frankly, that's as much of my worry as just moving the airplanes we've got; it's going to be the response when the recovery really does come. I want to make sure we're stable and ready for that.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from David Strauss with Barclays. Please go ahead.\"\n ]\n },\n {\n \"name\": \"David Strauss\",\n \"speech\": [\n \"Thanks. Good morning, everyone.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"David Strauss\",\n \"speech\": [\n \"Yeah. I wanted to ask, I guess, first of all, on the MAX, the 450 or so that you have in storage, what proportion of your customers have actually reaffirmed that they want to take aircraft in either '21 or '22? Because it seems like pretty much, everyone's come out and said that they want very few airplanes. And then on the 87, why not take the rate down earlier, given how much inventory you've already built on that aircraft? I think you have somewhere around 50 airplanes in storage. Thanks.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah. Look, on the 787, David, most of the inventory that we have is the result of the quality assessment that we've been doing and the rework associated with it. It's more heavily weighted there than it is customers not able to take the aircraft. So as I mentioned, we're going to have a big fourth quarter on deliveries here and, again, paced by our inspections and quality effort.\",\n \"And then that will pick up in '21. But as Dave said and I think I reiterated, that we're continuing to assess the wide-body market on a day-to-day basis and particularly linked to how we're seeing international coming back. So we're being, I think, very clear-eyed around who we've got in the backlog, the probability of delivery, the time frame, the potential movements of aircraft. And then where we've got unsold positions, what's the real probability there and risk assessing that.\",\n \"So that's going to continue to be our discipline, but we're, again, very diligently focused on it. And if we have to make further adjustments down, then we certainly will to match the demand. And maybe I'll just jump on the 37 and then hand it back to Dave. But look, on the profile around the 37s that we've got parked, really, three major kind of, I'd say, kind of ways we look at it.\",\n \"Obviously, you've seen the cancellations and contractual changes, and sometimes, those contractual changes are recontracting the airplanes to move out to further time frames. We're assessing the financial conditions of every customer and assessing that health, and then just other, I'll say, potential delivery risks, which is really tied to the recovery and the challenges across the globe with the pandemic. So all those taken into account, we go through a pretty thorough risk assessment over that profile, including, obviously, day-to-day contact with our customers and their ability to take the aircraft in certain time frames. But, look, I'll tell you, it's dynamic.\",\n \"It moves around. We've got a team that's dedicated to that skyline and engaging with those customers, and we're making adjustments real time. But at the same time, doing our own risk assessment. And that is a clear eye toward liquidity.\",\n \"If we see more risk, how do we bolster our liquidity? If that risk does not materialize, then it's upside for us. But we're doing that to really kind of understand, I'll say, the band of risk from the baseline plan that we have in place. I don't know, Dave, if you had anything you want to add.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah. No. I mean, it's as fluid as anything you could imagine. So again, I don't want to suggest that we know everything about everything.\",\n \"I will suggest, in light of what we have to do for the accountants and for ourselves, we tend to be more conservative than our customers are with respect to their intentions. So, yes, probably more than half are, in fact, planned for customers have already been through adjustments, and we're ready to go do what we're going to do. But we tend to be more conservative than they are on this front because we have to be. Anyway, it's not a perfect world.\",\n \"We'll continue to update it each and every week and month, and we'll keep you informed. But we are where we are now.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Sheila Kahyaoglu with Jefferies. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Thank you and good morning, Dave and Greg.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Greg, I think you mentioned you're unlikely to be cash positive in 2021. Can you help us square that, especially in light of some of the MAX production comments on 31 a month in 2022, which would lead us to believe some inventory unwind? And you haven't really changed production rates quarter over quarter. So what are the biggest drags on 2021 cash, whether it's BCA profitability, inventory, or PDPs, or concessions?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah. Probably a little bit of everything, Sheila, around that. I mean, certainly, it's become more challenging just as we've seen continued elevations of the virus, and then, therefore, the customer dialogues around the specific timing around, in particular, delivery. So all of that backdrop has made '21 more challenging.\",\n \"I'd say key drivers from '20 to '21, which we expect, again, '21 to be better than '20, it's the same elements. It's certainly the 737 return to service and that ramp up, in particular, near-term focus on the parked fleet. And then the 787 inventory build, as you mentioned, that timing of the transition between this year and next year will give us some cash headwind. But overall, it's just gotten a little more challenging, specifically around whether it's PPs or actually delivery slots that's made '21.\",\n \"Again, we're still shooting for it. But having said that, based on everything we know today, it really is looking more likely that cash flow positive is going to be in the '22 time frame. But like I said, we'll continue to work it, but that's how we see it today.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"You're welcome.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And next, we'll go to Ron Epstein with Bank of America. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Ron Epstein\",\n \"speech\": [\n \"Yeah. Hey. Good morning, guys.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Good morning, Ron.\"\n ]\n },\n {\n \"name\": \"Ron Epstein\",\n \"speech\": [\n \"Thank you for all the detail and color on the call. Maybe a bigger picture question for both of you. It really does seem in the narrow-body market like Boeing is [Inaudible] at this point is losing share to Airbus. I guess my question for both of you is, one, do you see it as a problem? And if you do, how can you address it given all the constraints that confront the company today?\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yes. So let me take this one. Market share, without a doubt, we've lost some share. When you don't produce an airplane for a year and the other guy does, by definition, you take a big hit with respect to share.\",\n \"With respect to future competitions and our airplane competing against their airplane, I'm not going to give up any ground, and I don't believe we will. I don't think our airplane will. They have a particular part of their narrow-body fleet, the 321, that's got advantages for certain routes, without a doubt. Our airplane, in the middle part of that route, with respect to efficiency and environmental performance, frankly, and seat cost, gives us an advantage.\",\n \"And I'm not sure how the mix of the market is going to ultimately play out with respect to the number of routes in each. But I'm not worried about the 737 family competing against the A320 family. And then with respect to wide-bodies, of course, I think we enjoy a big advantage, and I think we will continue that advantage despite the fact that the market's going to have a rough time. And it's going to take a while to get back.\",\n \"So, no, I'm not sitting around, sucking my thumb that we're disadvantaged with respect to our product offering. And then the next product's going to come along. We have some incredible underlying technologies that are going to support the point design of that next airplane. We're going to assess this market based on everything that's happened in the last year and probably the next year.\",\n \"And I think we'll be able to call out that point design and pull these underlying technologies that we think will create a winning airplane. So we're not out of the development business. We're still in it. This time -- or I will call it deferral of the NMA or whatever that slot was, this is actually going to advantage us in determining the point design based on what I think are some changing market conditions.\",\n \"But we never let up on the underlying technologies, and we will not let up. And our spending today covers those things. So yes, I believe we've got a very competitive product line, and I'm not in any way going to give up any room with respect to our competitor on that front.\"\n ]\n },\n {\n \"name\": \"Ron Epstein\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Carter Copeland with Melius Research. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Hey. Good morning, gentlemen.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Good morning, Carter.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Greg, I wondered, could you speak to whether there were any changes in your program margin assumptions across the portfolio? Obviously, the big decision on the South Carolina consolidation, and that was a pretty low program margin for the last quarter Q. But just in general, all these cost-out actions and the impact of those and what that means for your assumptions around cost and profit, whatnot, any color you could give us would be helpful. Thanks.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yes. I'd say not significant change within the quarter on the booking rates, Carter. 777 was up a little bit. 87 was up a little bit.\",\n \"And then we were down slightly on 37 and 47 a little bit on 67. Some of that is, as you said, customer mix. Some of it's cost, and some of it's escalation. So not a lot of movement within the quarter on program.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"OK. And with respect to the comments you had on the skyline and managing the skyline, are there any kind of broader observations or themes in how that skyline is settling out from a customer-type or regional standpoint, where those planes are going, or how that process is evolving? Thanks.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah. I can't sit here and say there's any specific themes. I know it's probably an overused term, but it's dynamic. So in each situation where the customer is different.\",\n \"It's different considering their own liquidity, access to liquidity, what their planned fleets are, what they were, and what's happening within their region with regards to any government restrictions on travel. So it really varies by customer and then within time frames because some customers want to remain and have remained committed to taking deliveries but needed to move them out to the right for a variety of reasons. So you can imagine, again, this is tail-by-tail, customer-by-customer weekly assessments by the teams that are engaging with customers. So we have a good line of sight, but recognizing we've got to be agile in it's dynamic.\",\n \"But then again, applying our own risk assessment to just look at it through a liquidity and cash lens to ensure that if we do see any risk building, how do we stay ahead of it? And that's the action, certainly, that we've been taking to date, and that relates to my comments around the debt maturing that we may seek to refinance in the fourth quarter, as well as the actions we're taking with the pension and the 401(k). So I can't say if there's anything specific that comes to mind as a common thread throughout other than, obviously, the significant impact the pandemic is having on everybody.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Great. Thanks for the color.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And next, we go to Jon Raviv with Citi. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Jon Raviv\",\n \"speech\": [\n \"Hey. Thanks. Good morning, everyone. So just talking about defense for a moment, I think it's a pretty important part of the cash flow generation story here.\",\n \"But when you look at it, it doesn't seem to be growing much this year. The margins are a bit lumpy. Backlog's really kind of in the 1 times, below 1 times area. So what's going on there? And maybe you can give us a full picture, including BGS government.\",\n \"And how do you see the future of the total defense enterprise developing over the next few years? Everyone is seeing decelerating growth next year. Can you guys sort of change that dynamic?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Maybe I'll take a shot on the top line and the margin, and then I'll hand it over to Dave. But this is a year -- certainly, if you take the production programs, steady production across, whether it's the fighter business or in the rotorcraft business. But this is a year of transition, in particular, for the development programs on the T-7A and the MQ-25 and residential aircraft. So obviously, once those get out of development and start to move their way into production, you'll see the, I'll say, the modest growth associated with that.\",\n \"I think, Jon, domestically, we're continuing to see good support for our core programs. But at the same time, I mean, we're competing to win there. So all this transformation effort doesn't just apply to commercial, it's really coming off the heels of what a lot of the effort we do at BDS for some time. But that mix of portfolio, Jon, on the development side is certainly impacting the margin here near term.\",\n \"And then as we've seen, we've had COVID impact on the defense business, and it's been disruptive that we're experiencing on KC-46 and we've experienced on a couple of other programs this year. But outside of that, I think, again, once we move into production on the development programs, and there's no question that we've got to improve our performance on overall development programs, we expect to see a more stable, growing margin there as well. I don't know, Dave, if you have anything to add.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah. The only thing I would comment on is, one, I feel great about the franchise broadly. In our services business broadly, government now is the majority of that business. And it continues to go quite well.\",\n \"So I do expect some growth in that. Two, our resource planning has not, in any way, tried to strangle government. In fact, it's been the opposite. So almost all of the reductions net that we've described across the company have been applied against our commercial franchise so that we're not starving something in our defense business as a result of the difficulties we're having in our commercial business.\",\n \"And finally, the tanker. The tanker has been a drag on us for like three or four years in every way you can think of with respect to investors. But we are beginning to clear the hurdle with our customer with respect to its performance in their fleet and then their need for that tanker. So that whole relationship, I believe, will begin to transition next year.\",\n \"And as opposed to being a drag on our franchise it's been, I believe it will become a strength in our franchise. So I think in combination with what Greg said, I think that's the situation. I will say, and I said it this morning, we're not planning on defense spending to go up in any appreciable way. In fact, we believe there will be pressure on defense spending as a result of all the COVID-related spending that governments around the world have been experiencing.\",\n \"So I don't think we're looking at that world through rose-colored glasses. I expect real pressure on that market.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Seth Seifman with JP Morgan. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Seth Seifman\",\n \"speech\": [\n \"Thanks very much and good morning.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Good morning, Seth.\"\n ]\n },\n {\n \"name\": \"Seth Seifman\",\n \"speech\": [\n \"Kind of a two-part question on China, one kind of specific and one bigger picture. I mean, specifically, when you think about your production and delivery expectations for 737, what are you assuming in terms of when you get certification from Chinese authorities? And then second of all, when we look at the 20-year forecast, and we see China is such a big market for new aircraft, and we think about increasingly explicit strategic competition between the two countries and their efforts over that 20-year time frame to break into the market, how do you plan for that over time? And how do you see it potentially eroding the market?\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah. So there's a narrow question and a giant question together. So let me start with the narrow one with respect to our narrow-body deliveries. We attempted quite a while ago to de-risk our delivery stream on the inventoried airplanes such that we pushed out the Chinese airplanes for later delivery.\",\n \"And at the same time, we've had a team on the field with the CAAC, the certification body in China, for probably a better part of two months. And they are working through that process just like the FAA and the EASA did here in Europe. And it's been going quite well and productively, and all the technical people are lined up, etc. So I'm confident that that process will happen, and then ultimately, we can get back to deliveries.\",\n \"And as everyone knows, China is back in business. And the airlines need this kind of lift, and we happen to be one of two people in the world that can deliver it. And that will be that way for quite a while. So we've had great relationships.\",\n \"We continue to have them. We're going to continue to manage it, and we know that there is going to be, over time, a competitive threat there. We're not afraid of it. We're going to continue to do what's right for our customers.\",\n \"When that threat shows up, what form it takes, ultimately, how it wants to compete around the world, we'll be up for that round of competition. I don't think that is for quite a while. And I've been around that discussion since the year 2000. So anyway, I have great respect for China and what they want to accomplish here.\",\n \"But the long view is still going to have to remain a constructive view with respect to Boeing and China, and that's where we're positioned.\"\n ]\n },\n {\n \"name\": \"Seth Seifman\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we'll go to Rob Spingarn with Credit Suisse. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Rob Spingarn\",\n \"speech\": [\n \"Hi. Good morning.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Hi, Rob.\"\n ]\n },\n {\n \"name\": \"Rob Spingarn\",\n \"speech\": [\n \"Greg, I wanted to ask you a little further on cost. You talked about reducing the footprint and is laser-focused on cost. I wanted to just explore how we think about the excess capacity that gets created in Everett with the 787 leaving and the 747 concluding. I mean, would you think about moving MAX up there at some point? Or does this next aircraft that Dave alluded to go there? How do we think about that?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yes. Maybe just stepping back, as I mentioned in the remarks, I mean, we're looking at all of our space around the globe, Rob, and looking for ways to be more efficient. And that's certainly as we see it today with the work that's in there, but as Dave said in his response to some of the BDS question, we're looking forward as well. So we're trying to take all of that into consideration and be strategic about it.\",\n \"But the fact is that all of our facilities are not fully utilized, and we need to get them fully utilized. And we got to do that in a very methodical way and do it as a company and doing it together about how do we think about strategically, how do we get our utilization improved, and overall efficiency. So it doesn't really just center around one site. I mean, that's certainly an important part of it.\",\n \"But it's every building, every lease, every office space, looking at current near-term demands, but also kind of future potential opportunities and so on. And every one of our decisions is going to be looking through all those lenses before we make it. But make no mistake about it. It's all about being more efficient and having improved utilization.\",\n \"As I mentioned, just in office space alone, we're targeting something like a 30% reduction there, and we'll continue to do so. And like I said, it's across all aspects of real estate. So more to come on it.\"\n ]\n },\n {\n \"name\": \"Rob Spingarn\",\n \"speech\": [\n \"Right. So you're not ruling out big changes?\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"We're not ruling out -- no, we're not ruling out big changes. But just by way of how we think about it, that Everett space that's freed up, I mean, we're going to line it off for quite a while because I don't want to move lines from one place to another just because it's available. And for the most part, our reinvigoration of all things lean in Boeing, and this is really related to workflow and the use of the capacity that we have, will suggest that we can actually produce a lot more in the same or even smaller footprint than we do today. So we're going to stay on that program, and we're going to line off the things that get freed up as a result of decisions like the 787 and the 47, etc.\",\n \"And we're not going to just try to fill it. We also need the market to return. We need to see where all the demands really ultimately play out and where that next footprint really needs to sit. We know we have some great skills in that area, there's no doubt.\",\n \"And that matters a lot, and that will factor. But we're not just going to try to fill empty space. That would not be in our best interest.\"\n ]\n },\n {\n \"name\": \"Rob Spingarn\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Myles Walton with UBS. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"Thanks. Good morning, almost afternoon. The question I had was really a clarification leading to a question. So the clarification on the $1 billion of equity sale stock toward the 401(k) sort of on an annual basis, I guess, on a go-forward basis, and then the $3 billion to the pension plan.\",\n \"Is that $3 billion prefund for a number of years, such that it's sort of a one-and-done for a few years? And then is the 401(k) more of an ongoing? And then, Greg, the question, obviously, to a broader equity issuance to rebalance the portfolio -- the balance sheet, rather, above and beyond what this is. What would make you consider that?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah. No. I mean, well, first of all, the way you're thinking about the 401(k) and pension is right. So the pension will be -- like I said, it's an attempt to really minimize the outflow over the next several years.\",\n \"So as we see it today, contributing the stock at an amount of $3 billion really takes that risk off the table. So ultimately, it should help our cash flow profile going forward. And like I said, the 401(k) is, yes, it's more of kind of an annual approach to that. But the whole idea on the balance sheet between debt and equity and so on, I mean, we're, again, diligently focused on what levers we have, how do we de-risk.\",\n \"Certainly, our credit rating is significantly important to us, and our overall balance sheet health. So it's a balance. It's a continuous balance of the two. And we think between what we've done and what we are doing internally, combined with the debt and the bank drawdown, and now, with this, think of that, again, as just a continuous balanced approach of looking through each one of these areas and trying to find the right mix.\",\n \"As I did mention, too, we've got $4 billion of debt maturing over the next year. So we'll again look at that and look at potentially refinancing that. So again, it's a very balanced approach in understanding the second, third-order effect of each of them. But the objective here, again, is just to try to stay ahead and manage our liquidity as we have on a day-to-day basis.\",\n \"But again, looking beyond our baseline plan around the possibilities with some of the near-term challenges and pulling the appropriate levels at the appropriate time. And this 401(k) and pension, we believe, fits right into that category.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"OK. Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And next, we'll go to Kristine Liwag with Morgan Stanley. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Kristine Liwag\",\n \"speech\": [\n \"HI. Good morning, Dave and Greg.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Hi, Kristine.\"\n ]\n },\n {\n \"name\": \"Kristine Liwag\",\n \"speech\": [\n \"Hi. With your decision to fund the pension with Boeing stock, I guess I would have thought that free cash flow in 2021 would have been incrementally positive. So first, were you initially expecting to fund the pension in 2021, and were you expecting to do that with stock? And then also second, can you provide a little bit more color on the moving parts and operating cash flow in 2021 and any one-time items, so we can bridge to your positive outlook in 2022?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah. So, Kristine, the pension funding or -- as you know, it all depends on the rates and the discount rate. But as we kind of modeled it, we started to see in the '22 time frame and beyond some incremental funding requirements. So we essentially, like I said, pulled that forward.\",\n \"We didn't see a significant amount of funding required in '21, but we did start to see some of it in the years beyond that. So this was again an opportunity to pull that forward and utilize our stock and improve the cash profile going forward. So net-net, as you know, we've done it before, and we know how to do it. And we think it was, again, a prudent thing to do.\",\n \"All part of just consistently reviewing the capital structure strategy and balancing the funding approach to the pension, in particular. As far as '20, I'll say, kind of '20 to '21, again, I'd say the key elements are very similar to what we talked last time, but the level of contribution is evolving and changing year over year. So as you bridge to an improved cash flow, which it will be, as we see it today in '21 over '20, 737 MAX is the single biggest contributor. So getting return to service, starting to deliver off the ramp, and then as Dave said, informing our production rates, and then ultimately, the marketplace and what the recovery looks like, that's going to be the single biggest driver.\",\n \"Outside of that, the next one is the 787. As I said, we're building inventory, and we'll have that inventory and delivery profile aligned into '21, and that will be your second largest contributor to '20 over '21 as it sits today. Those are the two single biggest. If you look at year over year, as we see it today with services or defense, it's pretty much in line with how we think we're going to finish this year.\",\n \"So it really does narrow down to those two product lines, in particular, with the 737 being the biggest contributor.\"\n ]\n },\n {\n \"name\": \"Kristine Liwag\",\n \"speech\": [\n \"Thank you very much.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"You're welcome.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"All right. John, we have time for one last question.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Great. And that will be from Peter Arment with Baird. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Peter Arment\",\n \"speech\": [\n \"Yeah, thanks. Thanks for squeezing me in. Good morning, Dave, Greg.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Hi, Peter.\"\n ]\n },\n {\n \"name\": \"Peter Arment\",\n \"speech\": [\n \"Hey, Greg, just on the 787, the consolidation move final assembly to one facility in South Carolina, maybe you can just talk through how you're thinking about -- does that change any kind of outlook on the times of the profitability of the overall program? Or how you're thinking about the kind of the productivity gains that you'll be able to achieve at one facility? Thanks.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah. I think, as you know, Peter, it really kind of starts with the market outlook that we had, and then looking at efficiencies, and then, ultimately, how do we become more competitive. And this is certainly a key contributor to that. As far as a program margin perspective, it won't have a significant impact on that certainly near term.\",\n \"But as Dave said earlier, we're looking beyond the current rate and looking at rates beyond where the marketplace is today. And that's ultimately where we'll see much more efficiencies, and particularly around logistics, going from the mid and half body right over into final assembly and not having the transportation logistics associated with that and having the dedicated crews and the cycling, again, we'll see the efficiencies. But really, we'll capture it more at the higher production rates.\"\n ]\n },\n {\n \"name\": \"Peter Arment\",\n \"speech\": [\n \"Appreciate all the detail. Thanks, guys.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"All right. Thank you all. That completes the Boeing Company's third-quarter 2020 earnings conference call. Thank you for joining.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Thank you, everyone.\"\n ]\n }\n]","isConversational":false}}},{"rowIdx":697,"cells":{"ticker":{"kind":"string","value":"BA"},"date":{"kind":"string","value":"2023-01-25"},"participants":{"kind":"list like","value":[{"description":"Vice President, Investor Relations","name":"Matt Welch","position":"Executive"},{"description":"President and Chief Executive Officer","name":"Dave Calhoun","position":"Executive"},{"description":"Executive Vice President and Chief Financial Officer","name":"Brian West","position":"Executive"},{"description":"Robert W. 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Baird and Company -- Analyst\",\n \"name\": \"Peter Arment\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"AllianceBernstein -- Analyst\",\n \"name\": \"Doug Harned\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Goldman Sachs -- Analyst\",\n \"name\": \"Noah Poponak\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Wolfe Research -- Analyst\",\n \"name\": \"Myles Walton\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Morgan Stanley -- Analyst\",\n \"name\": \"Kristine Liwag\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"JPMorgan Chase and Company -- Analyst\",\n \"name\": \"Seth Seifman\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Cowen and Company -- Analyst\",\n \"name\": \"Cai von Rumohr\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Barclays -- Analyst\",\n \"name\": \"David Strauss\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Citi -- Analyst\",\n \"name\": \"Jason Gursky\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Bank of America Merrill Lynch -- Analyst\",\n \"name\": \"Ron Epstein\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Seaport Research Partners -- Analyst\",\n \"name\": \"Rich Safran\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Jefferies -- Analyst\",\n \"name\": \"Sheila Kahyaoglu\",\n \"position\": \"Analyst\"\n }\n]","isConversational":false},"prepared_remarks":{"kind":"list like","value":[{"name":"Operator","speech":["Thank you for standing by. Good day, everyone, and welcome to The Boeing Company's fourth quarter 2022 earnings conference call. Today's call is being recorded. The management's discussion and slide presentation, plus the analyst question-and-answer session, are being broadcast live over the internet.","[Operator instructions] At this time, for opening remarks and introductions, I'll turn the call over to Mr. Matt Welch, vice president of investor relations for The Boeing Company. Mr. Welch, please go ahead."]},{"name":"Matt Welch","speech":["Thank you and good morning. Welcome to Boeing's fourth quarter 2022 earnings call. I am Matt Welch, and with me today are Dave Calhoun, Boeing's president and chief executive officer; and Brian West, Boeing's executive vice president and chief financial officer. And as a reminder, you can follow today's broadcast and slide presentation at boeing.com.","As always, detailed financial information is included in today's press release. Furthermore, projections, estimates, and goals included in today's discussion involve risks, including those described in our SEC filings and in the forward-looking statement disclaimer at the end of the web presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of certain non-GAAP measures. Now, I will turn the call over to Dave Calhoun."]},{"name":"Dave Calhoun","speech":["Thanks, Matt. Good morning. Thanks to all of you for joining us this morning. The last time we were together was the second in November where we had a chance for the first time, at least in my three-year tenure, to talk about guidance and expectations for the years ahead.","The good news is we had a very solid fourth quarter, a quarter that, in my view, puts us in good stead to step forward and meet the guidance that we have delivered to all of you. Not only have we taken big steps to reduce the risks that, of course, we've faced over the last three years, but importantly, we're well on our way to restoring the operational and financial strength that we got used to prior to our MAX moment. Challenges remain. We have a lot to do.","But overall, we're feeling pretty good about the way we closed '22, and we're well-positioned for '23 and beyond. Our key metric, as everybody knows, is free cash flow. Importantly, we were able to generate more than 3 billion in free cash flow in the fourth quarter, driven by the progress in our performance and, importantly, continued strong demand. And this helped us generate positive full year cash flow for the first time since 2018, a very important turnaround metric for us.","Several key milestones and events that I'd like to highlight. Let's start with the BCA deliveries, which I know everyone tracks. '22 total was 480, with 69 deliveries in December. Notably, the 737 deliveries, we had 387, had exceeded our target of 375, and it included 31 787s as we unwound inventory and delivered from the production line following the important return to delivery over the course of the summer.","On the order front and on the market side, we continue to see very strong demand across the portfolio. More than 800 net orders on the year, driven by the 737 MAX and the 787, highlighted most recently by the very historic deal with UAL, United Airlines, in December. In 2022, we sold 200-plus net wide-bodies. That's the most since 2018.","More broadly, the 737 MAX team has made tremendous progress. Fleet is performing exceptionally well. Production is stabilizing. Demand is strong.","We delivered 1,000-plus 737 MAXs in total now. And since our return to service, the fleet has surpassed 3 million flight hours. It's safe, and it's the most reliable of the airplane fleets. Production, we've gone from zero to 31 a month, and we're prioritizing stability, which we have not yet achieved, but we're on a steady course to do so.","In orders, more than 1,500 gross orders today. 737 MAX returning to service in China is another indication of this overall improvement in our business. This month, of course, we all know that that occurred. We have more airplanes on the tarmacs in China to bring back into service, just as we did here in the U.S.","before we began any deliveries of any sort. And I'm not going to guess going forward when deliveries may or may not start. As everyone knows, in our guidance, we have de-risked for that possibility. 737 MAX 7 and 10, everybody knows we got our extension approved and attached the legislation at the end of the year.","That was a very important moment. I'll remind everyone that that doesn't mean that these were certified. It simply means that the FAA and Boeing can follow the existing application and do that job and do it the right way. So, we're feeling very, very good about having de-risked that moment as well.","I will also want to point out. Every argument we made in behalf of that extension related to safety, the premise for our chosen course, and the application that we filed was safety first, and it will always be safety first. Boeing Defense, our SLS launch. This was a -- an enormous emotional upper for our company and for our team broadly.","The Artemis I launched in November, which was powered by the SLS rocket, was more than a little inspiring. And I'd like to congratulate the NASA team broadly for the succession of the Starliner mission. It's an incredible success. Incredible.","And it went beautifully and almost flawlessly every step of the way. So, again, a significant accomplishment for space travel in general. But that rocket, again, just shows what Boeing is capable of when we put our minds to it. We follow our disciplines.","We stay patient and ultimately prove to the world that there's more to do in space. Boeing Global Services, another terrific story. It is simply following the recovery of our industry, in general, and everywhere in the world. So, we had a great quarter pretty much across the board.","We continue to grow. We continue to invest so that we are prepared to support our customers as they bring their airlines back to where they were before COVID. So, we'll reaffirm our guidance. And with this progress, which we feel good about, both the financial and the operational outlook that we shared with you in November.","And that includes the cash flow, the delivery ranges that we set for '23, as well as for the 2025 and 2026 time frame. Our realities are still the same. A difficult, difficult supply chain. And while average deliveries met our objectives, we continue to face a few too many stoppages in our lines, simply so that we do not travel to work as we run into supply chain shortfalls.","So, those stoppages, while they are coming down, are not where they need to be as we think about stable rates going forward. I will not, in this discussion and/or in Q&A, highlight any one supplier within the supply chain. Know that we're working with all of them. There's a significant amount of transparency in those discussions between them, between us, and everybody is focused on the rate improvements that we have outlined to all of you.","All things considered and reflecting on these last few years, we're feeling pretty good about where we stand heading into this year. Demand, very strong; portfolio, very well positioned. We have faced plenty of tests in a number of orders all around the world with some of our toughest customers. And we know this portfolio is well positioned.","We have a robust pipeline of development programs, including broadly across our defense business, and we're innovating new capabilities that prepare us for the next generation of products. One of the more significant achievements was recently announced by NASA and their Sustainable Flight Demonstrator contract. This is a set of technologies that's intending to cut fuel emissions by up to 30%. Those are the kind of standards that, in our view, are required to ultimately launch a new commercial airplane, wrapped in sustainability.","We've de-risked major aspects of the business, and our performance is improving. We're embedding lean across our operations to drive productivity, ultimately, to achieve the kinds of targets that we've set out. We've got work to do, but we're feeling really good about our progress. We're proud of our team, and we're confident in the future.","With that, I'll turn it over to Brian West."]},{"name":"Brian West","speech":["Great. Thanks, Dave, and good morning, everyone. Let's go to the next page and cover the fourth quarter financial results. Revenue in the fourth quarter came in at $20 billion.","That's up 35% year over year, driven by higher commercial volume. Core operating margin was negative 3.3% and the core loss per share was $1.75. Both the margin and the loss per share were significantly better than prior year and impacted in the quarter by period expenses and abnormal costs. From a free cash flow perspective, our primary financial metric was positive $3.1 billion for the quarter, up significantly versus the prior year on higher deliveries and strong order activity and up sequentially versus the prior quarter and a bit better than our original estimate.","I'll take a minute to go through each of the business units, moving on to the next page with BCA. BCA revenue in the fourth quarter was $9.2 billion. That's up 94% year over year, driven by higher 787 and 737 deliveries, partially offset by 787 customer considerations. On the operating margins, they were negative 6.8% in the quarter, signaling better than the year ago, and in the quarter, driven by abnormal costs and higher period expenses, including higher R&D spending.","I'll take a minute to go through a few highlights of the major programs, starting with the 737. We had 110 deliveries in the fourth quarter and 387 for the full year, slightly ahead of our estimate. We ended the year with 250 MAX airplanes in inventory, 30 of which were -7 and -10s, and we had 138 for customers in China. We do expect the monthly deliveries from inventory to slow slightly as fewer airplanes will be available, combined with some impact from the -7, -10 builds.","We still expect most inventoried airplanes will be delivered by the end of 2024. On the 787, we had 22 deliveries in the fourth quarter and 31 for the full year. We ended the year with 100 airplanes in inventory, most of which will be delivered by the end of 2024. We booked $350 million of abnormal costs in the quarter, taking the total to date to 1.7 billion.","We're increasing the abnormal accounting estimate by about 600 million to roughly 2.8 billion in total as we will be under the five-per-month production rate a bit longer than expected due to a supplier constraint that has temporarily slowed production. We still expect to hit five per month this year. Our total year delivery guidance of 70 to 80 is unchanged, and there is no change to 2023 cash flows. 787 orders were strong in the quarter, and we've added 100 airplanes to the accounting quantity, which increases our gap program margin.","On the 777X, the program timeline is holding and efforts are ongoing. Abnormal costs were 112 million in the quarter, and there is no change to the 1.5 billion total estimate. On the customer settlement front, we continue to make good progress resolving contractual issues on the three big programs. The 737 MAX is near the finish line, with the vast majority of customers settled.","Of the original $9.3 billion set aside, there's only 3% left. On the 787, a year ago, we included a significant provision in the program, which has been very stable. There are far fewer customers in the MAX, and we've already reached agreement with several, all in line with our estimates. On the 777X, there are even fewer customers and discussions are ongoing.","Keep in mind that the revenue and cash impact of these settlements will be over several years and all contemplated in both the near- and long-term financial guidance. Finally, on the orders front for BCA, we booked 376 orders in the quarter and have over 4,500 airplanes in backlog valued at $330 billion. Moving on to the next page, I'll cover BDS. BDS revenues in the fourth quarter were $6.2 billion, up 5% year over year.","Operating margins were 1.8%. And if you include services, defense margins would be 200 basis points higher to 4%. There are two things impacting BDS margins in the quarter. First, we felt the operational impact of supply chain constraints and labor instability.","Second, we saw adverse timing of certain cost accrual true-ups, including higher pension costs that flowed through the P&L in the quarter. The big focus for the BDS leadership team is to improve execution stability both in the factory and in the supply base. Some additional highlights. As Dave mentioned, we're very proud of Artemis I's successful mission to the moon last November, and we delivered 45 aircraft in the quarter, including the first P-8 to New Zealand, as well as three satellites, including the first two O3b mPOWER units.","We received $7 billion in orders during the quarter, including a contract for two KC-46A tankers from Japan and an award for 12 Chinook helicopters from the Egyptian Air Force. The BDS backlog is at $54 billion. Moving on to the next page, Global Services. BGS had another strong quarter, primarily driven by our parts and distribution business.","BGS revenue was $4.6 billion, up 6% year over year; and operating margin was 13.9%. Commercial volume was very strong, partially offset by some softness in the government space. We received $5 billion in orders during the quarter, including an F-15 depot support order for the U.S. Air Force, and we opened up the Germany distribution center.","The BGS backlog is $19 billion. Moving on to the full year in the next page. Full year financial results, revenue came in at $66.6 billion. That's 5% up year over year, driven by higher commercial volume, offset by lower defense revenue.","Core operating margin was negative 7% and the core loss per share was over $11. Both are a bit worse, reflecting the impact of defense charges taken earlier in the year. And on free cash flow, we generated $2.3 billion positive free cash flow in the year, up significantly from the prior year, driven by higher deliveries and order activity. Moving on to the next page.","I just want to put that $2.3 billion of free cash flow in perspective. As you can see from the chart on the left, we've made a lot of progress over the last three years. 2020 was a usage of $20 billion of cash. 2021 improved, but was still a usage of $4 billion of cash.","In 2022, $2.3 billion positive. As Dave mentioned, a lot of work that's been done and more work to do. The team is pretty proud to get back to positive territory. It's been the 737 return to service and the deliveries that are ramping.","It's been the 787 that's been restarted. It's been the commercial market recovery that's been a benefit along the way, with a very strong order book, reflecting our customers' confidence in our product lineup. And of course, our service business has held up incredibly well. It was a good exit to 2022, and we expect momentum to continue for 2023.","Moving on to the next page, cash and debt. On the cash and marketable securities front, we ended the year with $17.2 billion, up $3 billion versus the third quarter, and we had $12 billion of revolving credit facilities, all of which remain undrawn. On the debt side, we finished the year with $57 billion in debt. And as a reminder, our investment grade credit rating continues to be a top priority.","Our liquidity position is strong, and we're very comfortable satisfying near-term maturities. And the overall plan continues to be deliver airplanes, generate cash, pay down debt. Moving on to the next page, 2023. Our financial outlook for 2023 is unchanged from what we shared in November.","Operating cash flow in total will be between $4.5 billion and $6.5 billion. We'll reinvest about 1.5 billion in capex for a net free cash flow of $3 billion to $5 billion in 2023. As we start the year, overall demand remains strong. Global passenger traffic increased almost 70% in 2022, and we're at 75% of pre-pandemic levels globally.","If you take out China, that number grows to over 90%. So, demand is pretty robust and reflective of our order book. Our priority continues to be execution stability. And while we still see some disruptions in the factory and the supply chain, we're hard at work with our partners to address these issues and ultimately focused on meeting our customer commitments.","On the segment operating cash flow, same numbers as in November. BDS, we expect to be at usage of between $0.5 billion and $1 billion of cash. BGS will generate between $2.5 billion and $3 billion. And BCA will generate between $2.5 billion and $3.5 billion.","On the commercial delivery front, 737 deliveries are unchanged and between 400 and 450 airplanes; 787 deliveries are unchanged, between 70 and 80 airplanes. And we've added a couple of items on the expense front. We expect R&D for 2023 to come in at about $3.2 billion versus $2.9 billion in 2022. The vast majority of this increase will be in BCA.","We also have unallocated eliminations and other, which will be relatively in line with 2022 at $1.6 billion. One important thing to note is on the quarterly phasing, it'll look very similar to last year as both deliveries and the financials will improve throughout the course of the year. On the first quarter specifically, EPS will be an improvement over 4Q 2022 but remain in a loss position and cash will still be a usage in the first quarter, although an improvement from the first quarter of 2022. Overall, we're squarely focused on free cash flow.","And so far, so good as we enter 2023. Moving on to the last page, 2025-2026 long-term guidance. Same page we showed you in November, 10 billion of free cash flow is still our objective. And it's important to note that margins and EPS are important, but they will be uneven over the next two years.","As we unwind the BCA inventory, we put the BCA abnormal costs behind us, and we get the BDS margins back on track to its normal trajectory. We're still confident that this plan is underpinned by things we largely control: one, productivity; two, the commercial rate ramp; three, services growth; and four, the transition of key defense programs from development to production. Overall, we're as confident today as we were back in November, and we feel good about the way 2023 is starting. With that, I'll turn it over to Dave for any final comments."]},{"name":"Dave Calhoun","speech":["Yeah, I think, Brian, the numbers speak for themselves. We couldn't be more pleased with the way the year closed, with very few surprises. We're heading into the year. We know the supply chain is going to be tough and constrained, but we also believe that we control that environment.","It's our job to get ahead of it. So, thank you. We are happy to take some questions."]}],"string":"[\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Thank you for standing by. Good day, everyone, and welcome to The Boeing Company's fourth quarter 2022 earnings conference call. Today's call is being recorded. The management's discussion and slide presentation, plus the analyst question-and-answer session, are being broadcast live over the internet.\",\n \"[Operator instructions] At this time, for opening remarks and introductions, I'll turn the call over to Mr. Matt Welch, vice president of investor relations for The Boeing Company. Mr. Welch, please go ahead.\"\n ]\n },\n {\n \"name\": \"Matt Welch\",\n \"speech\": [\n \"Thank you and good morning. Welcome to Boeing's fourth quarter 2022 earnings call. I am Matt Welch, and with me today are Dave Calhoun, Boeing's president and chief executive officer; and Brian West, Boeing's executive vice president and chief financial officer. And as a reminder, you can follow today's broadcast and slide presentation at boeing.com.\",\n \"As always, detailed financial information is included in today's press release. Furthermore, projections, estimates, and goals included in today's discussion involve risks, including those described in our SEC filings and in the forward-looking statement disclaimer at the end of the web presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of certain non-GAAP measures. Now, I will turn the call over to Dave Calhoun.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Thanks, Matt. Good morning. Thanks to all of you for joining us this morning. The last time we were together was the second in November where we had a chance for the first time, at least in my three-year tenure, to talk about guidance and expectations for the years ahead.\",\n \"The good news is we had a very solid fourth quarter, a quarter that, in my view, puts us in good stead to step forward and meet the guidance that we have delivered to all of you. Not only have we taken big steps to reduce the risks that, of course, we've faced over the last three years, but importantly, we're well on our way to restoring the operational and financial strength that we got used to prior to our MAX moment. Challenges remain. We have a lot to do.\",\n \"But overall, we're feeling pretty good about the way we closed '22, and we're well-positioned for '23 and beyond. Our key metric, as everybody knows, is free cash flow. Importantly, we were able to generate more than 3 billion in free cash flow in the fourth quarter, driven by the progress in our performance and, importantly, continued strong demand. And this helped us generate positive full year cash flow for the first time since 2018, a very important turnaround metric for us.\",\n \"Several key milestones and events that I'd like to highlight. Let's start with the BCA deliveries, which I know everyone tracks. '22 total was 480, with 69 deliveries in December. Notably, the 737 deliveries, we had 387, had exceeded our target of 375, and it included 31 787s as we unwound inventory and delivered from the production line following the important return to delivery over the course of the summer.\",\n \"On the order front and on the market side, we continue to see very strong demand across the portfolio. More than 800 net orders on the year, driven by the 737 MAX and the 787, highlighted most recently by the very historic deal with UAL, United Airlines, in December. In 2022, we sold 200-plus net wide-bodies. That's the most since 2018.\",\n \"More broadly, the 737 MAX team has made tremendous progress. Fleet is performing exceptionally well. Production is stabilizing. Demand is strong.\",\n \"We delivered 1,000-plus 737 MAXs in total now. And since our return to service, the fleet has surpassed 3 million flight hours. It's safe, and it's the most reliable of the airplane fleets. Production, we've gone from zero to 31 a month, and we're prioritizing stability, which we have not yet achieved, but we're on a steady course to do so.\",\n \"In orders, more than 1,500 gross orders today. 737 MAX returning to service in China is another indication of this overall improvement in our business. This month, of course, we all know that that occurred. We have more airplanes on the tarmacs in China to bring back into service, just as we did here in the U.S.\",\n \"before we began any deliveries of any sort. And I'm not going to guess going forward when deliveries may or may not start. As everyone knows, in our guidance, we have de-risked for that possibility. 737 MAX 7 and 10, everybody knows we got our extension approved and attached the legislation at the end of the year.\",\n \"That was a very important moment. I'll remind everyone that that doesn't mean that these were certified. It simply means that the FAA and Boeing can follow the existing application and do that job and do it the right way. So, we're feeling very, very good about having de-risked that moment as well.\",\n \"I will also want to point out. Every argument we made in behalf of that extension related to safety, the premise for our chosen course, and the application that we filed was safety first, and it will always be safety first. Boeing Defense, our SLS launch. This was a -- an enormous emotional upper for our company and for our team broadly.\",\n \"The Artemis I launched in November, which was powered by the SLS rocket, was more than a little inspiring. And I'd like to congratulate the NASA team broadly for the succession of the Starliner mission. It's an incredible success. Incredible.\",\n \"And it went beautifully and almost flawlessly every step of the way. So, again, a significant accomplishment for space travel in general. But that rocket, again, just shows what Boeing is capable of when we put our minds to it. We follow our disciplines.\",\n \"We stay patient and ultimately prove to the world that there's more to do in space. Boeing Global Services, another terrific story. It is simply following the recovery of our industry, in general, and everywhere in the world. So, we had a great quarter pretty much across the board.\",\n \"We continue to grow. We continue to invest so that we are prepared to support our customers as they bring their airlines back to where they were before COVID. So, we'll reaffirm our guidance. And with this progress, which we feel good about, both the financial and the operational outlook that we shared with you in November.\",\n \"And that includes the cash flow, the delivery ranges that we set for '23, as well as for the 2025 and 2026 time frame. Our realities are still the same. A difficult, difficult supply chain. And while average deliveries met our objectives, we continue to face a few too many stoppages in our lines, simply so that we do not travel to work as we run into supply chain shortfalls.\",\n \"So, those stoppages, while they are coming down, are not where they need to be as we think about stable rates going forward. I will not, in this discussion and/or in Q&A, highlight any one supplier within the supply chain. Know that we're working with all of them. There's a significant amount of transparency in those discussions between them, between us, and everybody is focused on the rate improvements that we have outlined to all of you.\",\n \"All things considered and reflecting on these last few years, we're feeling pretty good about where we stand heading into this year. Demand, very strong; portfolio, very well positioned. We have faced plenty of tests in a number of orders all around the world with some of our toughest customers. And we know this portfolio is well positioned.\",\n \"We have a robust pipeline of development programs, including broadly across our defense business, and we're innovating new capabilities that prepare us for the next generation of products. One of the more significant achievements was recently announced by NASA and their Sustainable Flight Demonstrator contract. This is a set of technologies that's intending to cut fuel emissions by up to 30%. Those are the kind of standards that, in our view, are required to ultimately launch a new commercial airplane, wrapped in sustainability.\",\n \"We've de-risked major aspects of the business, and our performance is improving. We're embedding lean across our operations to drive productivity, ultimately, to achieve the kinds of targets that we've set out. We've got work to do, but we're feeling really good about our progress. We're proud of our team, and we're confident in the future.\",\n \"With that, I'll turn it over to Brian West.\"\n ]\n },\n {\n \"name\": \"Brian West\",\n \"speech\": [\n \"Great. Thanks, Dave, and good morning, everyone. Let's go to the next page and cover the fourth quarter financial results. Revenue in the fourth quarter came in at $20 billion.\",\n \"That's up 35% year over year, driven by higher commercial volume. Core operating margin was negative 3.3% and the core loss per share was $1.75. Both the margin and the loss per share were significantly better than prior year and impacted in the quarter by period expenses and abnormal costs. From a free cash flow perspective, our primary financial metric was positive $3.1 billion for the quarter, up significantly versus the prior year on higher deliveries and strong order activity and up sequentially versus the prior quarter and a bit better than our original estimate.\",\n \"I'll take a minute to go through each of the business units, moving on to the next page with BCA. BCA revenue in the fourth quarter was $9.2 billion. That's up 94% year over year, driven by higher 787 and 737 deliveries, partially offset by 787 customer considerations. On the operating margins, they were negative 6.8% in the quarter, signaling better than the year ago, and in the quarter, driven by abnormal costs and higher period expenses, including higher R&D spending.\",\n \"I'll take a minute to go through a few highlights of the major programs, starting with the 737. We had 110 deliveries in the fourth quarter and 387 for the full year, slightly ahead of our estimate. We ended the year with 250 MAX airplanes in inventory, 30 of which were -7 and -10s, and we had 138 for customers in China. We do expect the monthly deliveries from inventory to slow slightly as fewer airplanes will be available, combined with some impact from the -7, -10 builds.\",\n \"We still expect most inventoried airplanes will be delivered by the end of 2024. On the 787, we had 22 deliveries in the fourth quarter and 31 for the full year. We ended the year with 100 airplanes in inventory, most of which will be delivered by the end of 2024. We booked $350 million of abnormal costs in the quarter, taking the total to date to 1.7 billion.\",\n \"We're increasing the abnormal accounting estimate by about 600 million to roughly 2.8 billion in total as we will be under the five-per-month production rate a bit longer than expected due to a supplier constraint that has temporarily slowed production. We still expect to hit five per month this year. Our total year delivery guidance of 70 to 80 is unchanged, and there is no change to 2023 cash flows. 787 orders were strong in the quarter, and we've added 100 airplanes to the accounting quantity, which increases our gap program margin.\",\n \"On the 777X, the program timeline is holding and efforts are ongoing. Abnormal costs were 112 million in the quarter, and there is no change to the 1.5 billion total estimate. On the customer settlement front, we continue to make good progress resolving contractual issues on the three big programs. The 737 MAX is near the finish line, with the vast majority of customers settled.\",\n \"Of the original $9.3 billion set aside, there's only 3% left. On the 787, a year ago, we included a significant provision in the program, which has been very stable. There are far fewer customers in the MAX, and we've already reached agreement with several, all in line with our estimates. On the 777X, there are even fewer customers and discussions are ongoing.\",\n \"Keep in mind that the revenue and cash impact of these settlements will be over several years and all contemplated in both the near- and long-term financial guidance. Finally, on the orders front for BCA, we booked 376 orders in the quarter and have over 4,500 airplanes in backlog valued at $330 billion. Moving on to the next page, I'll cover BDS. BDS revenues in the fourth quarter were $6.2 billion, up 5% year over year.\",\n \"Operating margins were 1.8%. And if you include services, defense margins would be 200 basis points higher to 4%. There are two things impacting BDS margins in the quarter. First, we felt the operational impact of supply chain constraints and labor instability.\",\n \"Second, we saw adverse timing of certain cost accrual true-ups, including higher pension costs that flowed through the P&L in the quarter. The big focus for the BDS leadership team is to improve execution stability both in the factory and in the supply base. Some additional highlights. As Dave mentioned, we're very proud of Artemis I's successful mission to the moon last November, and we delivered 45 aircraft in the quarter, including the first P-8 to New Zealand, as well as three satellites, including the first two O3b mPOWER units.\",\n \"We received $7 billion in orders during the quarter, including a contract for two KC-46A tankers from Japan and an award for 12 Chinook helicopters from the Egyptian Air Force. The BDS backlog is at $54 billion. Moving on to the next page, Global Services. BGS had another strong quarter, primarily driven by our parts and distribution business.\",\n \"BGS revenue was $4.6 billion, up 6% year over year; and operating margin was 13.9%. Commercial volume was very strong, partially offset by some softness in the government space. We received $5 billion in orders during the quarter, including an F-15 depot support order for the U.S. Air Force, and we opened up the Germany distribution center.\",\n \"The BGS backlog is $19 billion. Moving on to the full year in the next page. Full year financial results, revenue came in at $66.6 billion. That's 5% up year over year, driven by higher commercial volume, offset by lower defense revenue.\",\n \"Core operating margin was negative 7% and the core loss per share was over $11. Both are a bit worse, reflecting the impact of defense charges taken earlier in the year. And on free cash flow, we generated $2.3 billion positive free cash flow in the year, up significantly from the prior year, driven by higher deliveries and order activity. Moving on to the next page.\",\n \"I just want to put that $2.3 billion of free cash flow in perspective. As you can see from the chart on the left, we've made a lot of progress over the last three years. 2020 was a usage of $20 billion of cash. 2021 improved, but was still a usage of $4 billion of cash.\",\n \"In 2022, $2.3 billion positive. As Dave mentioned, a lot of work that's been done and more work to do. The team is pretty proud to get back to positive territory. It's been the 737 return to service and the deliveries that are ramping.\",\n \"It's been the 787 that's been restarted. It's been the commercial market recovery that's been a benefit along the way, with a very strong order book, reflecting our customers' confidence in our product lineup. And of course, our service business has held up incredibly well. It was a good exit to 2022, and we expect momentum to continue for 2023.\",\n \"Moving on to the next page, cash and debt. On the cash and marketable securities front, we ended the year with $17.2 billion, up $3 billion versus the third quarter, and we had $12 billion of revolving credit facilities, all of which remain undrawn. On the debt side, we finished the year with $57 billion in debt. And as a reminder, our investment grade credit rating continues to be a top priority.\",\n \"Our liquidity position is strong, and we're very comfortable satisfying near-term maturities. And the overall plan continues to be deliver airplanes, generate cash, pay down debt. Moving on to the next page, 2023. Our financial outlook for 2023 is unchanged from what we shared in November.\",\n \"Operating cash flow in total will be between $4.5 billion and $6.5 billion. We'll reinvest about 1.5 billion in capex for a net free cash flow of $3 billion to $5 billion in 2023. As we start the year, overall demand remains strong. Global passenger traffic increased almost 70% in 2022, and we're at 75% of pre-pandemic levels globally.\",\n \"If you take out China, that number grows to over 90%. So, demand is pretty robust and reflective of our order book. Our priority continues to be execution stability. And while we still see some disruptions in the factory and the supply chain, we're hard at work with our partners to address these issues and ultimately focused on meeting our customer commitments.\",\n \"On the segment operating cash flow, same numbers as in November. BDS, we expect to be at usage of between $0.5 billion and $1 billion of cash. BGS will generate between $2.5 billion and $3 billion. And BCA will generate between $2.5 billion and $3.5 billion.\",\n \"On the commercial delivery front, 737 deliveries are unchanged and between 400 and 450 airplanes; 787 deliveries are unchanged, between 70 and 80 airplanes. And we've added a couple of items on the expense front. We expect R&D for 2023 to come in at about $3.2 billion versus $2.9 billion in 2022. The vast majority of this increase will be in BCA.\",\n \"We also have unallocated eliminations and other, which will be relatively in line with 2022 at $1.6 billion. One important thing to note is on the quarterly phasing, it'll look very similar to last year as both deliveries and the financials will improve throughout the course of the year. On the first quarter specifically, EPS will be an improvement over 4Q 2022 but remain in a loss position and cash will still be a usage in the first quarter, although an improvement from the first quarter of 2022. Overall, we're squarely focused on free cash flow.\",\n \"And so far, so good as we enter 2023. Moving on to the last page, 2025-2026 long-term guidance. Same page we showed you in November, 10 billion of free cash flow is still our objective. And it's important to note that margins and EPS are important, but they will be uneven over the next two years.\",\n \"As we unwind the BCA inventory, we put the BCA abnormal costs behind us, and we get the BDS margins back on track to its normal trajectory. We're still confident that this plan is underpinned by things we largely control: one, productivity; two, the commercial rate ramp; three, services growth; and four, the transition of key defense programs from development to production. Overall, we're as confident today as we were back in November, and we feel good about the way 2023 is starting. With that, I'll turn it over to Dave for any final comments.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah, I think, Brian, the numbers speak for themselves. We couldn't be more pleased with the way the year closed, with very few surprises. We're heading into the year. We know the supply chain is going to be tough and constrained, but we also believe that we control that environment.\",\n \"It's our job to get ahead of it. So, thank you. We are happy to take some questions.\"\n ]\n }\n]","isConversational":false},"questions_and_answers":{"kind":"list like","value":[{"name":"Operator","speech":["[Operator instructions] Our first question will be from Peter Arment with Baird. Please go ahead."]},{"name":"Peter Arment","speech":["Yeah. Good morning, Dave and Brian. Hey. So, congrats on the progress in deliveries in the fourth quarter and the free cash flow generation.","And you reiterated obviously the long-term free cash flow target of 10 billion in mid-decade in the 3 billion to 5 billion in '23. So, Brian, I guess on '23, can you just maybe talk around confidence levels around that expected free cash flow target specifically at BCA and BDS? Like kind of what are the key risks to call out? I assume it's supply chain around the guidance ranges. And then just, Dave, unrelated question, but can you comment broadly on the pickup in MAX flights in China as our checks show 220 revenue flights that are scheduled in February and there's already 60 flights that occurred this month? So, clearly, there's MAX activity that's picking up in China. Thanks."]},{"name":"Dave Calhoun","speech":["Yeah. Peter, why don't I start with China? Your numbers are within the range of my numbers. That is what's going on. I think, as everybody knows, the opening up of China is going to be a major event in aviation.","And the aviation industry was already stressed in terms of demand broadly in the world. So, this is a serious bump for everybody. But most importantly, within China, they need the MAX to fly to satisfy those demands. So, we were going to do there what we do here in the U.S.","and focus on the airplanes they have on the tarmac today, which is close to 100 airplanes, the readiness of each and every one of them. And ultimately, they're getting into full revenue service. So, for six months, I think that's the course for all of us to stay focused on. And then we're going to take up the question of deliveries and is there a moment in time where that begins to come back.","I don't want to predict that date, Peter, but the odds go up every day our MAX gets back into service, and the airplanes that we have on our tarmacs, hopefully, we get ready and deliver to our customers. So, I think there's a reason to be optimistic. We will not change guidance and/or predict those outcomes until they actually occur."]},{"name":"Brian West","speech":["And, Peter, on the cash flow, the 3 to 5. Again, we feel very confident with that range. You know, the key underpinnings will be the deliveries that we talked about. The 37, you know, at the low end assumes that we don't get much better through the course of 2023 than we did this past year, which is low 30s through the whole year.","At the high end, it actually says we do low 30s first half and then low 40s second half. So, I think that all of that is within the mix. As you recall, we had a big December. One caution is that December was kind of over 50 on the MAXs, but October was not quite that high.","And that's an indication that we're still not stable, it's still bumpy, but we still feel good about the overall trajectory in terms of being able to hit the 400 to 450. And on the 87, similarly, feel good about where we landed and then where we're headed to hit the 70 to 80, which underpins pretty much most of the cash flow for BCA, those two product lines. And then BDS, no change to it. We thought things playing out pretty much as we expected."]},{"name":"Peter Arment","speech":["Appreciate the color. Thanks."]},{"name":"Operator","speech":["And next, we'll go to Doug Harned with Bernstein. Please go ahead."]},{"name":"Doug Harned","speech":["Thank you. Good morning."]},{"name":"Dave Calhoun","speech":["Hi, Doug."]},{"name":"Doug Harned","speech":["You know, when you look at the MAX right now, you know, the good news is you don't have a demand problem. You know, and as you guide to the 31-a-month production in 2023, and, you know, our assumption is that if you get into engine deliveries higher, you can move up from there giving -- given that your facilitized and staffed for 38. And if you look at it, the 2025 or 2026 time frame, when you're going to 50 a month -- you know, you were once at 57 a month. So, that would not be new territory.","So, what I'm trying to get at is when you look at these two years, clearly, there are supplier issues in '23, but is it feasible that you could see that production rate go higher? And if so, what would you want to see? And I look at '23 and '25 differently since '25, I'm assuming we'd be out from under a lot of these supplier issues."]},{"name":"Dave Calhoun","speech":["Yeah, Doug. I -- again, now, I don't want to conjecture too much, but the two essential things to achieve that kind of objective. Number one, are we facilitized to -- at that kind of rate? And the answer is, as we progressed through this year, the -- will be yes. Number two, and by far the more challenging is, are we going to be stable month to month, quarter to quarter, predictable where the supply chain and the buffers that we put in place with respect to that supply chain are adequate? That's a harder, tougher put.","I think it's going to take us all year to ultimately demonstrate that stability can and will be achieved. And if I get to that, and I hope I do, we do, then I'll take on that conjecture. But for right now, we are just squarely focused on that question of stability. As Brian said, our fourth quarter was good.","We finished well. We didn't have a lot of surprises in December. But if you look at the month to month in the quarter, you can't be happy with that. We had just a few too many stoppages along the way.","As you know, our philosophy is we're not going to travel anything anymore. We're not going to compound issues that occur, and we're going to maintain that philosophy. So, what's the month-to-month? That's going to tell you a lot about our willingness to consider the rates you're talking about."]},{"name":"Doug Harned","speech":["And is that true? And when you look out to the '25, '26 time frame, obviously there's a long way to go before we get there. How do you think about just flexibility given there may be a number of scenarios that could come out here in terms of production levels?"]},{"name":"Dave Calhoun","speech":["Well, as I said, will we be facilitized to handle that kind of volume at that stage? Yes. We'll stay well ahead of that. And you'll see things that occur over this year that will demonstrate that. So, I'm -- that's the part of it I'm not too worried about.","Again, it's stability questions. And then there will be a factor that we'll have to apply with respect to China. We're going to have to believe we're back and we're back for good."]},{"name":"Doug Harned","speech":["OK. OK, great. Thank you."]},{"name":"Dave Calhoun","speech":["Yeah."]},{"name":"Operator","speech":["Our next question is from Noah Poponak with Goldman Sachs. Please go ahead."]},{"name":"Noah Poponak","speech":["Hey, good morning, everyone."]},{"name":"Dave Calhoun","speech":["Hey, Noah. Good morning."]},{"name":"Noah Poponak","speech":["I wanted to ask about supply chain. Can you -- you know, I heard you, Dave, that you're not going to mention any specific supplier, and I hear that and respect that. But if you could provide any more detail on what's happening on the 787. Is there a new quality control escape or is it just pure timing, delays, visibility into that getting better? Any incremental detail there would be really helpful.","And then what's the latest from the engine OEMs? You know, sounded a little better yesterday, but what are you guys hearing?"]},{"name":"Dave Calhoun","speech":["Well, let me start with the latter, the engine discussion. Again, what I'm really happy with is the transparency with which we are planning for rates with our engine suppliers. And you can -- you know who they are and predominantly one. And I'm feeling good about that.","And we have plans to do it. I don't think any of us are yet at a high confidence moment on that. But we will. And that progression will occur over the course of the year.","When we are at high confidence, then we're going to get to the kind of rates that we're -- that are built into our guidance. We've got a low end and a higher end, and we'll find out where we're going to fit on that, depending on it. But the transparency is amazing. No one is outguessing each other.","And because this market has been so strong, no one is second-guessing the rates. Everybody knows these rates. If we get to them, we'll achieve them, and then we can continue to move forward. So, there's a lot of good.","But until we see it month to month and until we get to that high confidence moment, you know, we're going to hold our production rate steady. And, Brian, you're up to date on the 87 discussion."]},{"name":"Brian West","speech":["Yeah. So, on the 87, so the fourth quarter was our first real full quarter in a while of being able to deliver airplanes. Both [Audio gap] still to the low rate and also from [Audio gap] it feels pretty good. And as we go into 2023, remember, the scope of work is pretty clear, what we have to do in terms of reworking the inventory of airplanes.","But remember, our suppliers have a part of that responsibility in their scope. So, bringing the suppliers -- the big suppliers along to make sure that they are conforming and they've got all the protocols in place to get that done on their end is something that we're working our way through. You know, it's going to take us a little bit longer than originally expected, which is why we are going to shift out, go into five per month a bit later in the year. But we still see 70 to 80 in the cards.","And so far, so good. What you'll likely see is some good liquidation of the inventory as we go through the year and then obviously ramp up the factories as we get deeper into the year. But net-net, the 70, 80, we still feel good about."]},{"name":"Operator","speech":["Next question is from Myles Walton with Wolfe Research. Please go ahead."]},{"name":"Myles Walton","speech":["Thanks. Good morning. Just wanted to clarify a couple of things. One, Brian, I think you mentioned 600 million higher abnormal costs from the 787.","Is that cash? Is that absorbed now in the '23 unchanged free cash flow guidance? And then also for defense, if you can just touch on your margin profitability, expectation, and rough magnitude for 2023? Thanks."]},{"name":"Brian West","speech":["Sure. So, in terms of the first question, you know, we -- the 787 abnormal, there is no cash impact. Part of that is just because part of that's just fixed cost absorption. But there's no change in the cash outlook.","It's not significant in that regard, so we're holding. On the defense margins, so in the quarter, as I mentioned, we had some bumps around from the supply chain constraints and some of the labor knocked us in the fourth quarter, as well as some of the timing of accruals that I mentioned. As we move our way into 2023, we clearly expect those margins to get better. It's not going to be all the way back to what normal might look like, but it's going to be improved sequentially, and we feel pretty good about the lineup in terms of the product portfolio.","And as we remind you is that the products are performing incredibly well with the customer. So, we feel good about the underlying basis. The BDS margins will get better, and we're positioned for that as we head into the year."]},{"name":"Myles Walton","speech":["All right. Thank you."]},{"name":"Operator","speech":["Next, we'll go to Kristine Liwag with Morgan Stanley. Please go ahead."]},{"name":"Kristine Liwag","speech":["Hey, good morning, everyone."]},{"name":"Dave Calhoun","speech":["Yeah, hi, Kristine."]},{"name":"Kristine Liwag","speech":["You know, Dave, you mentioned the milestone order from United despite the macroeconomic uncertainty in the near and medium term. So, when you look at COVID-19 now approaching the rearview mirror, China reopening, I mean, the demand for air travel has been pretty strong. Can you talk about what your customers are saying about potential new aircraft orders? Should we anticipate more airlines making landmark orders like United? And could we see BCA has a positive book-to-bill for the year?"]},{"name":"Dave Calhoun","speech":["Yeah, I -- again, I always hesitate to forecast specific orders. I will say that we're involved in more big orders now than we've been in a long time. I think last year was a big indicator for folks that big orders are out there. I think the United one is, in fact, indicative by Delta earlier.","There's just -- there are some big interests in aviation. I'd say the majority now outside the U.S. as opposed to inside the U.S. We're considering some big -- some really big things.","And we're in the midst of all of those. So, yeah, I have a -- I'm pretty optimistic. I'm not going to forecast numbers because that's never healthy. But I do think, over the next couple of quarters, you'll see some big decisions made to both manufacturers, and you'll see some new entrants into the aviation world that aim to make a real difference and, again, largely in the global markets."]},{"name":"Kristine Liwag","speech":["Thanks, Dave. And if I could do a follow-up. With that environment that you described, it sounds pretty robust. Can you describe the pricing environment for these orders and how they compared to pre-COVID levels?"]},{"name":"Dave Calhoun","speech":["Yeah. Well, when you're in the midst of any one deal, it feels ruthless. But if you really do balance it out, and I guess I credit both manufacturers, it's been pretty disciplined through this whole COVID moment. And so, you see very few reaches and sort of crazy things that are out of the norm.","And now, we're in sort of that supply chain constraint world where people simply want to get positions so that they know they have airplanes when the time comes. Recessions don't seem to get in the way because, remember, we're competing for deliveries out four and five years from now. So, they're not really computing recession into that. So, anyway, I -- you know, again, I feel good.","And I -- also, I'm going to guess that -- because it's always a guess, that pricing will stay disciplined."]},{"name":"Kristine Liwag","speech":["Thank you."]},{"name":"Operator","speech":["And next, we'll go to Seth Seifman with J.P. Morgan. Please go ahead."]},{"name":"Seth Seifman","speech":["Hey, thanks very much. Good morning. And really, I guess just a little bit of a quick clarification this morning rather than a question. Just making sure to understand the difference between production and deliveries this year on 737.","When you say the high end of the guidance is assuming low 30s and moving to high 40s, you're talking deliveries there. And then with regard to production, when you say that you are kind of hoping to get to a place where you see some stability this year, that's with regard to production in the factory. And so, that would make it very -- make it seem unlikely that the production rate is going higher than 31 this year. Is that a fair way to think about things, regardless of where that deliveries shake out?"]},{"name":"Brian West","speech":["You're right on characterizing the delivery framework. And I would say that as we move through the course of the year and we'll have fewer inventoried airplanes, that will put a little bit more opportunity on units coming out of the factory. So, production rate, at the right moment, could get higher. We'll wait and see.","We're just going to stick to the range for now."]},{"name":"Dave Calhoun","speech":["And as a reminder that we're not shooting for the low end of the range."]},{"name":"Seth Seifman","speech":["Right. Right. And as far as that stability that you're looking for, how much at this point would you say, you know, needs to come from improvement in the supply chain versus any improvement that's necessary in internal productivity?"]},{"name":"Dave Calhoun","speech":["Yeah. Look, I don't want to suggest that we don't have our own opportunities internally. We do, mostly driving cycle out and creating buffers in the right positions, etc. All things that you would attach to a company that really practices lean.","So, we will make improvements there. But the lion's share of the rate discussions is going to be built around the supply chain and the capacity, literally the capacity and capability of that supply chain to meet the new rates. And as I said, very transparent discussions. It's almost entirely built around labor availability, trained labor availability as we move through the course of the year.","Hiring is not a constraint anymore. People are be -- are able to hire the people they need. It's all about the training and ultimately getting them ready to do the sophisticated work that we demand."]},{"name":"Seth Seifman","speech":["Right. Thank you."]},{"name":"Dave Calhoun","speech":["Yup."]},{"name":"Operator","speech":["And next, we'll go to Cai von Rumohr with Cowen. Please go ahead."]},{"name":"Cai von Rumohr","speech":["Yes. Thank you very much. Could you update us on your efforts to certify the MAX 7 and 10, as well as the 777X? And as part of that, you know, the agreement to allow you to push out the certification dates of the 7 and the 10, I think you agreed to some -- to back fit some software changes on the existing MAX fleet. Could you tell us how much that's likely to cost? When did you take the accounting impact? Thanks."]},{"name":"Brian West","speech":["I'll take the last part of that to get that off the table, Cai. Thanks. The provision to retrofit the fleet was taken in the fourth quarter. That's behind us.","It was small."]},{"name":"Cai von Rumohr","speech":["OK."]},{"name":"Dave Calhoun","speech":["And there's a reason why it's small. But I just -- I hope everybody knows and understands how important it was to get those extensions in place in the legislation. The argument was purely a safety argument. Fortunately, we got a lot of support on both sides of the aisle, and we got it done.","So, this gives us all the flexibility we need to get these airplanes certified under the existing applications. And we feel good about that. We think first flights for the 7 will be this year and probably for the 10 the next year. So, we like where that stands.","Everybody's calm. The FAA, nobody ever put pencils down. So, we're just going to progress. And like always, we're not going to tell you exact dates as to when we expect those certifications.","So, all feels good. And then, yes, the legislation that was approved included some improvements that we put into our cockpit on the -10 that everybody agrees are useful and helpful to pilots. And those largely software adjustments will be incorporated into the entire MAX fleet over several years. As Brian said, it's not a large number, but we provided for it, and we're confident we can meet those objectives provided the cert and those improvements are accomplished here in the next year or two."]},{"name":"Cai von Rumohr","speech":["And the 777X?"]},{"name":"Dave Calhoun","speech":["I'm sorry. Everything's on course for the 777X. And I think the only issue that has created some concern over the last couple of years has been our agreement with the EASA in some of the design principles, but we think we're making terrific progress with the EASA. I think we will have a coordinated regulator -- regulatory approach to the cert.","And so, we're staying on our target."]},{"name":"Cai von Rumohr","speech":["Thank you."]},{"name":"Dave Calhoun","speech":["Yup."]},{"name":"Operator","speech":["And next, we'll go to David Strauss with Barclays. Please go ahead."]},{"name":"David Strauss","speech":["Thanks for taking the question. Good morning. Could you touch on the large pickup in 787 deferred balance in the quarter? What that means going forward for the cash outlook on the 87. And also, Brian, if you could just touch on the big pickup that we saw in the BCA unit loss? Is that just related to the higher 787 deliveries in the quarter? Thanks."]},{"name":"Brian West","speech":["Yeah. On the deferred production balance, that's basically the 787 cost base extension that I mentioned has an impact on program margins, and that's amplified by all the finished goods inventory that's sitting there on the 100 airplanes. So, that's driving the increase. And your last question, basically, it's impacted by customer mix and the impact of customer concessions and considerations."]},{"name":"David Strauss","speech":["OK. And a quick, quick follow-up on the -- I think you said 138 China airplanes in inventory. Are you still looking to remarket those?"]},{"name":"Dave Calhoun","speech":["Yes, but only partially. And as of now, when you see the sort of the results of that effort, you can assume that will be on pause with respect to that until we get -- until we understand completely where China wants to go. So, the answer is yes, and you'll see progress, but you'll also see a pause so that we can discern what China wants to do. And hopefully, that's good news."]},{"name":"David Strauss","speech":["Thank you."]},{"name":"Operator","speech":["Our next question is from Jason Gursky with Citi. Please go ahead."]},{"name":"Jason Gursky","speech":["Hey, good morning, everybody. Brian, just a quick clarification question and then one over on the services business. And the clarification, you mentioned that margins at BDS tick up in '23, but don't get back to the long-term margin rates that you expect there on a normalized basis. Just curious what the milestones are going to be for us to be watching out for on getting back to those normalized rates.","And then on the services business, maybe just a little bit more color on expectations for '23 with regard to your expectations on growth rate and margins. Thanks."]},{"name":"Brian West","speech":["Yeah, sure. The BDS, so, you know, as you mentioned, long-term high single digits is what we've talked about. But in the near term, the same kind of supply chain constraints and labor availability that we've talked about in the BCA world, you know, impact the BDS world as well. So, when the current environment is less constrained and stabilizes, that'll be a benefit.","We expect it to happen partly in 2023. But the key thing to watch is just the stability of the supply chain is going to be a big, big deal that we're keeping our eye on, and that's going to be important as margins will tend to accelerate. The time and the pace remain to be seen, but it will get better in 2023. On the services side, so we had a big year for the services business.","You know, it's going to have to -- and part of that was based on the commercial recovery. We enjoyed the benefit of that in 2022. But BGS, you know, in terms of their revenue, you know, they finished the quarter at pretty good spot, pretty clean basis. And if you just kind of think about that as how you would extrapolate into 2023 by quarter, it gives you a pretty good view of where we see that growth coming for.","So, it'll grow. Margins will be just fine right within that mid-teen levels that we've enjoyed. So, we feel pretty good about the prospects for the services business. Very stable, continue to grow.","No surprises."]},{"name":"Jason Gursky","speech":["Great. Thank you."]},{"name":"Operator","speech":["Next, we'll go to Ron Epstein with Bank of America. Please go ahead."]},{"name":"Ron Epstein","speech":["Hey, good morning, everyone."]},{"name":"Dave Calhoun","speech":["Hey, Ron."]},{"name":"Ron Epstein","speech":["Just circling back on thinking about product development and so on and so forth. Like you mentioned at the Investor Day, that Boeing wouldn't be going forward with a middle-of-the-market product probably until sometime in the 2030s. How should we think about that in light of the recent win with NASA on the Truss-Based Transonic Wing programming and what that means? Could that be some early technology on a new platform, or what are you looking for to happen in the technology world to feel confident about doing something new?"]},{"name":"Dave Calhoun","speech":["Yeah. So, Ron, I'm going to highlight three things that I think are going to contribute to a truly differentiated new product. One of them is the truss wing, so I'll refer to that now. As you know, that is a technology that's been worked on for the better part of the decade alongside of NASA.","And the program that we've embarked on here is how do you commercialize it, how do we put it through the right set of tests, etc. so that it, in fact, can be incorporated into new airplanes. So, there's really intent there to be able to do it. I'm not sure it is going to be as good and/or applicable for middle of the market and/or wide body, but it will definitely have a role to play someday in the narrow-body world.","So, that's number one. Number two, you've heard us talk about the digital thread, being able to create the digital model not just for the airplane, but for the factory and for the servicing. We are really cutting our teeth on a couple of defense programs that, frankly, we're learning a lot every day, all day so that whatever we do on that next commercial airplane will incorporate the digital thread, and it'll be way more mature than what it's been so far in our discrete defense programs. So, anyway, I feel very good about that.","And then the last major element has been the one that usually carried the day, but in this case, I think, will simply contribute to a better day. And that's propulsion technologies, bigger bypass ratios. And you probably know truss wing setup. Truss wing setup will create that opportunity to a far greater extent than today's wing simply because of the distance from the ground.","So, there are lots of reasons why I think these technologies can and will be proven and ultimately adopted. And when you're considering a 50-year kind of program for any new airplane, you have to think about this. And in our view, the objective has to be somewhere between 25% and 30% better than it is today. And that's what we're focused on.","And I think we have the time to do it and we -- the technologies to play out."]},{"name":"Ron Epstein","speech":["Got it. But if I can, just a quick, detailed follow-on. What are you thinking about headcount productions as we go -- headcount projections as we go into '23? I mean, how's it been in the labor market? You know, kind of across the supply chain, what you hear is everybody needs more people. And, you know, how's it been for Boeing and what are you doing to try to cross that bridge?"]},{"name":"Dave Calhoun","speech":["Yeah. Hey, Ron, I want to be clear. We have had no trouble hiring people. None.","We're sort of at or a little above of where we were in the days you guys all remember because we've got so many of these rework apparatuses going on and there are a lot of people required to do it. So, our job is to actually just take what we have, incorporate all the learning from the folks who are doing the rework. That will displace whatever retirements and/or demographic issues that we have over the next couple of years. We have a pretty good setup on labor and a pretty good mechanism, ironically, with these return-to-service aircraft and the joint verification.","A pretty good mechanism to train mechanics, train our people to do the job. And on the engineering front, men, we've had a real good run. Hiring is over 10,000. Our job is to make sure that we just train them right, get them involved early, and get on the line.","So, we are not facing a big demand. Our supply chain probably still is work on the hiring a bit, but it's nowhere near as important as their -- the training of the people that they're bringing in. I've seen this thing really ease up in the last year, like really ease up. Tier I's, I doubt any of them are really fighting for talent anymore.","And underneath that, I think the supply chains are filling out. It's all about now that training and development."]},{"name":"Ron Epstein","speech":["Got it. Thank you."]},{"name":"Dave Calhoun","speech":["Yup."]},{"name":"Operator","speech":["And next, we'll go to Rich Safran with Seaport Research Partners. Please go ahead."]},{"name":"Rich Safran","speech":["Dave, Brian, and Matt, good morning."]},{"name":"Dave Calhoun","speech":["Good morning."]},{"name":"Rich Safran","speech":["So, you're not going to be surprised, I'd like to ask you about defense. I wanted to know, first, could you broadly discuss your defense portfolio, the opportunity set, and what we should be focusing on? You know, just by example, I noticed that AIAA and you were discussing a C-17, C-130 recap. Second to that, could you also discuss the F-15EX program in terms of expectations for deliveries, production rates? And also, if margins on the program might be comparable to what we saw when you were selling the older models under FMS? Thanks."]},{"name":"Dave Calhoun","speech":["Yeah. So, let me take this one. Let me address it at the portfolio level. In light of the difficulties we've had with the fixed price development contracts, which I consider more of a contracting exposure as opposed to a portfolio exposure, I feel really good about the portfolio broadly, and there are reasons why I feel that way.","We're fully invested, as you know, on autonomy. I believe autonomy and teaming are going to be one of the real drivers with respect to airplane development, Air Force, Navy requirements going forward. And we're already invested and we're making real progress with both of those members of the fighting forces. And I'm sure you know the programs that we talked about.","And there are others we can't talk about, which we're as excited, if not more excited about. So, the long portfolio and the development that we've sustained over all these years, I feel really good about. We have the T-7 trainer. It's way more important than just the market for trainers itself.","Ultimately, we think it's a -- it can be used as a derivative to do other things for the Air Force. And I'm sure you know what that's about. But maybe even more importantly, it's an absolute poster child for our digital thread. And it's teaching our customer how to think about the use of the digital thread.","And it's teaching us how to perfect all the production technologies that we need to take full advantage of the digital thread. So, if I look at our -- just our sort of our wing fleet, I feel very good about where we are. And as you point out, the F-15, the new derivatives, boy, are they -- they're -- they are really important to our customers. We feel great about the future.","It feels like a new platform, frankly, from my perspective. I'm not going to hand out the production rates at this stage, but we're feeling pretty good about the international demand, as well as our U.S. demand. And you know, in light of their only other choices, this gets, frankly, more valuable over time until the really new classified work ultimately is completed and brought to the market.","Anyway, I feel quite good about the portfolio, its development, where we stand in it. And I'm sorry, some of the contracting methods that we used in the early going here. But anyway, we are where we are. And I can't get off the page without talking about the tanker, which we all still believe very, very strongly.","And again, difficult contracting moment for us. On the other hand, its utility to the Air Force has been fantastic, the vision system, our commitment to it, and then technologies beyond that allow for even autonomous refueling. These are things we're fully invested in, and we believe in the growth of the industry and the need with our customer. So, anyway, there are other things, and you probably know a lot of that, but there's a reason to feel good, frankly, on the development front with respect to Boeing's defense business."]},{"name":"Rich Safran","speech":["Thanks for that, Dave."]},{"name":"Dave Calhoun","speech":["Yup."]},{"name":"Matt Welch","speech":["John, we have time for one more question."]},{"name":"Operator","speech":["Certainly. And that will be from Sheila Kahyaoglu with Jefferies. Please go ahead."]},{"name":"Sheila Kahyaoglu","speech":["Good morning, guys, and thank you. I know it's been asked a thousand different ways, but I don't know if I know the answer yet. So, maybe, Dave, can you give us an idea of how -- you know, where you are on the MAX and 787 from a cash per aircraft perspective or how far that is below prior peak? And is there a cadence of that profitability free cash flow as we think about production rates increasing, supply chain impacts, and just pricing, you know, as you get aircraft out of inventory?"]},{"name":"Brian West","speech":["Well, let me take a shot at the -- I'll talk cash margins, and let's start with the 787. So, in the near term, they're pressured but positive. And we got to work through all the things that we've been describing. And in long term, you know, they're going to be higher than they were back in 2018, driven by productivity pricing in the -10 model.","So, the 87 feels like it's on the verge of doing some really special stuff over the long term. On the 37, you know, near-term pressure because of all the supply chain things we talked about, some customer mix things that we're going to battle through, and possibly some impact on remarketing. And then long term, you know, it's going to be more or less in line with what it was before, and the benefit being the productivity and the rate ramp. So, that's kind of how we think about those two programs over time from a cash perspective."]},{"name":"Dave Calhoun","speech":["You know, really --"]},{"name":"Sheila Kahyaoglu","speech":["Thanks."]},{"name":"Dave Calhoun","speech":["Sheila, you really have to get through calendar year '24, and then a lot of the clouds, a lot of the things that we've been wrestling with, the things that impact the -- our margins and the lumpiness along the way, that all begins to clear as we get to the tail end of '24. And then as we think about '25 and on, I think that clarity will be apparent to everybody."]},{"name":"Sheila Kahyaoglu","speech":["Great. Thank you."]},{"name":"Dave Calhoun","speech":["Yup."]},{"name":"Matt Welch","speech":["All right. And that concludes our fourth quarter 2022 earnings call. Thank you for joining."]},{"name":"Dave Calhoun","speech":["Thanks, everyone."]}],"string":"[\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"[Operator instructions] Our first question will be from Peter Arment with Baird. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Peter Arment\",\n \"speech\": [\n \"Yeah. Good morning, Dave and Brian. Hey. So, congrats on the progress in deliveries in the fourth quarter and the free cash flow generation.\",\n \"And you reiterated obviously the long-term free cash flow target of 10 billion in mid-decade in the 3 billion to 5 billion in '23. So, Brian, I guess on '23, can you just maybe talk around confidence levels around that expected free cash flow target specifically at BCA and BDS? Like kind of what are the key risks to call out? I assume it's supply chain around the guidance ranges. And then just, Dave, unrelated question, but can you comment broadly on the pickup in MAX flights in China as our checks show 220 revenue flights that are scheduled in February and there's already 60 flights that occurred this month? So, clearly, there's MAX activity that's picking up in China. Thanks.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah. Peter, why don't I start with China? Your numbers are within the range of my numbers. That is what's going on. I think, as everybody knows, the opening up of China is going to be a major event in aviation.\",\n \"And the aviation industry was already stressed in terms of demand broadly in the world. So, this is a serious bump for everybody. But most importantly, within China, they need the MAX to fly to satisfy those demands. So, we were going to do there what we do here in the U.S.\",\n \"and focus on the airplanes they have on the tarmac today, which is close to 100 airplanes, the readiness of each and every one of them. And ultimately, they're getting into full revenue service. So, for six months, I think that's the course for all of us to stay focused on. And then we're going to take up the question of deliveries and is there a moment in time where that begins to come back.\",\n \"I don't want to predict that date, Peter, but the odds go up every day our MAX gets back into service, and the airplanes that we have on our tarmacs, hopefully, we get ready and deliver to our customers. So, I think there's a reason to be optimistic. We will not change guidance and/or predict those outcomes until they actually occur.\"\n ]\n },\n {\n \"name\": \"Brian West\",\n \"speech\": [\n \"And, Peter, on the cash flow, the 3 to 5. Again, we feel very confident with that range. You know, the key underpinnings will be the deliveries that we talked about. The 37, you know, at the low end assumes that we don't get much better through the course of 2023 than we did this past year, which is low 30s through the whole year.\",\n \"At the high end, it actually says we do low 30s first half and then low 40s second half. So, I think that all of that is within the mix. As you recall, we had a big December. One caution is that December was kind of over 50 on the MAXs, but October was not quite that high.\",\n \"And that's an indication that we're still not stable, it's still bumpy, but we still feel good about the overall trajectory in terms of being able to hit the 400 to 450. And on the 87, similarly, feel good about where we landed and then where we're headed to hit the 70 to 80, which underpins pretty much most of the cash flow for BCA, those two product lines. And then BDS, no change to it. We thought things playing out pretty much as we expected.\"\n ]\n },\n {\n \"name\": \"Peter Arment\",\n \"speech\": [\n \"Appreciate the color. Thanks.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And next, we'll go to Doug Harned with Bernstein. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Doug Harned\",\n \"speech\": [\n \"Thank you. Good morning.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Hi, Doug.\"\n ]\n },\n {\n \"name\": \"Doug Harned\",\n \"speech\": [\n \"You know, when you look at the MAX right now, you know, the good news is you don't have a demand problem. You know, and as you guide to the 31-a-month production in 2023, and, you know, our assumption is that if you get into engine deliveries higher, you can move up from there giving -- given that your facilitized and staffed for 38. And if you look at it, the 2025 or 2026 time frame, when you're going to 50 a month -- you know, you were once at 57 a month. So, that would not be new territory.\",\n \"So, what I'm trying to get at is when you look at these two years, clearly, there are supplier issues in '23, but is it feasible that you could see that production rate go higher? And if so, what would you want to see? And I look at '23 and '25 differently since '25, I'm assuming we'd be out from under a lot of these supplier issues.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah, Doug. I -- again, now, I don't want to conjecture too much, but the two essential things to achieve that kind of objective. Number one, are we facilitized to -- at that kind of rate? And the answer is, as we progressed through this year, the -- will be yes. Number two, and by far the more challenging is, are we going to be stable month to month, quarter to quarter, predictable where the supply chain and the buffers that we put in place with respect to that supply chain are adequate? That's a harder, tougher put.\",\n \"I think it's going to take us all year to ultimately demonstrate that stability can and will be achieved. And if I get to that, and I hope I do, we do, then I'll take on that conjecture. But for right now, we are just squarely focused on that question of stability. As Brian said, our fourth quarter was good.\",\n \"We finished well. We didn't have a lot of surprises in December. But if you look at the month to month in the quarter, you can't be happy with that. We had just a few too many stoppages along the way.\",\n \"As you know, our philosophy is we're not going to travel anything anymore. We're not going to compound issues that occur, and we're going to maintain that philosophy. So, what's the month-to-month? That's going to tell you a lot about our willingness to consider the rates you're talking about.\"\n ]\n },\n {\n \"name\": \"Doug Harned\",\n \"speech\": [\n \"And is that true? And when you look out to the '25, '26 time frame, obviously there's a long way to go before we get there. How do you think about just flexibility given there may be a number of scenarios that could come out here in terms of production levels?\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Well, as I said, will we be facilitized to handle that kind of volume at that stage? Yes. We'll stay well ahead of that. And you'll see things that occur over this year that will demonstrate that. So, I'm -- that's the part of it I'm not too worried about.\",\n \"Again, it's stability questions. And then there will be a factor that we'll have to apply with respect to China. We're going to have to believe we're back and we're back for good.\"\n ]\n },\n {\n \"name\": \"Doug Harned\",\n \"speech\": [\n \"OK. OK, great. Thank you.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Noah Poponak with Goldman Sachs. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Noah Poponak\",\n \"speech\": [\n \"Hey, good morning, everyone.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Hey, Noah. Good morning.\"\n ]\n },\n {\n \"name\": \"Noah Poponak\",\n \"speech\": [\n \"I wanted to ask about supply chain. Can you -- you know, I heard you, Dave, that you're not going to mention any specific supplier, and I hear that and respect that. But if you could provide any more detail on what's happening on the 787. Is there a new quality control escape or is it just pure timing, delays, visibility into that getting better? Any incremental detail there would be really helpful.\",\n \"And then what's the latest from the engine OEMs? You know, sounded a little better yesterday, but what are you guys hearing?\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Well, let me start with the latter, the engine discussion. Again, what I'm really happy with is the transparency with which we are planning for rates with our engine suppliers. And you can -- you know who they are and predominantly one. And I'm feeling good about that.\",\n \"And we have plans to do it. I don't think any of us are yet at a high confidence moment on that. But we will. And that progression will occur over the course of the year.\",\n \"When we are at high confidence, then we're going to get to the kind of rates that we're -- that are built into our guidance. We've got a low end and a higher end, and we'll find out where we're going to fit on that, depending on it. But the transparency is amazing. No one is outguessing each other.\",\n \"And because this market has been so strong, no one is second-guessing the rates. Everybody knows these rates. If we get to them, we'll achieve them, and then we can continue to move forward. So, there's a lot of good.\",\n \"But until we see it month to month and until we get to that high confidence moment, you know, we're going to hold our production rate steady. And, Brian, you're up to date on the 87 discussion.\"\n ]\n },\n {\n \"name\": \"Brian West\",\n \"speech\": [\n \"Yeah. So, on the 87, so the fourth quarter was our first real full quarter in a while of being able to deliver airplanes. Both [Audio gap] still to the low rate and also from [Audio gap] it feels pretty good. And as we go into 2023, remember, the scope of work is pretty clear, what we have to do in terms of reworking the inventory of airplanes.\",\n \"But remember, our suppliers have a part of that responsibility in their scope. So, bringing the suppliers -- the big suppliers along to make sure that they are conforming and they've got all the protocols in place to get that done on their end is something that we're working our way through. You know, it's going to take us a little bit longer than originally expected, which is why we are going to shift out, go into five per month a bit later in the year. But we still see 70 to 80 in the cards.\",\n \"And so far, so good. What you'll likely see is some good liquidation of the inventory as we go through the year and then obviously ramp up the factories as we get deeper into the year. But net-net, the 70, 80, we still feel good about.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next question is from Myles Walton with Wolfe Research. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"Thanks. Good morning. Just wanted to clarify a couple of things. One, Brian, I think you mentioned 600 million higher abnormal costs from the 787.\",\n \"Is that cash? Is that absorbed now in the '23 unchanged free cash flow guidance? And then also for defense, if you can just touch on your margin profitability, expectation, and rough magnitude for 2023? Thanks.\"\n ]\n },\n {\n \"name\": \"Brian West\",\n \"speech\": [\n \"Sure. So, in terms of the first question, you know, we -- the 787 abnormal, there is no cash impact. Part of that is just because part of that's just fixed cost absorption. But there's no change in the cash outlook.\",\n \"It's not significant in that regard, so we're holding. On the defense margins, so in the quarter, as I mentioned, we had some bumps around from the supply chain constraints and some of the labor knocked us in the fourth quarter, as well as some of the timing of accruals that I mentioned. As we move our way into 2023, we clearly expect those margins to get better. It's not going to be all the way back to what normal might look like, but it's going to be improved sequentially, and we feel pretty good about the lineup in terms of the product portfolio.\",\n \"And as we remind you is that the products are performing incredibly well with the customer. So, we feel good about the underlying basis. The BDS margins will get better, and we're positioned for that as we head into the year.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"All right. Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we'll go to Kristine Liwag with Morgan Stanley. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Kristine Liwag\",\n \"speech\": [\n \"Hey, good morning, everyone.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah, hi, Kristine.\"\n ]\n },\n {\n \"name\": \"Kristine Liwag\",\n \"speech\": [\n \"You know, Dave, you mentioned the milestone order from United despite the macroeconomic uncertainty in the near and medium term. So, when you look at COVID-19 now approaching the rearview mirror, China reopening, I mean, the demand for air travel has been pretty strong. Can you talk about what your customers are saying about potential new aircraft orders? Should we anticipate more airlines making landmark orders like United? And could we see BCA has a positive book-to-bill for the year?\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah, I -- again, I always hesitate to forecast specific orders. I will say that we're involved in more big orders now than we've been in a long time. I think last year was a big indicator for folks that big orders are out there. I think the United one is, in fact, indicative by Delta earlier.\",\n \"There's just -- there are some big interests in aviation. I'd say the majority now outside the U.S. as opposed to inside the U.S. We're considering some big -- some really big things.\",\n \"And we're in the midst of all of those. So, yeah, I have a -- I'm pretty optimistic. I'm not going to forecast numbers because that's never healthy. But I do think, over the next couple of quarters, you'll see some big decisions made to both manufacturers, and you'll see some new entrants into the aviation world that aim to make a real difference and, again, largely in the global markets.\"\n ]\n },\n {\n \"name\": \"Kristine Liwag\",\n \"speech\": [\n \"Thanks, Dave. And if I could do a follow-up. With that environment that you described, it sounds pretty robust. Can you describe the pricing environment for these orders and how they compared to pre-COVID levels?\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah. Well, when you're in the midst of any one deal, it feels ruthless. But if you really do balance it out, and I guess I credit both manufacturers, it's been pretty disciplined through this whole COVID moment. And so, you see very few reaches and sort of crazy things that are out of the norm.\",\n \"And now, we're in sort of that supply chain constraint world where people simply want to get positions so that they know they have airplanes when the time comes. Recessions don't seem to get in the way because, remember, we're competing for deliveries out four and five years from now. So, they're not really computing recession into that. So, anyway, I -- you know, again, I feel good.\",\n \"And I -- also, I'm going to guess that -- because it's always a guess, that pricing will stay disciplined.\"\n ]\n },\n {\n \"name\": \"Kristine Liwag\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And next, we'll go to Seth Seifman with J.P. Morgan. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Seth Seifman\",\n \"speech\": [\n \"Hey, thanks very much. Good morning. And really, I guess just a little bit of a quick clarification this morning rather than a question. Just making sure to understand the difference between production and deliveries this year on 737.\",\n \"When you say the high end of the guidance is assuming low 30s and moving to high 40s, you're talking deliveries there. And then with regard to production, when you say that you are kind of hoping to get to a place where you see some stability this year, that's with regard to production in the factory. And so, that would make it very -- make it seem unlikely that the production rate is going higher than 31 this year. Is that a fair way to think about things, regardless of where that deliveries shake out?\"\n ]\n },\n {\n \"name\": \"Brian West\",\n \"speech\": [\n \"You're right on characterizing the delivery framework. And I would say that as we move through the course of the year and we'll have fewer inventoried airplanes, that will put a little bit more opportunity on units coming out of the factory. So, production rate, at the right moment, could get higher. We'll wait and see.\",\n \"We're just going to stick to the range for now.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"And as a reminder that we're not shooting for the low end of the range.\"\n ]\n },\n {\n \"name\": \"Seth Seifman\",\n \"speech\": [\n \"Right. Right. And as far as that stability that you're looking for, how much at this point would you say, you know, needs to come from improvement in the supply chain versus any improvement that's necessary in internal productivity?\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah. Look, I don't want to suggest that we don't have our own opportunities internally. We do, mostly driving cycle out and creating buffers in the right positions, etc. All things that you would attach to a company that really practices lean.\",\n \"So, we will make improvements there. But the lion's share of the rate discussions is going to be built around the supply chain and the capacity, literally the capacity and capability of that supply chain to meet the new rates. And as I said, very transparent discussions. It's almost entirely built around labor availability, trained labor availability as we move through the course of the year.\",\n \"Hiring is not a constraint anymore. People are be -- are able to hire the people they need. It's all about the training and ultimately getting them ready to do the sophisticated work that we demand.\"\n ]\n },\n {\n \"name\": \"Seth Seifman\",\n \"speech\": [\n \"Right. Thank you.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yup.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And next, we'll go to Cai von Rumohr with Cowen. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Cai von Rumohr\",\n \"speech\": [\n \"Yes. Thank you very much. Could you update us on your efforts to certify the MAX 7 and 10, as well as the 777X? And as part of that, you know, the agreement to allow you to push out the certification dates of the 7 and the 10, I think you agreed to some -- to back fit some software changes on the existing MAX fleet. Could you tell us how much that's likely to cost? When did you take the accounting impact? Thanks.\"\n ]\n },\n {\n \"name\": \"Brian West\",\n \"speech\": [\n \"I'll take the last part of that to get that off the table, Cai. Thanks. The provision to retrofit the fleet was taken in the fourth quarter. That's behind us.\",\n \"It was small.\"\n ]\n },\n {\n \"name\": \"Cai von Rumohr\",\n \"speech\": [\n \"OK.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"And there's a reason why it's small. But I just -- I hope everybody knows and understands how important it was to get those extensions in place in the legislation. The argument was purely a safety argument. Fortunately, we got a lot of support on both sides of the aisle, and we got it done.\",\n \"So, this gives us all the flexibility we need to get these airplanes certified under the existing applications. And we feel good about that. We think first flights for the 7 will be this year and probably for the 10 the next year. So, we like where that stands.\",\n \"Everybody's calm. The FAA, nobody ever put pencils down. So, we're just going to progress. And like always, we're not going to tell you exact dates as to when we expect those certifications.\",\n \"So, all feels good. And then, yes, the legislation that was approved included some improvements that we put into our cockpit on the -10 that everybody agrees are useful and helpful to pilots. And those largely software adjustments will be incorporated into the entire MAX fleet over several years. As Brian said, it's not a large number, but we provided for it, and we're confident we can meet those objectives provided the cert and those improvements are accomplished here in the next year or two.\"\n ]\n },\n {\n \"name\": \"Cai von Rumohr\",\n \"speech\": [\n \"And the 777X?\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"I'm sorry. Everything's on course for the 777X. And I think the only issue that has created some concern over the last couple of years has been our agreement with the EASA in some of the design principles, but we think we're making terrific progress with the EASA. I think we will have a coordinated regulator -- regulatory approach to the cert.\",\n \"And so, we're staying on our target.\"\n ]\n },\n {\n \"name\": \"Cai von Rumohr\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yup.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And next, we'll go to David Strauss with Barclays. Please go ahead.\"\n ]\n },\n {\n \"name\": \"David Strauss\",\n \"speech\": [\n \"Thanks for taking the question. Good morning. Could you touch on the large pickup in 787 deferred balance in the quarter? What that means going forward for the cash outlook on the 87. And also, Brian, if you could just touch on the big pickup that we saw in the BCA unit loss? Is that just related to the higher 787 deliveries in the quarter? Thanks.\"\n ]\n },\n {\n \"name\": \"Brian West\",\n \"speech\": [\n \"Yeah. On the deferred production balance, that's basically the 787 cost base extension that I mentioned has an impact on program margins, and that's amplified by all the finished goods inventory that's sitting there on the 100 airplanes. So, that's driving the increase. And your last question, basically, it's impacted by customer mix and the impact of customer concessions and considerations.\"\n ]\n },\n {\n \"name\": \"David Strauss\",\n \"speech\": [\n \"OK. And a quick, quick follow-up on the -- I think you said 138 China airplanes in inventory. Are you still looking to remarket those?\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yes, but only partially. And as of now, when you see the sort of the results of that effort, you can assume that will be on pause with respect to that until we get -- until we understand completely where China wants to go. So, the answer is yes, and you'll see progress, but you'll also see a pause so that we can discern what China wants to do. And hopefully, that's good news.\"\n ]\n },\n {\n \"name\": \"David Strauss\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Jason Gursky with Citi. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Jason Gursky\",\n \"speech\": [\n \"Hey, good morning, everybody. Brian, just a quick clarification question and then one over on the services business. And the clarification, you mentioned that margins at BDS tick up in '23, but don't get back to the long-term margin rates that you expect there on a normalized basis. Just curious what the milestones are going to be for us to be watching out for on getting back to those normalized rates.\",\n \"And then on the services business, maybe just a little bit more color on expectations for '23 with regard to your expectations on growth rate and margins. Thanks.\"\n ]\n },\n {\n \"name\": \"Brian West\",\n \"speech\": [\n \"Yeah, sure. The BDS, so, you know, as you mentioned, long-term high single digits is what we've talked about. But in the near term, the same kind of supply chain constraints and labor availability that we've talked about in the BCA world, you know, impact the BDS world as well. So, when the current environment is less constrained and stabilizes, that'll be a benefit.\",\n \"We expect it to happen partly in 2023. But the key thing to watch is just the stability of the supply chain is going to be a big, big deal that we're keeping our eye on, and that's going to be important as margins will tend to accelerate. The time and the pace remain to be seen, but it will get better in 2023. On the services side, so we had a big year for the services business.\",\n \"You know, it's going to have to -- and part of that was based on the commercial recovery. We enjoyed the benefit of that in 2022. But BGS, you know, in terms of their revenue, you know, they finished the quarter at pretty good spot, pretty clean basis. And if you just kind of think about that as how you would extrapolate into 2023 by quarter, it gives you a pretty good view of where we see that growth coming for.\",\n \"So, it'll grow. Margins will be just fine right within that mid-teen levels that we've enjoyed. So, we feel pretty good about the prospects for the services business. Very stable, continue to grow.\",\n \"No surprises.\"\n ]\n },\n {\n \"name\": \"Jason Gursky\",\n \"speech\": [\n \"Great. Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we'll go to Ron Epstein with Bank of America. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Ron Epstein\",\n \"speech\": [\n \"Hey, good morning, everyone.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Hey, Ron.\"\n ]\n },\n {\n \"name\": \"Ron Epstein\",\n \"speech\": [\n \"Just circling back on thinking about product development and so on and so forth. Like you mentioned at the Investor Day, that Boeing wouldn't be going forward with a middle-of-the-market product probably until sometime in the 2030s. How should we think about that in light of the recent win with NASA on the Truss-Based Transonic Wing programming and what that means? Could that be some early technology on a new platform, or what are you looking for to happen in the technology world to feel confident about doing something new?\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah. So, Ron, I'm going to highlight three things that I think are going to contribute to a truly differentiated new product. One of them is the truss wing, so I'll refer to that now. As you know, that is a technology that's been worked on for the better part of the decade alongside of NASA.\",\n \"And the program that we've embarked on here is how do you commercialize it, how do we put it through the right set of tests, etc. so that it, in fact, can be incorporated into new airplanes. So, there's really intent there to be able to do it. I'm not sure it is going to be as good and/or applicable for middle of the market and/or wide body, but it will definitely have a role to play someday in the narrow-body world.\",\n \"So, that's number one. Number two, you've heard us talk about the digital thread, being able to create the digital model not just for the airplane, but for the factory and for the servicing. We are really cutting our teeth on a couple of defense programs that, frankly, we're learning a lot every day, all day so that whatever we do on that next commercial airplane will incorporate the digital thread, and it'll be way more mature than what it's been so far in our discrete defense programs. So, anyway, I feel very good about that.\",\n \"And then the last major element has been the one that usually carried the day, but in this case, I think, will simply contribute to a better day. And that's propulsion technologies, bigger bypass ratios. And you probably know truss wing setup. Truss wing setup will create that opportunity to a far greater extent than today's wing simply because of the distance from the ground.\",\n \"So, there are lots of reasons why I think these technologies can and will be proven and ultimately adopted. And when you're considering a 50-year kind of program for any new airplane, you have to think about this. And in our view, the objective has to be somewhere between 25% and 30% better than it is today. And that's what we're focused on.\",\n \"And I think we have the time to do it and we -- the technologies to play out.\"\n ]\n },\n {\n \"name\": \"Ron Epstein\",\n \"speech\": [\n \"Got it. But if I can, just a quick, detailed follow-on. What are you thinking about headcount productions as we go -- headcount projections as we go into '23? I mean, how's it been in the labor market? You know, kind of across the supply chain, what you hear is everybody needs more people. And, you know, how's it been for Boeing and what are you doing to try to cross that bridge?\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah. Hey, Ron, I want to be clear. We have had no trouble hiring people. None.\",\n \"We're sort of at or a little above of where we were in the days you guys all remember because we've got so many of these rework apparatuses going on and there are a lot of people required to do it. So, our job is to actually just take what we have, incorporate all the learning from the folks who are doing the rework. That will displace whatever retirements and/or demographic issues that we have over the next couple of years. We have a pretty good setup on labor and a pretty good mechanism, ironically, with these return-to-service aircraft and the joint verification.\",\n \"A pretty good mechanism to train mechanics, train our people to do the job. And on the engineering front, men, we've had a real good run. Hiring is over 10,000. Our job is to make sure that we just train them right, get them involved early, and get on the line.\",\n \"So, we are not facing a big demand. Our supply chain probably still is work on the hiring a bit, but it's nowhere near as important as their -- the training of the people that they're bringing in. I've seen this thing really ease up in the last year, like really ease up. Tier I's, I doubt any of them are really fighting for talent anymore.\",\n \"And underneath that, I think the supply chains are filling out. It's all about now that training and development.\"\n ]\n },\n {\n \"name\": \"Ron Epstein\",\n \"speech\": [\n \"Got it. Thank you.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yup.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And next, we'll go to Rich Safran with Seaport Research Partners. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Rich Safran\",\n \"speech\": [\n \"Dave, Brian, and Matt, good morning.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"Rich Safran\",\n \"speech\": [\n \"So, you're not going to be surprised, I'd like to ask you about defense. I wanted to know, first, could you broadly discuss your defense portfolio, the opportunity set, and what we should be focusing on? You know, just by example, I noticed that AIAA and you were discussing a C-17, C-130 recap. Second to that, could you also discuss the F-15EX program in terms of expectations for deliveries, production rates? And also, if margins on the program might be comparable to what we saw when you were selling the older models under FMS? Thanks.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yeah. So, let me take this one. Let me address it at the portfolio level. In light of the difficulties we've had with the fixed price development contracts, which I consider more of a contracting exposure as opposed to a portfolio exposure, I feel really good about the portfolio broadly, and there are reasons why I feel that way.\",\n \"We're fully invested, as you know, on autonomy. I believe autonomy and teaming are going to be one of the real drivers with respect to airplane development, Air Force, Navy requirements going forward. And we're already invested and we're making real progress with both of those members of the fighting forces. And I'm sure you know the programs that we talked about.\",\n \"And there are others we can't talk about, which we're as excited, if not more excited about. So, the long portfolio and the development that we've sustained over all these years, I feel really good about. We have the T-7 trainer. It's way more important than just the market for trainers itself.\",\n \"Ultimately, we think it's a -- it can be used as a derivative to do other things for the Air Force. And I'm sure you know what that's about. But maybe even more importantly, it's an absolute poster child for our digital thread. And it's teaching our customer how to think about the use of the digital thread.\",\n \"And it's teaching us how to perfect all the production technologies that we need to take full advantage of the digital thread. So, if I look at our -- just our sort of our wing fleet, I feel very good about where we are. And as you point out, the F-15, the new derivatives, boy, are they -- they're -- they are really important to our customers. We feel great about the future.\",\n \"It feels like a new platform, frankly, from my perspective. I'm not going to hand out the production rates at this stage, but we're feeling pretty good about the international demand, as well as our U.S. demand. And you know, in light of their only other choices, this gets, frankly, more valuable over time until the really new classified work ultimately is completed and brought to the market.\",\n \"Anyway, I feel quite good about the portfolio, its development, where we stand in it. And I'm sorry, some of the contracting methods that we used in the early going here. But anyway, we are where we are. And I can't get off the page without talking about the tanker, which we all still believe very, very strongly.\",\n \"And again, difficult contracting moment for us. On the other hand, its utility to the Air Force has been fantastic, the vision system, our commitment to it, and then technologies beyond that allow for even autonomous refueling. These are things we're fully invested in, and we believe in the growth of the industry and the need with our customer. So, anyway, there are other things, and you probably know a lot of that, but there's a reason to feel good, frankly, on the development front with respect to Boeing's defense business.\"\n ]\n },\n {\n \"name\": \"Rich Safran\",\n \"speech\": [\n \"Thanks for that, Dave.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yup.\"\n ]\n },\n {\n \"name\": \"Matt Welch\",\n \"speech\": [\n \"John, we have time for one more question.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Certainly. And that will be from Sheila Kahyaoglu with Jefferies. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Good morning, guys, and thank you. I know it's been asked a thousand different ways, but I don't know if I know the answer yet. So, maybe, Dave, can you give us an idea of how -- you know, where you are on the MAX and 787 from a cash per aircraft perspective or how far that is below prior peak? And is there a cadence of that profitability free cash flow as we think about production rates increasing, supply chain impacts, and just pricing, you know, as you get aircraft out of inventory?\"\n ]\n },\n {\n \"name\": \"Brian West\",\n \"speech\": [\n \"Well, let me take a shot at the -- I'll talk cash margins, and let's start with the 787. So, in the near term, they're pressured but positive. And we got to work through all the things that we've been describing. And in long term, you know, they're going to be higher than they were back in 2018, driven by productivity pricing in the -10 model.\",\n \"So, the 87 feels like it's on the verge of doing some really special stuff over the long term. On the 37, you know, near-term pressure because of all the supply chain things we talked about, some customer mix things that we're going to battle through, and possibly some impact on remarketing. And then long term, you know, it's going to be more or less in line with what it was before, and the benefit being the productivity and the rate ramp. So, that's kind of how we think about those two programs over time from a cash perspective.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"You know, really --\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Thanks.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Sheila, you really have to get through calendar year '24, and then a lot of the clouds, a lot of the things that we've been wrestling with, the things that impact the -- our margins and the lumpiness along the way, that all begins to clear as we get to the tail end of '24. And then as we think about '25 and on, I think that clarity will be apparent to everybody.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Great. Thank you.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Yup.\"\n ]\n },\n {\n \"name\": \"Matt Welch\",\n \"speech\": [\n \"All right. And that concludes our fourth quarter 2022 earnings call. Thank you for joining.\"\n ]\n },\n {\n \"name\": \"Dave Calhoun\",\n \"speech\": [\n \"Thanks, everyone.\"\n ]\n }\n]","isConversational":false}}},{"rowIdx":698,"cells":{"ticker":{"kind":"string","value":"BA"},"date":{"kind":"string","value":"2020-04-29"},"participants":{"kind":"list like","value":[{"description":"Investor Relations","name":"Maurita Sutedja","position":"Other"},{"description":"President and Chief Executive Officer","name":"David L. Calhoun","position":"Executive"},{"description":"Chief Financial Officer and Executive Vice President, Enterprise Performance & Strategy","name":"Greg Smith","position":"Executive"},{"description":"Robert W. Baird -- Analyst","name":"Peter Arment","position":"Analyst"},{"description":"Credit Suisse -- Analyst","name":"Robert Spingarn","position":"Analyst"},{"description":"JP Morgan -- Analyst","name":"Seth Seifman","position":"Analyst"},{"description":"Melius Research -- Analyst","name":"Carter Copeland","position":"Analyst"},{"description":"Goldman Sachs -- Analyst","name":"Noah Poponak","position":"Analyst"},{"description":"Bernstein Research -- Analyst","name":"Douglas S. Harned","position":"Analyst"},{"description":"Bank of America Merrill Lynch -- Analyst","name":"Ronald J. Epstein","position":"Analyst"},{"description":"Jefferies -- Analyst","name":"Sheila Kahyaoglu","position":"Analyst"},{"description":"Citi -- Analyst","name":"Jonathan Raviv","position":"Analyst"},{"description":"UBS -- Analyst","name":"Myles Walton","position":"Analyst"}],"string":"[\n {\n \"description\": \"Investor Relations\",\n \"name\": \"Maurita Sutedja\",\n \"position\": \"Other\"\n },\n {\n \"description\": \"President and Chief Executive Officer\",\n \"name\": \"David L. Calhoun\",\n \"position\": \"Executive\"\n },\n {\n \"description\": \"Chief Financial Officer and Executive Vice President, Enterprise Performance & Strategy\",\n \"name\": \"Greg Smith\",\n \"position\": \"Executive\"\n },\n {\n \"description\": \"Robert W. Baird -- Analyst\",\n \"name\": \"Peter Arment\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Credit Suisse -- Analyst\",\n \"name\": \"Robert Spingarn\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"JP Morgan -- Analyst\",\n \"name\": \"Seth Seifman\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Melius Research -- Analyst\",\n \"name\": \"Carter Copeland\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Goldman Sachs -- Analyst\",\n \"name\": \"Noah Poponak\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Bernstein Research -- Analyst\",\n \"name\": \"Douglas S. Harned\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Bank of America Merrill Lynch -- Analyst\",\n \"name\": \"Ronald J. Epstein\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Jefferies -- Analyst\",\n \"name\": \"Sheila Kahyaoglu\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Citi -- Analyst\",\n \"name\": \"Jonathan Raviv\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"UBS -- Analyst\",\n \"name\": \"Myles Walton\",\n \"position\": \"Analyst\"\n }\n]","isConversational":false},"prepared_remarks":{"kind":"list like","value":[{"name":"Operator","speech":["Good day everyone, and welcome to The Boeing Company's First Quarter 2020 Earnings Conference Call.","Today's call is being recorded. The management discussion and slide presentation, plus the analyst question-and-answer session are being broadcast live over the Internet.","[Operator Instructions]","At this time for opening remarks and introductions, I'm turning the call over to Ms. Maurita Sutedja, Vice President of Investor Relations for The Boeing Company. Ms. Sutedja, please go ahead."]},{"name":"Maurita Sutedja","speech":["Thank you, John, and good morning. Welcome to Boeing's first quarter 2020 earnings call.","I'm Maurita Sutedja, and with me today are David Calhoun, Boeing's President and Chief Executive Officer, and Greg Smith, Boeing's Executive Vice President, Enterprise Operations and Chief Financial Officer. After management comments, we will conduct a question-and-answer session.","[Operator Instructions]","As always, we have provided detailed financial information in our press release issued earlier today. And as a reminder, you can follow today's broadcast and slide presentation through our website at boeing.com.","Before we begin, I need to remind you that any projections, estimates and goals we include in our discussion this morning are likely to involve risks which are detailed in our news release, in our various SEC filings and in the forward-looking statement disclaimer at the end of this web presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of certain non-GAAP measures.","Now, I will turn the call over to Dave Calhoun."]},{"name":"David L. Calhoun","speech":["Thank you, Maurita, and good morning, everyone.","I want to start by saying, I hope you are all staying safe and healthy during this global crisis. I also want to thank my Boeing colleagues around the globe for everything they are doing to support each other, our business and our customers during these intensely challenging times. On behalf of Boeing, I'd like to recognize all of the public servants out there from federal, state and local authorities to frontline healthcare professionals and first responders for the difficult decisions and the personal risks they are making to protect and care for all of us.","Let's turn to the second slide please. The COVID-19 pandemic is a global crisis like no other. This hits home for us personally and professionally. Across Boeing, we're focused on keeping our people and our communities safe. We're battling to stop the virus by taking every measure possible including early implementation of virtual work, deep cleaning our work areas, adjusting work patterns, adding visual indicators to increase social distancing and temperature screening stations with no touch thermal scanners, providing access to medical information around the clock, quarantining anyone potentially exposed to the virus, suspending operations where necessary and more.","We have doubled our paid leave policy for those who cannot work remotely when their sites were suspended. At sites where we've had to temporarily suspend operations, we've worked closely with our customers to ensure we maintain critical support for them. And before bringing our teams back to work, we've implemented objectives and rigorous steps aligned with federal and state guidance to ensure safe and orderly restart of operations. Earlier this week, we announced that we will resume operations at our Boeing South Carolina site beginning on May 3. This move brings back our final production site that was temporarily suspended as a result of COVID-19.","We're also doing everything we can to support our global supply chain health. A number of our suppliers have suspended or reduced their operations resulting in some supply shortages for our own operations. In some cases, this contributed to our site suspension decisions. We've taken mitigating actions where we can, but supply disruption remains a key watch item for us. At the other end of our value chain, we continue to support our commercial airplanes and services customers as their own business slows to a trickle. We've also focused on meeting the commitments to our defense and space customers.","Given the swift and severe nature of this COVID-19 shock, to preserve the long-term competitiveness of our company as well as our industry, we are intensely focused on ensuring liquidity through the immediate crisis. We welcome that some 26 countries, including the United States, have announced economic support packages worth more than $100 billion, specifically targeting the aerospace and airline sectors. The aerospace industry relies on a global shared supply chain and the aviation sector supports 3.6% of the global GDP, generating more than 65 million jobs worldwide. In the US, we applaud the administration and Congress for working together to pass the CARES Act, which will be critical to supporting the nation's entire aerospace manufacturing sector, which comprise 2.5 million jobs and 17,000 suppliers.","We expect that programs coming out of the bill and funding options the government is putting in place will provide support to help the credit markets function again providing the liquidity that is vital to our industry's ability to bridge recovery. The $25 billion support package agreed to by the US airlines and the government is a pivotal step toward maintaining the aviation pillar of the US economy. Even a full recovery will take years, not months. Knowing that the US airline industry has critical financial support through the pandemic, allows us to plan our production and services system for the medium and long-term impact on air travel.","Greg will go through our liquidity situation in more detail a bit later, but let me just say, we believe that government support will be critical to ensuring our industry's access to liquidity. We continue to evaluate options in the capital markets as well as funding options from the US Government via the US Treasury and various Federal Reserve programs. We've also taken other aggressive liquidity steps, including drawing down on a term loan, reducing operating cost, suspending dividend payments, terminating share repurchase authorization, reducing or deferring non-critical spend and accelerating some progress payment receipts with the help from our defense customers.","Additionally, we are working to resize and reshape our business, starting at the top with our leadership structure. We are consolidating roles, simplifying processes and focusing accountabilities. As part of this reorganization, I've asked Greg Smith, who most of you know well to take additional responsibilities leading our enterprise, manufacturing, supply chain and services functions, in addition to his CFO and strategy roles.","Before I turn to our longer-term business environment and the steps we're taking to prepare for it, I want to call out the selfless contributions Boeing employees have made to the broader fight against the coronavirus. They've been producing protective face shields for distribution to healthcare professionals, have flown our aircraft on missions to transport critical healthcare supplies around the world, donated masks, gloves and other equipment, and contributed hundreds of thousands of dollars to food centers for people in need, and that's just a partial list.","Now I'd like to turn the attention to the outlook for our industry highlighted on Slide 3. The air travel industry has never seen anything quite like this. The latest IATA forecast projects full-year passenger traffic to be down 48% this year compared to 2019, as global economic activity slows down due to the COVID-19 and the governments severely restricting travel to contain the spread of that virus. Here in the US, passenger traffic at this moment in time is down 95% compared to a year ago. Airlines are cutting back operations dramatically. As they assess their businesses, they're making difficult decisions that result in grounding fleets, deferring airplane orders, postponing acceptance of completed orders, and slowing down or stopping payments.","They are also accelerating aircraft retirements and requiring fewer services. The fundamentals that have driven air travel for the past five decades and doubled air traffic over the past two decades remain intact. We believe this industry will recover but it will take two to three years for travel to return to 2019 levels and it will be a few years beyond that for the industry to return to long-term growth trends. Our outlook is informed by decades of analysis and insights on customer behavior including how the industry has reacted to prior market shocks. We incorporated assumptions related to a prolonged recession and potential consolidation within the industry in our assessment.","The picture is dynamic and subject to many unknowns, but as we see it today, narrow-body airplanes will lead the way to recovery trailed by wide-body fleets as airlines progressively bring their networks back online. Therefore, wide-body passenger fleets will likely be more significantly impacted than narrow-body airplanes in the near term. A key driver in both segments will be the rate of retirements of older fleets. We expect our customers to look at their fleet planning strategies differently in light of these dynamics. More than 2,500 aircraft with 20-plus years of service were in active service prior to the crisis. Replacements will not be uniform as airlines will focus on the oldest and least efficient to retire. Some airlines have already made announcements to this effect.","Airplanes that we plan to deliver this year will be 25% to 40% more fuel efficient than airplanes that they're replacing. Our position is helped by the value proposition of our family of airplanes and the diversity of our backlog, this includes our market-leading 787 Dreamliner family, our unmatched cargo line up, the world's largest and most efficient twin-engine jet 777X and the versatile 737 family. To balance the supply and demand given the COVID-19 shock and to preserve our long-term potential and competitiveness, we have decided to reduce the production rates of several of our commercial airplane programs.","Let's turn to Slide 4. In the narrow-body segment, we have assumed that we will resume 737 MAX aircraft production at low rates in 2020 as timing and conditions of return to service are better understood. We expect to gradually increase the production rate to 31 during 2021 with further gradual increases that correspond with market demand. The slower production rate ramp up reflects commercial airline industry uncertainty due to the impact of COVID-19, and the production rate ramp profile is also affected by the pace of delivery of our stored aircraft.","We continue to see our new MAX airplanes creating capacity for growth and providing required replacements for older, less efficient airplanes. We will continue to work closely with our customers to review their fleet plans and make adjustments where appropriate to adapt to lower than planned 737 MAX production in the near term, provide more flexibility to deliver MAX airplanes in our backlog and protect the value of the MAX family.","Moving to the wide-body segment. We now plan to reduce the 787 production rate to 10 per month in 2020 and then gradually reduce to seven per month by 2022. We will continue to evaluate the rate beyond 2022 to balance supply and demand. Our 787 Dreamliner family has a compelling value proposition, offering unparalleled fuel efficiency and range flexibility, enabling carriers to optimize fleet and network performance as well as profitability -- as well as profitably expanding to new markets.","Turning to the 777X. We've made progress on the 777X certification requirements and have resumed flight testing with the restart of our operations in the Puget Sound. We currently expect first delivery of the 777-9 to be in 2021 and will continue to manage the risks inherent in any development program, especially ones around certification in the post-MAX environment and COVID-19-related impacts. We now expect to deliver 777 at an average rate of approximately 2.5 per month in 2020. And due to the market uncertainties driven primarily by the impacts of COVID-19, we plan to reduce the combined 777/777X production rate to three per month in 2021. We will take a measured approach to the 777X rate ramp as we will look to minimize the amount of change in corporation work by managing the number of aircraft produced prior to entry into service. On the 777, as I discussed earlier, we will continue to closely monitor the cargo market and carefully manage our skyline.","Finally, we'll make no change to the 767 and 747 production rates at this time. These programs are targeted for the cargo market and approximately half of the 767 production line is dedicated to the tanker program. These rate decisions are based on our current assessment of the demand environment, taking into account a host of risks and opportunities. We will closely monitor the key factors that affect our skyline including the wide-body replacement cycle and the cargo market. We will maintain a discipline rate management process and make adjustments as appropriate in the future.","Now let's turn to Slide 5. The diversity of our portfolio is unmatched and our government services, defense and space programs will provide critical stability for us moving forward. In fact our work in these areas accounted for 45% of our overall revenue in 2019 that will obviously increase in the year ahead. At Defense, Space & Security, we continue to see a healthy market with solid demand for our major platforms and programs, both domestically and internationally. Despite some near-term production impacts associated with our temporary suspension of operations at various locations, our portfolio of programs and technologies remains well aligned to our customers' missions. We are also well-positioned with proven world-class platforms to address current needs, and innovative capable and affordable new franchise programs for the future.","For example, the President's budget request for fiscal year '21 supports key Boeing programs, including the V-22 and Apache, 12 F-15EX aircraft and 15 KC-46A Tankers. It also requests funding in line with the expected development profile of future franchise programs, the MQ-25, the T-7A Red Hawk and the MH-139A Grey Wolf, and our extra large unmanned undersea vehicle. We have received broad support from the Pentagon for programs and products across the BDS portfolio. We are continuously improving performance of our existing platforms, including the KC-46A Tanker and our space programs. While the tanker program has had delays and other challenges, with this month's agreement with the US Air Force to develop and integrate a new Remote Vision System, we will ensure that KC-46 becomes the standard by which all future refueling aircraft are measured.","Given its 2020 design update, no other tanker will have the technological capabilities of the KC-46. The men and women of the US Air Force have our full commitment, and our investment in tanker reinforces that dedication. Our space teams completed the core stage of NASA's Space Launch System and learned key lessons from the CST-100 Starliner's Orbital Flight Test. We will refly this test to demonstrate the quality of the Starliner system, paving the way for future crude flights. It is the right thing to do for our NASA customer and the astronauts who ultimately fly on it.","As you may recall, we provisioned for another uncrewed mission in our financials last quarter. On the services side, we are seeing a direct impact on our commercial supply chain business as fewer flights result in a decreased demand for our parts and logistics offerings. Our commercial customers are curtailing discretionary spend such as modifications and upgrades and focusing on required maintenance. We anticipate accelerated retirement of older airplanes, which will result in a newer fleet when air travel resumes to previous levels, which will prolong the period of decreased demand for our commercial services offerings.","Similar to Commercial Airplanes, we expect a multi-year recovery period for the commercial services business. The demand outlook for our government services business, which in 2019 accounted for just under half of the BGS revenue, it remains stable. The strength of government services provides a strong foundation for our overall services business. We see growth in a number of government services areas including ramp-ups to support international customers with training, logistics and supply chain offerings as well as growth on key US programs.","In summary, our industry is going to look very different as a result of this pandemic and the economic impact it has had on airlines and schedules around the world. The resulting reductions in the BCA production rates I outlined will require us to make similar adjustment in our infrastructure, our spending and our workforce. We will be a smaller company for a while. We've worked hard to maintain the stability of our workforce avoiding layoffs even through the suspension of MAX production, doubling the length of time we pay employees impacted by the COVID-induced shutdown of Puget Sound, Charleston and other sites, bringing people back to work at those sites as soon as we safely could. But the sharp reduction in demand for our airplanes that we see out over the next several years won't support the size of the workforce we have today.","At this time, we are taking action to reduce our workforce by approximately 10% of our roughly 160,000 employees by end of this year, through the combination of voluntary layoffs, attrition and involuntary layoffs as necessary. This is 10% of the total for our enterprise. We'll have to make even deeper reductions in areas that are most exposed to the condition of our commercial customers, more than 15% across commercial airplanes and services businesses, as well as our corporate functions. At the same time, the ongoing stability of our defense, space and related services businesses will help us limit the overall depth of the cut.","Of course, we will continue to monitor market conditions closely in light of the unpredictable factors currently driving it and we will make ongoing adjustments as appropriate. We will continuously work to shape our business to compete and what we think the market will look like over the next five years. I shared this news with our employees this morning and I committed to implementing these reductions as fairly respectfully and transparently as possible and to providing as much support for our employees as we can through the duration of the global health emergency we are facing.","Before I turn this over to Greg, I want to update you on a couple of other important topics. First, our progress on safely returning the 737 MAX to service. We're continuing our work on the safe return of the MAX to service working closely with the FAA and other global regulators. Right now, we are focused on completing the software validation and required technical documentation that will precede a certification flight. Some of this documentation work has taken longer than we anticipated and the coronavirus situation has also required some changes to how we do things including working remotely and virtual meetings with our regulators.","With that said, we've continued to make very solid progress and we currently expect that the necessary regulatory approvals will be obtained in time to support resumption of 737 MAX deliveries during the third quarter. Of course, the actual timing will ultimately be determined by our regulators. In the meantime, we have approximately 450 737 MAX aircraft built and stored and our MAX backlog has remained strong throughout this process at approximately 4,000 aircraft. They are the most fuel-efficient narrow-body planes in the market with useful lives well over 25 years. We have been working proactively with our customers to maintain the health of this backlog, while responding to their needs.","Turning to Embraer, we announced Saturday that we have terminated the agreement to establish a strategic partnership between our two companies, covering both the planned commercial and defense joint ventures. We worked diligently for two years to finalize the transaction, but ultimately we could not come to resolution around critical unsatisfied conditions for the deal under our Master Transaction Agreement. It is deeply disappointing but we have had reached a point where continued negotiation was no longer helpful and so we exercised the rights set out in the MTA to terminate the agreement.","Looking ahead, we will continue to concentrate on what is most important across Boeing. To that end, I established six company priorities in January. They included returning to the 737 MAX safely to service and earning back trust with our stakeholders. We are also committed to delivering excellence across our businesses and restoring our production health, and we are determined to invest in our future while always living our values. We will not lose sight of the importance of making investments that are critical to our future, such as the continued -- such as continuing to progress on our development programs such as the 777X and the 737 MAX 10.With that, let me turn it over to Greg for an update on our financial performance. Greg?"]},{"name":"Greg Smith","speech":["Great. Thanks, Dave, and good morning, everyone.","Let's please turn to Slide 6 for our first quarter results. Our first quarter results were primarily driven by the COVID-19 impacts and the 737 MAX grounding. Revenue, earnings per share and operating cash flow materially reduced. Prior to experiencing COVID-19 impacts, we were tracking well to meeting our original internal first quarter forecast. Our revenue of $16.9 billion, reflects lower 737 MAX deliveries versus first quarter of last year, as well as fewer deliveries in the quarter due to COVID-19. Core earnings per share was negative $1.70 and earnings in the quarter were also impacted by a charge on the KC-46A Tanker program.","Before we discuss the segment performance, let me touch on 737 MAX. As Dave mentioned, we're currently -- have approximately 450 737 MAX aircraft built and stored in inventory. We continue to monitor and maintain these aircraft in a regular basis, including completing more than 1,000 flights over the past year. Also, as mentioned, primarily due to COVID-19 impacts, we've revised our assumptions on timing and the profile deliveries from storage and the production rate ramp. Delivery from storage will continue to be priority one, post assisting our customers with their return to service. These aircraft in storage will convert to significant operating cash over the period of time it takes to deliver these aircraft out of inventory.","In preparation for our first quarter financial statements, we made certain assumptions, including timing of initial deliveries, production and rate ramp profile. We've assumed that we will begin 737 MAX aircraft production at low rates during the second quarter 2020 as timing and conditions of return to service and COVID-19 impacts are better understood. We expect to gradually increase the production rate to 31 during 2021 and expect further gradual increases to correspond with market demand. We've assumed that the timing of regulatory approvals will enable the 737 MAX deliveries to resume during the third quarter of 2020. We've also assumed that a majority of the 737 MAX aircraft produced during the grounding and included within inventory will be delivered during the first year after the resumption of deliveries, although again at a slower pace than we previously assumed.","Again, the slower production and delivery rate ramp reflects commercial airline industry impacts as a result of COVID-19. In the first quarter, we reduced the number of aircraft in the 737 accounting quantity by 400 units as a result of the reduction to plan production rates due to COVID-19. The reduction to the planned production rates will result in further increases in cost to produce undelivered aircraft, primarily due to additional fixed cost absorption. This reduces program margins after deliveries resume. In addition, abnormally low production rates will extend for a longer period once production resumes and as expected to result in around $1 billion of additional abnormal production cost, increasing the total from approximately $4 billion to $5 billion. These will be expensed as incurred, and we expect the majority of these abnormal production cost to be expensed this year.","During the first quarter, we expensed $797 million of abnormal production costs. Any changes to these assumptions could require us to recognize additional financial impacts. There is no material change to our estimate of potential concessions and other considerations to customers for disruption related to the MAX grounding and associated delivery delays. In the first quarter, we reduced the liability balance by approximately $700 million, primarily through cash payments. We continue to address the impact individually customer by customer, including assessing the impacts of the MAX disruption is having on their operations in light of COVID-19 pandemic. We also continue to expect any concessions or other consideration to be provided over a number of years with the cash impact to be more front-loaded in the first few years.","Let's now move to the Commercial Airplanes on Slide 7. Our Commercial Airplane business revenue decreased to $6.2 billion during the quarter reflecting lower deliveries, primarily by the 737 MAX grounding as well as impacts of COVID-19. Operating margins declined to negative 33.3% due to the following, lower delivery volume, $797 million of abnormal costs from the temporary suspension of the MAX program mentioned earlier, a $336 million charge related to the 737 Next Generation frame fitting component also known as the pickle fork and the repair cost associated with that, lower 787 margins primarily due to rate reductions related to COVID-19, and a $137 million of abnormal production costs from the temporary suspension of Puget Sound operations in response to COVID-19. We saw approximately one week impact of these costs in the quarter.","We expect to see additional abnormal costs in the second quarter related to suspension of our Puget Sound and also our Charleston sites due to COVID-19 through April and early May. The 787 program margin decreased in the quarter, primarily due to lower planned production rates, which drove additional fixed cost absorption, higher disruption costs, and 100-unit contraction of the accounting quantity requiring us to recognize the remaining deferred balance over fewer aircraft. BCA backlog includes over 5,000 airplanes valued at $352 billion.","As Dave mentioned earlier, the COVID-19 pandemic has significantly impacted aircraft demand, we're taking actions as a result of these new realities by adjusting production rates and our infrastructure, which will position us for the future and help us bridge to recovery. These rate decisions are based on current assessment of our demand environment and we will continue to closely monitor these factors that affect our skyline and make rate adjustments as appropriate in the future.","Let's now move to Defense, Space & Security on Slide 8. First quarter revenue decreased to $6 billion, primarily driven by the charge on the KC-46A Tanker, BDS operating margins of negative 3.2%, primarily due to pre-tax charge of $827 million for the KC-46A Tanker, of which $551 million was driven by the cost associated with the agreement signed in April with the US Air Force to develop and integrate our new Remote Vision System, while the remaining costs reflect productivity inefficiencies and COVID-19-related factory disruption.","A number of other programs, including the VC-25B, were also impacted by COVID-19 further reducing margin in the quarter. There are provisions of the Care Act in our contracts that may provide an opportunity to recover some of these costs related to COVID-19 over time, and we'll continue to evaluate them. During the quarter, BDS won key contracts worth $6 billion and our backlog now stands at $64 billion with 28% from outside the United States.","Let's turn to Boeing Global Services results on Slide 9. In the first quarter, Global Services revenue was flat at $4.6 billion, reflecting higher government services volume, largely offset by lower commercial service volume due to the COVID-19. BGS operating margin increased to 15.3% primarily due to favorable government service performance. During the quarter, BGS won key contract awards worth approximately $4 billion, which brings its backlog now to approximately $23 billion. We only saw the beginning of the impact of COVID-19 on our commercial services demand for the first quarter and we expect COVID-19 to have significantly larger impact on the BGS business in future periods.","To respond to this changing market dynamic, we are taking a number of proactive steps to rightsize and ultimately better position our business for these new market realities, these include employment actions as well as proactively taking steps to rightsize our inventory and tailor our portfolio to ensure that we're positioned to serve our customers both through this challenging time and when the industry begins to recover.","Let's turn now to cash flow on Slide 10. During our last earnings call, we shared that the use of cash flow this year is expected to be greater than 2019. Clearly, COVID-19 has made our cash flow situation even more challenging in 2020. The shift and severe impact it has had on the airlines in the global economy has added significant pressure on our cash receipts. Operating cash flow for the first quarter was negative $4.3 billion driven by the lower commercial airplane delivery volume, advanced payments and impact of COVID-19, and timing of receipts and expenditures. And as discussed, COVID-19 also caused delivery and production disruption in the quarter. Also in the quarter, we spent $428 million on capital expenditures, paid $1.2 billion in dividends which were declared last December, and paid $2.2 billion of debt maturity.","COVID-19 pandemic clearly presenting unprecedented challenges for our industry and our company. We're taking a number of actions to accelerate and conserve cash. In March 2020, we suspended payment of our dividend until further notice. Since April 2019, we've suspended our share repurchase program, and in March 2020, our Board of Directors terminated its prior authorization to repurchase shares of the company's common stock. And as previously mentioned, we have taken actions to reduce production rates in our commercial business, and we have furloughed certain employees, and as Dave discussed, will be taking workforce actions through a combination of voluntary layoffs, attrition and involuntary layoffs as necessary.","We have and we will continue to reduce discretionary spending. Also reducing or deferring research and development, and capital expenditures, but we will continue spending in key priorities and technologies that will be critical to our future into our customers' success. We're working with our government customers to assess and mitigate any impacts associated with COVID-19 pandemic. We appreciate the steps that the Department of Defense has taken to work with its industry partners to improve near-term liquidity in the forms of increased progress payment rates and reductions in withholds among other initiatives. In pursuit of the CARES Act, we're also deferring certain tax payments.","We are working with our supply chain partners to carefully manage liquidity, but at the same time doing everything we can do to manage the stability and health of our supply chain, as we manage through this demand shock to protect the long-term health of the US aerospace industry. We are focused on the best ways to keep liquidity flowing through our business and to our supply chain with this period. The most important source of liquidity for our suppliers is good credit of the OEM and Tier 1 suppliers.","As I mentioned, prior to COVID-19, we were tracking our internal first quarter and full-year forecast. Also as mentioned, COVID-19 is clearly putting additional pressure on 2020 cash flow and we expect operating cash to be more negative in 2020. We also expect a slower cash flow recovery going forward due to the revised 737 MAX delivery profile and the new wide-body production rates. Outside Commercial Airplanes, in commercial services, we expect cash flow generation to be solid and in line with earnings on the government side of our business.","Let's now move to Slide 11 and we'll discuss liquidity position and finance planning. As previously discussed, we drew down the $13.8 billion delayed draw term loan early to help shore-up our liquidity position as we work through the current challenges. Also in the quarter, we paid down $2.2 billion of debt maturity, resulting in an $11.6 billion increase, bringing the total debt balance now to $38.9 billion. We ended the quarter with $15.5 billion of cash and marketable securities. Again due to COVID-19, our daily use of cash has continued to reduce this balance. We continue to have access to our $9.6 billion revolving credit facility, which to date has not been drawn upon.","Given the significant impact of COVID-19 on our operating cash, we are proactively managing our cash position and working to access additional liquidity. We believe the government support will be critical to ensuring our industry's access to liquidity and we continue to evaluate options in the capital markets as well as funding options from US Government via the US Treasury and various Federal Reserve programs. We will continue to review all available access and select the best options for our company. We believe through a combination of our actions and our ability to access additional liquidity, we will be able to obtain sufficient cash to fund our operations.","Managing our liquidity and balance sheet leverage are top priorities as we navigate this challenging environment. We plan to immediately reduce our debt levels once our cash flow generation returns to more normal levels. Again, we will not lose sight of making necessary investments in our business, our people, new technology and better processes and tools that are critical to our future. This includes recent organizational change, as Dave mentioned, to simplify and streamline roles and responsibilities and prepare now for the post-pandemic industry footprint. As part of that, I'm excited to take on a new role and work closely with our teams across the business units to drive operational excellence and restore production and supply chain health as we and the broader aerospace industry recover from COVID-19 pandemic and rebuild stronger.","The current environment is obviously very challenging and extremely dynamic. We're staying fully engaged with our customers, continually assessing the changing environment to ensure we have the right-minded about the near and longer-term demand. And as we discussed, we're taking and will continue to take appropriate action to bridge to recovery. But our company and the US aerospace industry, and the 17,000 suppliers supporting it, can remain healthy and be well-positioned to capture future opportunities when we all emerge on the other side of this crisis.","With that, I'll turn it back over to Dave for some closing comments."]},{"name":"David L. Calhoun","speech":["Thanks, Greg.","We're in an unprecedented period for the industry and the world, and I am humbled and privileged to lead the talented people of Boeing. We are and will be taking the right action to navigate through this pandemic, support our workforce, maintain supply chain continuity and stability and position for a changing market. We continue to support our defense customers in their critical national security missions. We are progressing toward the safe return to service of the 737 MAX and we are driving safety, quality and operational excellence into all that we do every day. And through it all, we are keeping the health of our employees, their families and our communities top of mind.","We believe the long-term industry fundamentals remain strong and air travel will recover. Our portfolio of products and technology is well-positioned and we're confident we will emerge from this crisis and thrive again as a leader of our industry. History has proven Boeing is a company that rises to these challenges.","With that, Greg and I will be happy to take your questions. Thank you."]}],"string":"[\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Good day everyone, and welcome to The Boeing Company's First Quarter 2020 Earnings Conference Call.\",\n \"Today's call is being recorded. The management discussion and slide presentation, plus the analyst question-and-answer session are being broadcast live over the Internet.\",\n \"[Operator Instructions]\",\n \"At this time for opening remarks and introductions, I'm turning the call over to Ms. Maurita Sutedja, Vice President of Investor Relations for The Boeing Company. Ms. Sutedja, please go ahead.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"Thank you, John, and good morning. Welcome to Boeing's first quarter 2020 earnings call.\",\n \"I'm Maurita Sutedja, and with me today are David Calhoun, Boeing's President and Chief Executive Officer, and Greg Smith, Boeing's Executive Vice President, Enterprise Operations and Chief Financial Officer. After management comments, we will conduct a question-and-answer session.\",\n \"[Operator Instructions]\",\n \"As always, we have provided detailed financial information in our press release issued earlier today. And as a reminder, you can follow today's broadcast and slide presentation through our website at boeing.com.\",\n \"Before we begin, I need to remind you that any projections, estimates and goals we include in our discussion this morning are likely to involve risks which are detailed in our news release, in our various SEC filings and in the forward-looking statement disclaimer at the end of this web presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of certain non-GAAP measures.\",\n \"Now, I will turn the call over to Dave Calhoun.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Thank you, Maurita, and good morning, everyone.\",\n \"I want to start by saying, I hope you are all staying safe and healthy during this global crisis. I also want to thank my Boeing colleagues around the globe for everything they are doing to support each other, our business and our customers during these intensely challenging times. On behalf of Boeing, I'd like to recognize all of the public servants out there from federal, state and local authorities to frontline healthcare professionals and first responders for the difficult decisions and the personal risks they are making to protect and care for all of us.\",\n \"Let's turn to the second slide please. The COVID-19 pandemic is a global crisis like no other. This hits home for us personally and professionally. Across Boeing, we're focused on keeping our people and our communities safe. We're battling to stop the virus by taking every measure possible including early implementation of virtual work, deep cleaning our work areas, adjusting work patterns, adding visual indicators to increase social distancing and temperature screening stations with no touch thermal scanners, providing access to medical information around the clock, quarantining anyone potentially exposed to the virus, suspending operations where necessary and more.\",\n \"We have doubled our paid leave policy for those who cannot work remotely when their sites were suspended. At sites where we've had to temporarily suspend operations, we've worked closely with our customers to ensure we maintain critical support for them. And before bringing our teams back to work, we've implemented objectives and rigorous steps aligned with federal and state guidance to ensure safe and orderly restart of operations. Earlier this week, we announced that we will resume operations at our Boeing South Carolina site beginning on May 3. This move brings back our final production site that was temporarily suspended as a result of COVID-19.\",\n \"We're also doing everything we can to support our global supply chain health. A number of our suppliers have suspended or reduced their operations resulting in some supply shortages for our own operations. In some cases, this contributed to our site suspension decisions. We've taken mitigating actions where we can, but supply disruption remains a key watch item for us. At the other end of our value chain, we continue to support our commercial airplanes and services customers as their own business slows to a trickle. We've also focused on meeting the commitments to our defense and space customers.\",\n \"Given the swift and severe nature of this COVID-19 shock, to preserve the long-term competitiveness of our company as well as our industry, we are intensely focused on ensuring liquidity through the immediate crisis. We welcome that some 26 countries, including the United States, have announced economic support packages worth more than $100 billion, specifically targeting the aerospace and airline sectors. The aerospace industry relies on a global shared supply chain and the aviation sector supports 3.6% of the global GDP, generating more than 65 million jobs worldwide. In the US, we applaud the administration and Congress for working together to pass the CARES Act, which will be critical to supporting the nation's entire aerospace manufacturing sector, which comprise 2.5 million jobs and 17,000 suppliers.\",\n \"We expect that programs coming out of the bill and funding options the government is putting in place will provide support to help the credit markets function again providing the liquidity that is vital to our industry's ability to bridge recovery. The $25 billion support package agreed to by the US airlines and the government is a pivotal step toward maintaining the aviation pillar of the US economy. Even a full recovery will take years, not months. Knowing that the US airline industry has critical financial support through the pandemic, allows us to plan our production and services system for the medium and long-term impact on air travel.\",\n \"Greg will go through our liquidity situation in more detail a bit later, but let me just say, we believe that government support will be critical to ensuring our industry's access to liquidity. We continue to evaluate options in the capital markets as well as funding options from the US Government via the US Treasury and various Federal Reserve programs. We've also taken other aggressive liquidity steps, including drawing down on a term loan, reducing operating cost, suspending dividend payments, terminating share repurchase authorization, reducing or deferring non-critical spend and accelerating some progress payment receipts with the help from our defense customers.\",\n \"Additionally, we are working to resize and reshape our business, starting at the top with our leadership structure. We are consolidating roles, simplifying processes and focusing accountabilities. As part of this reorganization, I've asked Greg Smith, who most of you know well to take additional responsibilities leading our enterprise, manufacturing, supply chain and services functions, in addition to his CFO and strategy roles.\",\n \"Before I turn to our longer-term business environment and the steps we're taking to prepare for it, I want to call out the selfless contributions Boeing employees have made to the broader fight against the coronavirus. They've been producing protective face shields for distribution to healthcare professionals, have flown our aircraft on missions to transport critical healthcare supplies around the world, donated masks, gloves and other equipment, and contributed hundreds of thousands of dollars to food centers for people in need, and that's just a partial list.\",\n \"Now I'd like to turn the attention to the outlook for our industry highlighted on Slide 3. The air travel industry has never seen anything quite like this. The latest IATA forecast projects full-year passenger traffic to be down 48% this year compared to 2019, as global economic activity slows down due to the COVID-19 and the governments severely restricting travel to contain the spread of that virus. Here in the US, passenger traffic at this moment in time is down 95% compared to a year ago. Airlines are cutting back operations dramatically. As they assess their businesses, they're making difficult decisions that result in grounding fleets, deferring airplane orders, postponing acceptance of completed orders, and slowing down or stopping payments.\",\n \"They are also accelerating aircraft retirements and requiring fewer services. The fundamentals that have driven air travel for the past five decades and doubled air traffic over the past two decades remain intact. We believe this industry will recover but it will take two to three years for travel to return to 2019 levels and it will be a few years beyond that for the industry to return to long-term growth trends. Our outlook is informed by decades of analysis and insights on customer behavior including how the industry has reacted to prior market shocks. We incorporated assumptions related to a prolonged recession and potential consolidation within the industry in our assessment.\",\n \"The picture is dynamic and subject to many unknowns, but as we see it today, narrow-body airplanes will lead the way to recovery trailed by wide-body fleets as airlines progressively bring their networks back online. Therefore, wide-body passenger fleets will likely be more significantly impacted than narrow-body airplanes in the near term. A key driver in both segments will be the rate of retirements of older fleets. We expect our customers to look at their fleet planning strategies differently in light of these dynamics. More than 2,500 aircraft with 20-plus years of service were in active service prior to the crisis. Replacements will not be uniform as airlines will focus on the oldest and least efficient to retire. Some airlines have already made announcements to this effect.\",\n \"Airplanes that we plan to deliver this year will be 25% to 40% more fuel efficient than airplanes that they're replacing. Our position is helped by the value proposition of our family of airplanes and the diversity of our backlog, this includes our market-leading 787 Dreamliner family, our unmatched cargo line up, the world's largest and most efficient twin-engine jet 777X and the versatile 737 family. To balance the supply and demand given the COVID-19 shock and to preserve our long-term potential and competitiveness, we have decided to reduce the production rates of several of our commercial airplane programs.\",\n \"Let's turn to Slide 4. In the narrow-body segment, we have assumed that we will resume 737 MAX aircraft production at low rates in 2020 as timing and conditions of return to service are better understood. We expect to gradually increase the production rate to 31 during 2021 with further gradual increases that correspond with market demand. The slower production rate ramp up reflects commercial airline industry uncertainty due to the impact of COVID-19, and the production rate ramp profile is also affected by the pace of delivery of our stored aircraft.\",\n \"We continue to see our new MAX airplanes creating capacity for growth and providing required replacements for older, less efficient airplanes. We will continue to work closely with our customers to review their fleet plans and make adjustments where appropriate to adapt to lower than planned 737 MAX production in the near term, provide more flexibility to deliver MAX airplanes in our backlog and protect the value of the MAX family.\",\n \"Moving to the wide-body segment. We now plan to reduce the 787 production rate to 10 per month in 2020 and then gradually reduce to seven per month by 2022. We will continue to evaluate the rate beyond 2022 to balance supply and demand. Our 787 Dreamliner family has a compelling value proposition, offering unparalleled fuel efficiency and range flexibility, enabling carriers to optimize fleet and network performance as well as profitability -- as well as profitably expanding to new markets.\",\n \"Turning to the 777X. We've made progress on the 777X certification requirements and have resumed flight testing with the restart of our operations in the Puget Sound. We currently expect first delivery of the 777-9 to be in 2021 and will continue to manage the risks inherent in any development program, especially ones around certification in the post-MAX environment and COVID-19-related impacts. We now expect to deliver 777 at an average rate of approximately 2.5 per month in 2020. And due to the market uncertainties driven primarily by the impacts of COVID-19, we plan to reduce the combined 777/777X production rate to three per month in 2021. We will take a measured approach to the 777X rate ramp as we will look to minimize the amount of change in corporation work by managing the number of aircraft produced prior to entry into service. On the 777, as I discussed earlier, we will continue to closely monitor the cargo market and carefully manage our skyline.\",\n \"Finally, we'll make no change to the 767 and 747 production rates at this time. These programs are targeted for the cargo market and approximately half of the 767 production line is dedicated to the tanker program. These rate decisions are based on our current assessment of the demand environment, taking into account a host of risks and opportunities. We will closely monitor the key factors that affect our skyline including the wide-body replacement cycle and the cargo market. We will maintain a discipline rate management process and make adjustments as appropriate in the future.\",\n \"Now let's turn to Slide 5. The diversity of our portfolio is unmatched and our government services, defense and space programs will provide critical stability for us moving forward. In fact our work in these areas accounted for 45% of our overall revenue in 2019 that will obviously increase in the year ahead. At Defense, Space & Security, we continue to see a healthy market with solid demand for our major platforms and programs, both domestically and internationally. Despite some near-term production impacts associated with our temporary suspension of operations at various locations, our portfolio of programs and technologies remains well aligned to our customers' missions. We are also well-positioned with proven world-class platforms to address current needs, and innovative capable and affordable new franchise programs for the future.\",\n \"For example, the President's budget request for fiscal year '21 supports key Boeing programs, including the V-22 and Apache, 12 F-15EX aircraft and 15 KC-46A Tankers. It also requests funding in line with the expected development profile of future franchise programs, the MQ-25, the T-7A Red Hawk and the MH-139A Grey Wolf, and our extra large unmanned undersea vehicle. We have received broad support from the Pentagon for programs and products across the BDS portfolio. We are continuously improving performance of our existing platforms, including the KC-46A Tanker and our space programs. While the tanker program has had delays and other challenges, with this month's agreement with the US Air Force to develop and integrate a new Remote Vision System, we will ensure that KC-46 becomes the standard by which all future refueling aircraft are measured.\",\n \"Given its 2020 design update, no other tanker will have the technological capabilities of the KC-46. The men and women of the US Air Force have our full commitment, and our investment in tanker reinforces that dedication. Our space teams completed the core stage of NASA's Space Launch System and learned key lessons from the CST-100 Starliner's Orbital Flight Test. We will refly this test to demonstrate the quality of the Starliner system, paving the way for future crude flights. It is the right thing to do for our NASA customer and the astronauts who ultimately fly on it.\",\n \"As you may recall, we provisioned for another uncrewed mission in our financials last quarter. On the services side, we are seeing a direct impact on our commercial supply chain business as fewer flights result in a decreased demand for our parts and logistics offerings. Our commercial customers are curtailing discretionary spend such as modifications and upgrades and focusing on required maintenance. We anticipate accelerated retirement of older airplanes, which will result in a newer fleet when air travel resumes to previous levels, which will prolong the period of decreased demand for our commercial services offerings.\",\n \"Similar to Commercial Airplanes, we expect a multi-year recovery period for the commercial services business. The demand outlook for our government services business, which in 2019 accounted for just under half of the BGS revenue, it remains stable. The strength of government services provides a strong foundation for our overall services business. We see growth in a number of government services areas including ramp-ups to support international customers with training, logistics and supply chain offerings as well as growth on key US programs.\",\n \"In summary, our industry is going to look very different as a result of this pandemic and the economic impact it has had on airlines and schedules around the world. The resulting reductions in the BCA production rates I outlined will require us to make similar adjustment in our infrastructure, our spending and our workforce. We will be a smaller company for a while. We've worked hard to maintain the stability of our workforce avoiding layoffs even through the suspension of MAX production, doubling the length of time we pay employees impacted by the COVID-induced shutdown of Puget Sound, Charleston and other sites, bringing people back to work at those sites as soon as we safely could. But the sharp reduction in demand for our airplanes that we see out over the next several years won't support the size of the workforce we have today.\",\n \"At this time, we are taking action to reduce our workforce by approximately 10% of our roughly 160,000 employees by end of this year, through the combination of voluntary layoffs, attrition and involuntary layoffs as necessary. This is 10% of the total for our enterprise. We'll have to make even deeper reductions in areas that are most exposed to the condition of our commercial customers, more than 15% across commercial airplanes and services businesses, as well as our corporate functions. At the same time, the ongoing stability of our defense, space and related services businesses will help us limit the overall depth of the cut.\",\n \"Of course, we will continue to monitor market conditions closely in light of the unpredictable factors currently driving it and we will make ongoing adjustments as appropriate. We will continuously work to shape our business to compete and what we think the market will look like over the next five years. I shared this news with our employees this morning and I committed to implementing these reductions as fairly respectfully and transparently as possible and to providing as much support for our employees as we can through the duration of the global health emergency we are facing.\",\n \"Before I turn this over to Greg, I want to update you on a couple of other important topics. First, our progress on safely returning the 737 MAX to service. We're continuing our work on the safe return of the MAX to service working closely with the FAA and other global regulators. Right now, we are focused on completing the software validation and required technical documentation that will precede a certification flight. Some of this documentation work has taken longer than we anticipated and the coronavirus situation has also required some changes to how we do things including working remotely and virtual meetings with our regulators.\",\n \"With that said, we've continued to make very solid progress and we currently expect that the necessary regulatory approvals will be obtained in time to support resumption of 737 MAX deliveries during the third quarter. Of course, the actual timing will ultimately be determined by our regulators. In the meantime, we have approximately 450 737 MAX aircraft built and stored and our MAX backlog has remained strong throughout this process at approximately 4,000 aircraft. They are the most fuel-efficient narrow-body planes in the market with useful lives well over 25 years. We have been working proactively with our customers to maintain the health of this backlog, while responding to their needs.\",\n \"Turning to Embraer, we announced Saturday that we have terminated the agreement to establish a strategic partnership between our two companies, covering both the planned commercial and defense joint ventures. We worked diligently for two years to finalize the transaction, but ultimately we could not come to resolution around critical unsatisfied conditions for the deal under our Master Transaction Agreement. It is deeply disappointing but we have had reached a point where continued negotiation was no longer helpful and so we exercised the rights set out in the MTA to terminate the agreement.\",\n \"Looking ahead, we will continue to concentrate on what is most important across Boeing. To that end, I established six company priorities in January. They included returning to the 737 MAX safely to service and earning back trust with our stakeholders. We are also committed to delivering excellence across our businesses and restoring our production health, and we are determined to invest in our future while always living our values. We will not lose sight of the importance of making investments that are critical to our future, such as the continued -- such as continuing to progress on our development programs such as the 777X and the 737 MAX 10.With that, let me turn it over to Greg for an update on our financial performance. Greg?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Great. Thanks, Dave, and good morning, everyone.\",\n \"Let's please turn to Slide 6 for our first quarter results. Our first quarter results were primarily driven by the COVID-19 impacts and the 737 MAX grounding. Revenue, earnings per share and operating cash flow materially reduced. Prior to experiencing COVID-19 impacts, we were tracking well to meeting our original internal first quarter forecast. Our revenue of $16.9 billion, reflects lower 737 MAX deliveries versus first quarter of last year, as well as fewer deliveries in the quarter due to COVID-19. Core earnings per share was negative $1.70 and earnings in the quarter were also impacted by a charge on the KC-46A Tanker program.\",\n \"Before we discuss the segment performance, let me touch on 737 MAX. As Dave mentioned, we're currently -- have approximately 450 737 MAX aircraft built and stored in inventory. We continue to monitor and maintain these aircraft in a regular basis, including completing more than 1,000 flights over the past year. Also, as mentioned, primarily due to COVID-19 impacts, we've revised our assumptions on timing and the profile deliveries from storage and the production rate ramp. Delivery from storage will continue to be priority one, post assisting our customers with their return to service. These aircraft in storage will convert to significant operating cash over the period of time it takes to deliver these aircraft out of inventory.\",\n \"In preparation for our first quarter financial statements, we made certain assumptions, including timing of initial deliveries, production and rate ramp profile. We've assumed that we will begin 737 MAX aircraft production at low rates during the second quarter 2020 as timing and conditions of return to service and COVID-19 impacts are better understood. We expect to gradually increase the production rate to 31 during 2021 and expect further gradual increases to correspond with market demand. We've assumed that the timing of regulatory approvals will enable the 737 MAX deliveries to resume during the third quarter of 2020. We've also assumed that a majority of the 737 MAX aircraft produced during the grounding and included within inventory will be delivered during the first year after the resumption of deliveries, although again at a slower pace than we previously assumed.\",\n \"Again, the slower production and delivery rate ramp reflects commercial airline industry impacts as a result of COVID-19. In the first quarter, we reduced the number of aircraft in the 737 accounting quantity by 400 units as a result of the reduction to plan production rates due to COVID-19. The reduction to the planned production rates will result in further increases in cost to produce undelivered aircraft, primarily due to additional fixed cost absorption. This reduces program margins after deliveries resume. In addition, abnormally low production rates will extend for a longer period once production resumes and as expected to result in around $1 billion of additional abnormal production cost, increasing the total from approximately $4 billion to $5 billion. These will be expensed as incurred, and we expect the majority of these abnormal production cost to be expensed this year.\",\n \"During the first quarter, we expensed $797 million of abnormal production costs. Any changes to these assumptions could require us to recognize additional financial impacts. There is no material change to our estimate of potential concessions and other considerations to customers for disruption related to the MAX grounding and associated delivery delays. In the first quarter, we reduced the liability balance by approximately $700 million, primarily through cash payments. We continue to address the impact individually customer by customer, including assessing the impacts of the MAX disruption is having on their operations in light of COVID-19 pandemic. We also continue to expect any concessions or other consideration to be provided over a number of years with the cash impact to be more front-loaded in the first few years.\",\n \"Let's now move to the Commercial Airplanes on Slide 7. Our Commercial Airplane business revenue decreased to $6.2 billion during the quarter reflecting lower deliveries, primarily by the 737 MAX grounding as well as impacts of COVID-19. Operating margins declined to negative 33.3% due to the following, lower delivery volume, $797 million of abnormal costs from the temporary suspension of the MAX program mentioned earlier, a $336 million charge related to the 737 Next Generation frame fitting component also known as the pickle fork and the repair cost associated with that, lower 787 margins primarily due to rate reductions related to COVID-19, and a $137 million of abnormal production costs from the temporary suspension of Puget Sound operations in response to COVID-19. We saw approximately one week impact of these costs in the quarter.\",\n \"We expect to see additional abnormal costs in the second quarter related to suspension of our Puget Sound and also our Charleston sites due to COVID-19 through April and early May. The 787 program margin decreased in the quarter, primarily due to lower planned production rates, which drove additional fixed cost absorption, higher disruption costs, and 100-unit contraction of the accounting quantity requiring us to recognize the remaining deferred balance over fewer aircraft. BCA backlog includes over 5,000 airplanes valued at $352 billion.\",\n \"As Dave mentioned earlier, the COVID-19 pandemic has significantly impacted aircraft demand, we're taking actions as a result of these new realities by adjusting production rates and our infrastructure, which will position us for the future and help us bridge to recovery. These rate decisions are based on current assessment of our demand environment and we will continue to closely monitor these factors that affect our skyline and make rate adjustments as appropriate in the future.\",\n \"Let's now move to Defense, Space & Security on Slide 8. First quarter revenue decreased to $6 billion, primarily driven by the charge on the KC-46A Tanker, BDS operating margins of negative 3.2%, primarily due to pre-tax charge of $827 million for the KC-46A Tanker, of which $551 million was driven by the cost associated with the agreement signed in April with the US Air Force to develop and integrate our new Remote Vision System, while the remaining costs reflect productivity inefficiencies and COVID-19-related factory disruption.\",\n \"A number of other programs, including the VC-25B, were also impacted by COVID-19 further reducing margin in the quarter. There are provisions of the Care Act in our contracts that may provide an opportunity to recover some of these costs related to COVID-19 over time, and we'll continue to evaluate them. During the quarter, BDS won key contracts worth $6 billion and our backlog now stands at $64 billion with 28% from outside the United States.\",\n \"Let's turn to Boeing Global Services results on Slide 9. In the first quarter, Global Services revenue was flat at $4.6 billion, reflecting higher government services volume, largely offset by lower commercial service volume due to the COVID-19. BGS operating margin increased to 15.3% primarily due to favorable government service performance. During the quarter, BGS won key contract awards worth approximately $4 billion, which brings its backlog now to approximately $23 billion. We only saw the beginning of the impact of COVID-19 on our commercial services demand for the first quarter and we expect COVID-19 to have significantly larger impact on the BGS business in future periods.\",\n \"To respond to this changing market dynamic, we are taking a number of proactive steps to rightsize and ultimately better position our business for these new market realities, these include employment actions as well as proactively taking steps to rightsize our inventory and tailor our portfolio to ensure that we're positioned to serve our customers both through this challenging time and when the industry begins to recover.\",\n \"Let's turn now to cash flow on Slide 10. During our last earnings call, we shared that the use of cash flow this year is expected to be greater than 2019. Clearly, COVID-19 has made our cash flow situation even more challenging in 2020. The shift and severe impact it has had on the airlines in the global economy has added significant pressure on our cash receipts. Operating cash flow for the first quarter was negative $4.3 billion driven by the lower commercial airplane delivery volume, advanced payments and impact of COVID-19, and timing of receipts and expenditures. And as discussed, COVID-19 also caused delivery and production disruption in the quarter. Also in the quarter, we spent $428 million on capital expenditures, paid $1.2 billion in dividends which were declared last December, and paid $2.2 billion of debt maturity.\",\n \"COVID-19 pandemic clearly presenting unprecedented challenges for our industry and our company. We're taking a number of actions to accelerate and conserve cash. In March 2020, we suspended payment of our dividend until further notice. Since April 2019, we've suspended our share repurchase program, and in March 2020, our Board of Directors terminated its prior authorization to repurchase shares of the company's common stock. And as previously mentioned, we have taken actions to reduce production rates in our commercial business, and we have furloughed certain employees, and as Dave discussed, will be taking workforce actions through a combination of voluntary layoffs, attrition and involuntary layoffs as necessary.\",\n \"We have and we will continue to reduce discretionary spending. Also reducing or deferring research and development, and capital expenditures, but we will continue spending in key priorities and technologies that will be critical to our future into our customers' success. We're working with our government customers to assess and mitigate any impacts associated with COVID-19 pandemic. We appreciate the steps that the Department of Defense has taken to work with its industry partners to improve near-term liquidity in the forms of increased progress payment rates and reductions in withholds among other initiatives. In pursuit of the CARES Act, we're also deferring certain tax payments.\",\n \"We are working with our supply chain partners to carefully manage liquidity, but at the same time doing everything we can do to manage the stability and health of our supply chain, as we manage through this demand shock to protect the long-term health of the US aerospace industry. We are focused on the best ways to keep liquidity flowing through our business and to our supply chain with this period. The most important source of liquidity for our suppliers is good credit of the OEM and Tier 1 suppliers.\",\n \"As I mentioned, prior to COVID-19, we were tracking our internal first quarter and full-year forecast. Also as mentioned, COVID-19 is clearly putting additional pressure on 2020 cash flow and we expect operating cash to be more negative in 2020. We also expect a slower cash flow recovery going forward due to the revised 737 MAX delivery profile and the new wide-body production rates. Outside Commercial Airplanes, in commercial services, we expect cash flow generation to be solid and in line with earnings on the government side of our business.\",\n \"Let's now move to Slide 11 and we'll discuss liquidity position and finance planning. As previously discussed, we drew down the $13.8 billion delayed draw term loan early to help shore-up our liquidity position as we work through the current challenges. Also in the quarter, we paid down $2.2 billion of debt maturity, resulting in an $11.6 billion increase, bringing the total debt balance now to $38.9 billion. We ended the quarter with $15.5 billion of cash and marketable securities. Again due to COVID-19, our daily use of cash has continued to reduce this balance. We continue to have access to our $9.6 billion revolving credit facility, which to date has not been drawn upon.\",\n \"Given the significant impact of COVID-19 on our operating cash, we are proactively managing our cash position and working to access additional liquidity. We believe the government support will be critical to ensuring our industry's access to liquidity and we continue to evaluate options in the capital markets as well as funding options from US Government via the US Treasury and various Federal Reserve programs. We will continue to review all available access and select the best options for our company. We believe through a combination of our actions and our ability to access additional liquidity, we will be able to obtain sufficient cash to fund our operations.\",\n \"Managing our liquidity and balance sheet leverage are top priorities as we navigate this challenging environment. We plan to immediately reduce our debt levels once our cash flow generation returns to more normal levels. Again, we will not lose sight of making necessary investments in our business, our people, new technology and better processes and tools that are critical to our future. This includes recent organizational change, as Dave mentioned, to simplify and streamline roles and responsibilities and prepare now for the post-pandemic industry footprint. As part of that, I'm excited to take on a new role and work closely with our teams across the business units to drive operational excellence and restore production and supply chain health as we and the broader aerospace industry recover from COVID-19 pandemic and rebuild stronger.\",\n \"The current environment is obviously very challenging and extremely dynamic. We're staying fully engaged with our customers, continually assessing the changing environment to ensure we have the right-minded about the near and longer-term demand. And as we discussed, we're taking and will continue to take appropriate action to bridge to recovery. But our company and the US aerospace industry, and the 17,000 suppliers supporting it, can remain healthy and be well-positioned to capture future opportunities when we all emerge on the other side of this crisis.\",\n \"With that, I'll turn it back over to Dave for some closing comments.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Thanks, Greg.\",\n \"We're in an unprecedented period for the industry and the world, and I am humbled and privileged to lead the talented people of Boeing. We are and will be taking the right action to navigate through this pandemic, support our workforce, maintain supply chain continuity and stability and position for a changing market. We continue to support our defense customers in their critical national security missions. We are progressing toward the safe return to service of the 737 MAX and we are driving safety, quality and operational excellence into all that we do every day. And through it all, we are keeping the health of our employees, their families and our communities top of mind.\",\n \"We believe the long-term industry fundamentals remain strong and air travel will recover. Our portfolio of products and technology is well-positioned and we're confident we will emerge from this crisis and thrive again as a leader of our industry. History has proven Boeing is a company that rises to these challenges.\",\n \"With that, Greg and I will be happy to take your questions. Thank you.\"\n ]\n }\n]","isConversational":false},"questions_and_answers":{"kind":"list like","value":[{"name":"Operator","speech":["[Operator Instructions]","Our first question comes from Peter Arment with Baird. Please go ahead."]},{"name":"Peter Arment","speech":["Good morning, Dave, Greg. Thanks for your time."]},{"name":"David L. Calhoun","speech":["Good morning, Peter."]},{"name":"Peter Arment","speech":["I don't know if this question is for David or Greg, but maybe just Dave, the pace of deliveries for the stored fleet over, once you get back to certification in Q3 over, I guess the majority you're going to be looking to deliver over kind of a 12-month period and then squaring that against the warming up of the production line and trying to get to a target of 31 aircraft, just seems like a lot of deliveries. Maybe you could just kind of walk us through kind of how you're arriving at that? I know that that's just given the backdrop of what we're seeing in air travel right now. Thanks."]},{"name":"David L. Calhoun","speech":["Yeah, thank you. Number one, as you probably know and has been reported on widely, we have been having conversations, intense ones for the better part of a month with our MAX customers about delivery and when to take them. And it's -- I would call it a wide variation with respect to what they ask for. Some want them right away, some of them want to defer for quite a while. Our assessment is reflected in these numbers based on those interactions. And yeah, there is more to be had. But we think it sort of accurately reflects that. And if anything in light of the -- now all of the government resources that had been provided to many of the airlines, which a month ago were still in doubt, some of that has settled down.","So now, with respect to priorities, our priority will be to deliver the finished goods inventory that we have and as a result, the production rate is the one that we will sort of change based on what happens in the marketplace. Marketplace gets more robust for any reason, we'll increase that rate sooner rather than later and if it defers and/or gets any worse, we will do the opposite. So the variable in this is going to be the production rate, and the rate we've chosen now is 31 number and a slow pace to get to 31 reflects everything we know about the conversations with all of our MAX customers."]},{"name":"Peter Arment","speech":["Thank you."]},{"name":"Operator","speech":["And our next question is from Rob Spingarn with Credit Suisse. Please go ahead."]},{"name":"Robert Spingarn","speech":["Good morning."]},{"name":"David L. Calhoun","speech":["Good morning, Rob."]},{"name":"Greg Smith","speech":["Good morning."]},{"name":"Robert Spingarn","speech":["Greg, this -- this one's for you, Greg. Let's say that in the 787 -- seven 787s per month and 31 MAXs in 2022, and I guess three 777s is the new normal. What kind of free cash flow profile would you have with that assuming stable BDS and a reasonable recovery at BGS? I'm talking about 2022 now."]},{"name":"Greg Smith","speech":["Yeah, yeah. Well clearly, Rob, to Peter's question to Dave, that is the -- I would say the single biggest driver. To your point, we've kind of laid out at least currently how we're thinking about production rates in that time frame, but the single biggest driver of that will be MAX and not only priority one delivering off that ramp is being the first step, but then that production rate increased from there and so obviously, the market is going to inform us how we can -- if we have the right profile that we've established today based on the numerous discussions we've had with the customer. But that will be the single biggest driver within that period.","And then, I'd say outside of that is the 777 to 777X. As you know, 777X is a use of cash this year, will peak this year. We expect it to be a use of cash next year, but then, it's cash flow positive in the following year. So that transition that will take place will be key to 2022 cash flow. Obviously, we expect 2022 to be much better than what we're experiencing this year and next, but those will be the real -- I would say, key operational drivers that will allow us to get there."]},{"name":"Robert Spingarn","speech":["But Greg, is there any way to quantify what cash flow looks like with 787 at seven a month, half of what the peak rate has been? And with the 737 just a little over half, what that targeted mature rate would be? How do we think about what cash flow looks like in that environment?"]},{"name":"Greg Smith","speech":["Yeah. Rob, I don't want to get into the specifics on that time frame. Because obviously as we sit here today, 2022 feels like a long way away, considering what we're navigating, but it will be -- obviously it will be positive cash flow in that period from those key drivers. Now, how positive? It will really obviously depend on rates even further going out and not delivery rates as much as, but production rates and advances that could impact 2022 positively or negatively depending on where rates go from there. But those will be the big drivers.","And like I said, now with these production rates we've established, that's our best assessment at this time. And that could change and we'll size accordingly to do that. But 2022 starts to feel like a more normal year certainly than what we've experienced in '19 and what we're going to experience in '20."]},{"name":"Robert Spingarn","speech":["Okay, fair enough. Thank you, Greg."]},{"name":"Greg Smith","speech":["Thanks, Rob."]},{"name":"Operator","speech":["Our next question is from the line of Seth Seifman with JP Morgan. Please go ahead."]},{"name":"Seth Seifman","speech":["Thanks very much, and good morning."]},{"name":"David L. Calhoun","speech":["Good morning, Seth."]},{"name":"Seth Seifman","speech":["Just a couple of questions -- good morning. A couple of questions about liquidity and capital structure. You've got the $15 billion of cash on the balance sheet but also about $5 billion of short-term debt and burning cash. Can you talk about the timeline? Can you talk about maybe the $60-billion-plus number for the industry that you guys put out there several weeks ago and kind of what we in that and how you think about it now? And can you talk about whether Boeing needs to be an investment grade rated company?"]},{"name":"Greg Smith","speech":["Yeah, maybe I'll let Dave address the industry, and then I'll follow up."]},{"name":"David L. Calhoun","speech":["The $60 billion number of course was put together early in this process and credit markets were as tight as they could be and we were trying to assess the fragility of mostly the supply chain, frankly. And we do have some weak or soft spots in that supply chain but with respect to Boeing's role in the health of the supply chain, I think everybody here knows that the real leverage for us is when we are sound and our credit is good, and we place orders against all of our supply chains, then in fact that provides the liquidity that they need ultimately to make the adjustments that they're going to make in response to our production rates.","So that in and of itself, whatever ultimately we do and the liquidity we provide to our suppliers is most important. But our number was meant to represent sort of the whole all of the supply chain, 17,000 suppliers, the Tier 1s and the support that the Tier 1s might need and I can't speak for that. And so again, $60 billion number was in fact an industry number, not a Boeing-specific number."]},{"name":"Greg Smith","speech":["Yeah. And Seth, just as -- your second part of your question around being investment grade. Certainly, we would like to maintain being investment grade, and I think as you've heard and seen that we're doing everything possible to do that. But look, the market is probably going to impact that more than anything. Fortunately, as you know, we started at position of strength with our balance sheet that's allowed us to navigate it. And as Dave and I outlined, we're taking all the right steps to manage liquidity day in and day out, and prepare for the recovery on the other side. But at the end of the day, it's going to be what it's going to be on the investment grade. But certainly, we'd prefer to stay investment grade. And again, I think we're doing all the -- taken all the right actions to try to maintain that."]},{"name":"Seth Seifman","speech":["Great. Thanks."]},{"name":"Operator","speech":["And our next question is from Carter Copeland with Melius Research. Please go ahead."]},{"name":"Carter Copeland","speech":["Hey, good morning, gentlemen. Thanks for the time."]},{"name":"Greg Smith","speech":["Good morning, Carter."]},{"name":"David L. Calhoun","speech":["Hi, good morning."]},{"name":"Carter Copeland","speech":["Just -- Greg, just quickly on the 87. I just want to make sure I heard you right on the block reduction. I think you said 100 units. I wonder if you could just give some color on why to reduce that. Or is that a lack of visibility around unsold pricing? And then just with respect to that, what that did to the deferred production. It looks like a $2 billion number in the quarter that would kind of imply that you've shaved that program margin down to a pretty razor-thin level. Am I missing something in the math there?"]},{"name":"Greg Smith","speech":["No, I think you got it -- I think you got it right. The contraction in the cost base was driven by time. So it's staying within the five-year period that we have on cost bases. So as a result of producing fewer units that caused us to contract that cost base by 100 units. I would say, even with that contraction, when you look at margin going forward on the 787, even with the lower production rates, net-net on a unit basis, it holds up pretty well. And the real key drivers that even with the lower volume, like I said, we're going to be impacted by the fixed costs. But you kind of come back to the fundamentals on the backlog and the profile of the program going forward, when you look at model mix, you look at supplier step down, and even with our own productivity, it is impacted, like I said, but not impacted as much as I think some would expect.","So I think those fundamentals -- I would ask don't lose sight of those because they're still a key driver to cash margin on the program."]},{"name":"Carter Copeland","speech":["Yeah, it's just GAAP. All right."]},{"name":"Greg Smith","speech":["Yeah."]},{"name":"Carter Copeland","speech":["Thank you for the color."]},{"name":"Greg Smith","speech":["Yeah. You got it."]},{"name":"David L. Calhoun","speech":["Just one -- maybe one other comment with respect to the market backdrop on the 787. The demand for the 87 is pretty strong. Our issue is and our assumptions, and we think we're right, is that the international route structures are going to come back much slower than the domestic ones. And as a result, the 87 suffers for that. But otherwise the airplane's performance, its utilization right now in the marketplace is pretty amazing. So we feel good about the airplane, but this push-over, based on the assumptions we've made, it is what it is."]},{"name":"Carter Copeland","speech":["Thanks for the color, gentlemen."]},{"name":"Greg Smith","speech":["You're welcome."]},{"name":"Operator","speech":["And next we'll go to Noah Poponak with Goldman Sachs. Please go ahead."]},{"name":"Noah Poponak","speech":["Hey, good morning, everyone."]},{"name":"David L. Calhoun","speech":["Good morning."]},{"name":"Greg Smith","speech":["Good morning."]},{"name":"Noah Poponak","speech":["I wanted to try, if at all possible, to get precise or more precise on -- it's clearly challenging out there, but just how many of your customers are attempting to revise their position in the delivery skyline? Because the traffic growth numbers and just the way it feels, it looks and feels like you could imagine literally every single one of your customers having a conversation with you about deferring or canceling. But you are maintaining 10 a month on the 87 for the year, which would suggest that's not happening. I'm pretty surprised by that.","You're telling us your conversations with your MAX customers suggest they still want the airplane, some -- for a decent amount of them, somewhere close to where they originally wanted it. So I don't know if there's any way to quantify what percentage of your customers are asking to move versus what percentage of your customers are just sticking to what they had previously? What percentage of the backlog you expect to be canceled? I'm just trying to get some kind of sense for the degree of turmoil in the immediate term with your customers' ability to take airplanes."]},{"name":"David L. Calhoun","speech":["So let me take a swing at that. First of all, I'm going to assume, if we haven't heard from literally all of our customers by now, we will, with respect to what they would like to do. And these discussions are constructive and we do everything in our power to defer when we can, swap where we can, etc. And remember a lot of our customers -- all of them are invested, but with respect to the PDPs that of course we have retained. So, each of these discussions, believe it or not, has been quite constructive and productive.","And everything we know about their initial requests are reflected in our new production rates. And it's not to suggest that there isn't risk remaining on the demand side, but we're not looking through rose colored glasses, we're actually doing quite the opposite, which is to meet as many of these requests as we can, negotiate outcomes where we can and we have a whole bunch of them, and then reflect that accurately in the production rates in the forward view, and that is exactly where we sit.","So anyway it's surprising, but -- the one thing that's probably surprised me a bit is the extent to which this will accelerate fleet rationalization in the customer base. You know the scenario. We went from a growth -- a robust growth environment where even if they had plans to retire a portion of their fleet, they couldn't do it, simply because the market wasn't robust as it was, and they've now gone to the polar opposite. And so this is that moment where rationalization efforts get big, and believe it or not in some cases, it even requires that may be new airplanes be ordered simply to rationalize the fleet that they are trying to put out of business.","So this is a very interesting set of dynamics, the fleet planning efforts are in full swing for everybody. And again, I think we've reflected everything we know."]},{"name":"Noah Poponak","speech":["Dave, when I went to look up how much of the market is sale leaseback, I reminded myself -- I was surprised to remind myself how large that is. A lot of large publicly traded leasing companies have raised capital recently, you have state-owned customers and you just have customers that had a good financial position coming into this. Is it reasonable to assume that that set of customers that I just described can hold -- as challenging as things are, can hold you together through 2020 until things are normalized and you're growing again in 2021?"]},{"name":"David L. Calhoun","speech":["Noah, in my experience and I lived through it in my life at GECAS back in the post 9/11 world, it turns out that that is exactly what holds up. And we believe that, in fact, it will hold up again and a lot of the discussions we've had have been with financial markets and lessors as you would imagine. So I think your assumption is correct and part of our assumptions in this process reflect the discussions we've had with financial sources. So I guess, yes is the answer. I can't put an absolute number on it for you, but it's clearly reflected in our numbers."]},{"name":"Noah Poponak","speech":["Thanks very much."]},{"name":"Operator","speech":["Our next question is from Doug Harned with Bernstein. Please go ahead."]},{"name":"Douglas S. Harned","speech":["Great, and thank you. On liquidity, this morning Airbus management described a lot of the same liquidity issues that you're describing today with the focus on the supply chain's health. And it appears that the biggest cash risk that you're facing is also with the supply chain. You had the discussion around the $60 billion before. But when you look at the responsibility for the cash needs of suppliers, it crosses Boeing, it crosses Airbus with a lot of overlaps, you've got support potentially from governments, and then the suppliers themselves. So it looks like there are a wide range of potential scenarios here for what the cash outcome could be for Boeing related to the supply chain.","Can you talk about how you work with the different constituencies to try and address this? And can you give us a sense as to what the range of outcomes could be here as you look over the next year?"]},{"name":"David L. Calhoun","speech":["Well, let me take a crack at this first. The right order of business is the one that is going on right before our eyes. And the first is to get the airlines from the pre-COVID moment into the post-COVID moment. And for them to be warm when they get there so that they can begin that recovery process, that in and of itself put some stability out there in the marketplace and it allows us, Boeing, to now reflect medium-term demand, long-term demand and make the adjustments in accordance with that. We believe we have a balance sheet and we believe we have tools available to us and credit markets that are open enough to us to be able to get from here to there and get there with room to spare.","And as we do that, our good credit then extends into the supply chain, and the supply chain then has to make a whole bunch of adjustments on their own to reflect the new production requirements at both Airbus and Boeing. So again the airlines bridging that moment, Boeing, Airbus access to credit and their ability to finance from here to that medium-term moment and then the supply chain's ability to now restructure themselves to meet that new demand, but always relying on our credit and always relying on our factories being open, that's a real advantage.","And then the tools that the CARES Act has put in place and we do work closely with the administration on trying to get them to understand where the soft spots might be in that overall supply chain and direct those tools to that supply chain. And that's the process is unfolding before our eyes. Believe it or not, I think it's robust and it's working and so I'm not anticipating, at least at this moment in time any big or serious repercussions from supply chain issues. In some ways, just in the last two or three weeks, as governments have stepped up with their tools, etc., there has been a little more stability than there was just prior."]},{"name":"Douglas S. Harned","speech":["So is it fair to say, as you and Greg look at the range of possible outcomes here, with respect to the suppliers, when you're talking about feeling fairly confident in this now, you're able to say you can take off say some worst-case scenarios that perhaps were there back when you mentioned that $60 billion, so that even under the sort of current worst case, you're fairly confident you're in solid shape for this year?"]},{"name":"David L. Calhoun","speech":["We are. And I know you would imagine, but we have a lot of folks who help us with this and we have stress test the case that we're putting forward in many, many ways that are much more difficult than what we believe we're going to do. And we do get through it. And we do ultimately, when we do take on more debt, we also believe strongly that we're going to start paying it down. Now at what rate we pay it down is the real question. But when we get to some form of stability at these production rates, and I believe we will, we'll be in good shape to begin that process of returning money to our lenders."]},{"name":"Douglas S. Harned","speech":["Okay, great. Thank you."]},{"name":"Operator","speech":["Our next question is from Ron Epstein with Bank of America. Please go ahead."]},{"name":"Ronald J. Epstein","speech":["Good morning, guys."]},{"name":"Greg Smith","speech":["Good morning, Ron."]},{"name":"Ronald J. Epstein","speech":["Maybe changing the focus a little bit to product strategy. With the Embraer deal not playing out and then NMA being off the table, how do you think about competing against Airbus who has a product at the lower end of the market and a product at the higher end of the narrow-body market, where it seems like that the MAX is -- it's fine, but it's -- how can say it, sandwiched [Phonetic] between aircraft that are optimized on both ends of the market by your competitor, so particularly in an environment where you're constrained on your R&D expense and your development expense?"]},{"name":"David L. Calhoun","speech":["Well, with respect to the MAX, I have a lot more confidence in the MAX and its place in the market than maybe the question implies. We have a value prop that actually is still pretty good in some ways if airplane loads want to get smaller as a result of a maybe a smaller set of passengers flying on them in the next several years, it might actually play to us. We have a robust backlog with it and we're not out of the product development business, we're definitely in it. We are invested in capabilities with respect to manufacturing and engineering that we believe will offer a very differentiated product in whatever strategy we choose and we're fast at work at that stuff and we continue to be at work on it.","It will probably not be applied to an NMA and I think we've conveyed that to the marketplace. But this time actually in some of these market changes and then those important technologies we're investing in, and actually, I have a lot of faith both in the product that we currently started with and then secondly, the capabilities we'll bring to whatever we eventually develop as a next-gen. And in the meantime, on wide-body world and in particularly in the freighter world, we like our strategies, we're going to continue to invest in it, and I believe at the moment, that's our -- probably our biggest priority.","And then at the low end, Embraer is not going away. They're going to fight tooth and nail to win at that low end of the marketplace and they'll battle Airbus, the former Bombardier in doing so. And I don't think that's going to move the market in any significant way and/or affect the future of Boeing in any significant way. So anyway, that's probably it in a nutshell."]},{"name":"Ronald J. Epstein","speech":["All right. Thank you."]},{"name":"Operator","speech":["Our next question is from Sheila Kahyaoglu with Jefferies. Please go ahead."]},{"name":"Sheila Kahyaoglu","speech":["Hi, good morning, Dave and Greg. Thank you for the time."]},{"name":"Greg Smith","speech":["Good morning, Sheila."]},{"name":"David L. Calhoun","speech":["Good morning."]},{"name":"Sheila Kahyaoglu","speech":["Dave, you mentioned on wide-bodies, I'm just following up on this. You seem pretty comfortable that the bottom of demand is in. Given this is largely a replacement market and granted not uniform, what type of retirement rates are you thinking for the industry?"]},{"name":"David L. Calhoun","speech":["Well, I don't have a retirement number on the tip of my tongue. Suffice to say there are going to -- the retirements are going to accelerate in my view considerably and airplanes are going to get put down permanently at a faster rate, that's the most important part of this, that they get down -- they get put down permanently, not that they just get parked. And so, I do think that actually is going to play to our favor.","I love where our product line is, I think it's fundamentally advantage. Unfortunately, just this international route structure I just think is going to take longer to recover, and as a result we'll suffer with respect to ramp. But I do feel very good about it and I do think retirements are going to fuel a fair amount of our demand."]},{"name":"Greg Smith","speech":["Yeah. And just to add to it, Sheila, as you know very well, when you look at the number of airplanes that are 20-plus years old and it's a significant amount of them, to Dave's point, at least what we've been picking up on the customer side, they will be put down and won't be coming back up. And then when you look at what we have in the pipeline or in the backlog to some of those customers from an efficiency point of view, obviously there is significant improvements and it crosses the entire product line. So we'll see how it goes, but I think across the globe, we're hearing a lot more commitment to retiring that aged fleet, and to Dave's point, retiring it for good and not bringing it back.","And we'll continue to monitor that obviously. We will take that into account as we think about our production schedules going forward."]},{"name":"Sheila Kahyaoglu","speech":["Greg, just on that point, should we think about production in line with deliveries? So production equates to deliveries for wide-bodies in 2020 and '21 and beyond?"]},{"name":"Greg Smith","speech":["Yeah, I think the only one that may be a little off is the transition from the 777 to 777X through that period, as we're building the balance of the flight-test airplanes. But outside of that, pretty good correlation production rate to delivery rate."]},{"name":"Sheila Kahyaoglu","speech":["Okay, thank you."]},{"name":"Greg Smith","speech":["Of course, MAX -- MAX being unique, as we talked earlier. Yeah. Good, thank you."]},{"name":"Operator","speech":["Our next question is from Jon Raviv with Citi. Please go ahead."]},{"name":"Jonathan Raviv","speech":["Hey, good morning. Just to ask a question about the 45% of the business that is defense right now. I think on the last call you mentioned that defense cash flow might be little bit down year-on-year this year due to timing mostly, but how do you see that playing out going forward? And I asked on the context also have a lot of the gross items in your defense portfolio being related to very new programs, you've taken on some risk on the front end in terms of investments. How do you see those dynamics playing out over the next few years as a way to plug some of the hole being created by aero clearly being down here?"]},{"name":"David L. Calhoun","speech":["Greg, do you want to take that one, or you want me to?"]},{"name":"Greg Smith","speech":["Sorry, I missed part of it, I apologize. It cut out on me."]},{"name":"David L. Calhoun","speech":["This is with respect to our defense business, and I'll start with it."]},{"name":"Greg Smith","speech":["Yeah."]},{"name":"David L. Calhoun","speech":["You are in fact correct. 2019, where we did have some balance, the defense business was 45%. This year, of course, the defense business will probably be bigger than the commercial business and that will probably hold for a little while, of course, with these new rates and deliveries. So that's an important part of our company that I'm not sure a lot of people reflect. The risk elements associated with our defense portfolio, now I'm going to knock on wood while I say it, but I believe we've de-risked much of our portfolio, largely as a result of the significant issues we've had on tanker, and of course the continuous write-offs that we've had to experience. I do believe that that program now is exactly where it needs to be, we're going to finish well, importantly, our customer is going to feel like we have finished well and we've delivered a product that is second to none.","So I do believe that even the tanker future is significantly brighter than the one we've experienced up until now. And then our fighter aircraft, we will continue to supplement or attempt to supplement our order stream and production build and largely with the help of a defense department whose posture is to want to do those kinds of things, particularly in this moment in time. So again and I feel good about that. And on the development front, our development programs at the early stages are all looking quite good. We're not, we're really not off-plan on anything. And usually by now, we have a sniff that we might be.","So again, I feel pretty good about the risk profile of our defense business, despite the difficulties that we've attempted to overcome in just the last couple of years. Greg, I'm not sure if you want to add anything to that?"]},{"name":"Greg Smith","speech":["Yeah, no, I agree with everything you said, Dave. And obviously when you look at the portfolio mix, Jon, that MAX ramp up, that's where it will start to differentiate, go back to a richer mix on the commercial side. But outside of that, I think it's pretty much the way Dave outlined it. And on the development program, Dave said, we've tried to de-risk a lot of these upfront, especially some of those wins that we had most recently. And outside of that, the portfolio is actually performing well, as is the BGS government services side of the business. So we got to keep that keep that engine running smoothly as well."]},{"name":"Jonathan Raviv","speech":["Thanks. I'll keep it to one."]},{"name":"Maurita Sutedja","speech":["Okay. Operator, we have --."]},{"name":"David L. Calhoun","speech":["Thanks, Jon."]},{"name":"Maurita Sutedja","speech":["Time for one more question."]},{"name":"Operator","speech":["And that will be from Myles Walton with UBS. Please go ahead."]},{"name":"Myles Walton","speech":["Thanks, good morning. Thanks for taking the question."]},{"name":"David L. Calhoun","speech":["Good morning."]},{"name":"Myles Walton","speech":["Greg, in a prior question, I think you talked about 2022 cash flow -- free cash flow as being kind of pointing north for us to look at. I'm just curious in '21, is there any reason we shouldn't expect that to be a sizable positive cash flow year given the liquidation you're talking about on the MAX, or are the advances headwinds enough for '21 to also be negative?"]},{"name":"Greg Smith","speech":["Yeah, no, definitely '21 is at least as we have a forecast today much better than '20. A lot of the key elements in that is certainly the MAX again, the profile of the MAX deliveries coming off the ramp in the production. There is more impact on the progress payments side, but again, as I talked about operationally on the 787, we're still seeing good cash conversion on the program. And then, like I said, 777X has improved from a cash burn in '21 as well. So lots of moving pieces as there always is, but the single biggest driver in there is MAX -- the rate ramp on MAX and that's what'll contribute to a much more improved 2021 versus 2020."]},{"name":"Myles Walton","speech":["But -- sorry, Greg, just to underline that they'll improve, is it positive? Do you kind of feel comfortable enough to say that?"]},{"name":"Greg Smith","speech":["Yeah. Our current forecast based on all the rate discussions we just had today is a positive 2021 cash flow."]},{"name":"Myles Walton","speech":["Okay, thank you."]},{"name":"Greg Smith","speech":["You're welcome."]},{"name":"Maurita Sutedja","speech":["All right. So that completes Boeing Company's first quarter 2020 earnings conference call. Thank you all for joining."]},{"name":"Operator","speech":["[Operator Closing Remarks]"]}],"string":"[\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"[Operator Instructions]\",\n \"Our first question comes from Peter Arment with Baird. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Peter Arment\",\n \"speech\": [\n \"Good morning, Dave, Greg. Thanks for your time.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Good morning, Peter.\"\n ]\n },\n {\n \"name\": \"Peter Arment\",\n \"speech\": [\n \"I don't know if this question is for David or Greg, but maybe just Dave, the pace of deliveries for the stored fleet over, once you get back to certification in Q3 over, I guess the majority you're going to be looking to deliver over kind of a 12-month period and then squaring that against the warming up of the production line and trying to get to a target of 31 aircraft, just seems like a lot of deliveries. Maybe you could just kind of walk us through kind of how you're arriving at that? I know that that's just given the backdrop of what we're seeing in air travel right now. Thanks.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Yeah, thank you. Number one, as you probably know and has been reported on widely, we have been having conversations, intense ones for the better part of a month with our MAX customers about delivery and when to take them. And it's -- I would call it a wide variation with respect to what they ask for. Some want them right away, some of them want to defer for quite a while. Our assessment is reflected in these numbers based on those interactions. And yeah, there is more to be had. But we think it sort of accurately reflects that. And if anything in light of the -- now all of the government resources that had been provided to many of the airlines, which a month ago were still in doubt, some of that has settled down.\",\n \"So now, with respect to priorities, our priority will be to deliver the finished goods inventory that we have and as a result, the production rate is the one that we will sort of change based on what happens in the marketplace. Marketplace gets more robust for any reason, we'll increase that rate sooner rather than later and if it defers and/or gets any worse, we will do the opposite. So the variable in this is going to be the production rate, and the rate we've chosen now is 31 number and a slow pace to get to 31 reflects everything we know about the conversations with all of our MAX customers.\"\n ]\n },\n {\n \"name\": \"Peter Arment\",\n \"speech\": [\n \"Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And our next question is from Rob Spingarn with Credit Suisse. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Robert Spingarn\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Good morning, Rob.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"Robert Spingarn\",\n \"speech\": [\n \"Greg, this -- this one's for you, Greg. Let's say that in the 787 -- seven 787s per month and 31 MAXs in 2022, and I guess three 777s is the new normal. What kind of free cash flow profile would you have with that assuming stable BDS and a reasonable recovery at BGS? I'm talking about 2022 now.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah, yeah. Well clearly, Rob, to Peter's question to Dave, that is the -- I would say the single biggest driver. To your point, we've kind of laid out at least currently how we're thinking about production rates in that time frame, but the single biggest driver of that will be MAX and not only priority one delivering off that ramp is being the first step, but then that production rate increased from there and so obviously, the market is going to inform us how we can -- if we have the right profile that we've established today based on the numerous discussions we've had with the customer. But that will be the single biggest driver within that period.\",\n \"And then, I'd say outside of that is the 777 to 777X. As you know, 777X is a use of cash this year, will peak this year. We expect it to be a use of cash next year, but then, it's cash flow positive in the following year. So that transition that will take place will be key to 2022 cash flow. Obviously, we expect 2022 to be much better than what we're experiencing this year and next, but those will be the real -- I would say, key operational drivers that will allow us to get there.\"\n ]\n },\n {\n \"name\": \"Robert Spingarn\",\n \"speech\": [\n \"But Greg, is there any way to quantify what cash flow looks like with 787 at seven a month, half of what the peak rate has been? And with the 737 just a little over half, what that targeted mature rate would be? How do we think about what cash flow looks like in that environment?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah. Rob, I don't want to get into the specifics on that time frame. Because obviously as we sit here today, 2022 feels like a long way away, considering what we're navigating, but it will be -- obviously it will be positive cash flow in that period from those key drivers. Now, how positive? It will really obviously depend on rates even further going out and not delivery rates as much as, but production rates and advances that could impact 2022 positively or negatively depending on where rates go from there. But those will be the big drivers.\",\n \"And like I said, now with these production rates we've established, that's our best assessment at this time. And that could change and we'll size accordingly to do that. But 2022 starts to feel like a more normal year certainly than what we've experienced in '19 and what we're going to experience in '20.\"\n ]\n },\n {\n \"name\": \"Robert Spingarn\",\n \"speech\": [\n \"Okay, fair enough. Thank you, Greg.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Thanks, Rob.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from the line of Seth Seifman with JP Morgan. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Seth Seifman\",\n \"speech\": [\n \"Thanks very much, and good morning.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Good morning, Seth.\"\n ]\n },\n {\n \"name\": \"Seth Seifman\",\n \"speech\": [\n \"Just a couple of questions -- good morning. A couple of questions about liquidity and capital structure. You've got the $15 billion of cash on the balance sheet but also about $5 billion of short-term debt and burning cash. Can you talk about the timeline? Can you talk about maybe the $60-billion-plus number for the industry that you guys put out there several weeks ago and kind of what we in that and how you think about it now? And can you talk about whether Boeing needs to be an investment grade rated company?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah, maybe I'll let Dave address the industry, and then I'll follow up.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"The $60 billion number of course was put together early in this process and credit markets were as tight as they could be and we were trying to assess the fragility of mostly the supply chain, frankly. And we do have some weak or soft spots in that supply chain but with respect to Boeing's role in the health of the supply chain, I think everybody here knows that the real leverage for us is when we are sound and our credit is good, and we place orders against all of our supply chains, then in fact that provides the liquidity that they need ultimately to make the adjustments that they're going to make in response to our production rates.\",\n \"So that in and of itself, whatever ultimately we do and the liquidity we provide to our suppliers is most important. But our number was meant to represent sort of the whole all of the supply chain, 17,000 suppliers, the Tier 1s and the support that the Tier 1s might need and I can't speak for that. And so again, $60 billion number was in fact an industry number, not a Boeing-specific number.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah. And Seth, just as -- your second part of your question around being investment grade. Certainly, we would like to maintain being investment grade, and I think as you've heard and seen that we're doing everything possible to do that. But look, the market is probably going to impact that more than anything. Fortunately, as you know, we started at position of strength with our balance sheet that's allowed us to navigate it. And as Dave and I outlined, we're taking all the right steps to manage liquidity day in and day out, and prepare for the recovery on the other side. But at the end of the day, it's going to be what it's going to be on the investment grade. But certainly, we'd prefer to stay investment grade. And again, I think we're doing all the -- taken all the right actions to try to maintain that.\"\n ]\n },\n {\n \"name\": \"Seth Seifman\",\n \"speech\": [\n \"Great. Thanks.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And our next question is from Carter Copeland with Melius Research. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Hey, good morning, gentlemen. Thanks for the time.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Good morning, Carter.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Hi, good morning.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Just -- Greg, just quickly on the 87. I just want to make sure I heard you right on the block reduction. I think you said 100 units. I wonder if you could just give some color on why to reduce that. Or is that a lack of visibility around unsold pricing? And then just with respect to that, what that did to the deferred production. It looks like a $2 billion number in the quarter that would kind of imply that you've shaved that program margin down to a pretty razor-thin level. Am I missing something in the math there?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"No, I think you got it -- I think you got it right. The contraction in the cost base was driven by time. So it's staying within the five-year period that we have on cost bases. So as a result of producing fewer units that caused us to contract that cost base by 100 units. I would say, even with that contraction, when you look at margin going forward on the 787, even with the lower production rates, net-net on a unit basis, it holds up pretty well. And the real key drivers that even with the lower volume, like I said, we're going to be impacted by the fixed costs. But you kind of come back to the fundamentals on the backlog and the profile of the program going forward, when you look at model mix, you look at supplier step down, and even with our own productivity, it is impacted, like I said, but not impacted as much as I think some would expect.\",\n \"So I think those fundamentals -- I would ask don't lose sight of those because they're still a key driver to cash margin on the program.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Yeah, it's just GAAP. All right.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Thank you for the color.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah. You got it.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Just one -- maybe one other comment with respect to the market backdrop on the 787. The demand for the 87 is pretty strong. Our issue is and our assumptions, and we think we're right, is that the international route structures are going to come back much slower than the domestic ones. And as a result, the 87 suffers for that. But otherwise the airplane's performance, its utilization right now in the marketplace is pretty amazing. So we feel good about the airplane, but this push-over, based on the assumptions we've made, it is what it is.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Thanks for the color, gentlemen.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"You're welcome.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And next we'll go to Noah Poponak with Goldman Sachs. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Noah Poponak\",\n \"speech\": [\n \"Hey, good morning, everyone.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"Noah Poponak\",\n \"speech\": [\n \"I wanted to try, if at all possible, to get precise or more precise on -- it's clearly challenging out there, but just how many of your customers are attempting to revise their position in the delivery skyline? Because the traffic growth numbers and just the way it feels, it looks and feels like you could imagine literally every single one of your customers having a conversation with you about deferring or canceling. But you are maintaining 10 a month on the 87 for the year, which would suggest that's not happening. I'm pretty surprised by that.\",\n \"You're telling us your conversations with your MAX customers suggest they still want the airplane, some -- for a decent amount of them, somewhere close to where they originally wanted it. So I don't know if there's any way to quantify what percentage of your customers are asking to move versus what percentage of your customers are just sticking to what they had previously? What percentage of the backlog you expect to be canceled? I'm just trying to get some kind of sense for the degree of turmoil in the immediate term with your customers' ability to take airplanes.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"So let me take a swing at that. First of all, I'm going to assume, if we haven't heard from literally all of our customers by now, we will, with respect to what they would like to do. And these discussions are constructive and we do everything in our power to defer when we can, swap where we can, etc. And remember a lot of our customers -- all of them are invested, but with respect to the PDPs that of course we have retained. So, each of these discussions, believe it or not, has been quite constructive and productive.\",\n \"And everything we know about their initial requests are reflected in our new production rates. And it's not to suggest that there isn't risk remaining on the demand side, but we're not looking through rose colored glasses, we're actually doing quite the opposite, which is to meet as many of these requests as we can, negotiate outcomes where we can and we have a whole bunch of them, and then reflect that accurately in the production rates in the forward view, and that is exactly where we sit.\",\n \"So anyway it's surprising, but -- the one thing that's probably surprised me a bit is the extent to which this will accelerate fleet rationalization in the customer base. You know the scenario. We went from a growth -- a robust growth environment where even if they had plans to retire a portion of their fleet, they couldn't do it, simply because the market wasn't robust as it was, and they've now gone to the polar opposite. And so this is that moment where rationalization efforts get big, and believe it or not in some cases, it even requires that may be new airplanes be ordered simply to rationalize the fleet that they are trying to put out of business.\",\n \"So this is a very interesting set of dynamics, the fleet planning efforts are in full swing for everybody. And again, I think we've reflected everything we know.\"\n ]\n },\n {\n \"name\": \"Noah Poponak\",\n \"speech\": [\n \"Dave, when I went to look up how much of the market is sale leaseback, I reminded myself -- I was surprised to remind myself how large that is. A lot of large publicly traded leasing companies have raised capital recently, you have state-owned customers and you just have customers that had a good financial position coming into this. Is it reasonable to assume that that set of customers that I just described can hold -- as challenging as things are, can hold you together through 2020 until things are normalized and you're growing again in 2021?\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Noah, in my experience and I lived through it in my life at GECAS back in the post 9/11 world, it turns out that that is exactly what holds up. And we believe that, in fact, it will hold up again and a lot of the discussions we've had have been with financial markets and lessors as you would imagine. So I think your assumption is correct and part of our assumptions in this process reflect the discussions we've had with financial sources. So I guess, yes is the answer. I can't put an absolute number on it for you, but it's clearly reflected in our numbers.\"\n ]\n },\n {\n \"name\": \"Noah Poponak\",\n \"speech\": [\n \"Thanks very much.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Doug Harned with Bernstein. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Douglas S. Harned\",\n \"speech\": [\n \"Great, and thank you. On liquidity, this morning Airbus management described a lot of the same liquidity issues that you're describing today with the focus on the supply chain's health. And it appears that the biggest cash risk that you're facing is also with the supply chain. You had the discussion around the $60 billion before. But when you look at the responsibility for the cash needs of suppliers, it crosses Boeing, it crosses Airbus with a lot of overlaps, you've got support potentially from governments, and then the suppliers themselves. So it looks like there are a wide range of potential scenarios here for what the cash outcome could be for Boeing related to the supply chain.\",\n \"Can you talk about how you work with the different constituencies to try and address this? And can you give us a sense as to what the range of outcomes could be here as you look over the next year?\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Well, let me take a crack at this first. The right order of business is the one that is going on right before our eyes. And the first is to get the airlines from the pre-COVID moment into the post-COVID moment. And for them to be warm when they get there so that they can begin that recovery process, that in and of itself put some stability out there in the marketplace and it allows us, Boeing, to now reflect medium-term demand, long-term demand and make the adjustments in accordance with that. We believe we have a balance sheet and we believe we have tools available to us and credit markets that are open enough to us to be able to get from here to there and get there with room to spare.\",\n \"And as we do that, our good credit then extends into the supply chain, and the supply chain then has to make a whole bunch of adjustments on their own to reflect the new production requirements at both Airbus and Boeing. So again the airlines bridging that moment, Boeing, Airbus access to credit and their ability to finance from here to that medium-term moment and then the supply chain's ability to now restructure themselves to meet that new demand, but always relying on our credit and always relying on our factories being open, that's a real advantage.\",\n \"And then the tools that the CARES Act has put in place and we do work closely with the administration on trying to get them to understand where the soft spots might be in that overall supply chain and direct those tools to that supply chain. And that's the process is unfolding before our eyes. Believe it or not, I think it's robust and it's working and so I'm not anticipating, at least at this moment in time any big or serious repercussions from supply chain issues. In some ways, just in the last two or three weeks, as governments have stepped up with their tools, etc., there has been a little more stability than there was just prior.\"\n ]\n },\n {\n \"name\": \"Douglas S. Harned\",\n \"speech\": [\n \"So is it fair to say, as you and Greg look at the range of possible outcomes here, with respect to the suppliers, when you're talking about feeling fairly confident in this now, you're able to say you can take off say some worst-case scenarios that perhaps were there back when you mentioned that $60 billion, so that even under the sort of current worst case, you're fairly confident you're in solid shape for this year?\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"We are. And I know you would imagine, but we have a lot of folks who help us with this and we have stress test the case that we're putting forward in many, many ways that are much more difficult than what we believe we're going to do. And we do get through it. And we do ultimately, when we do take on more debt, we also believe strongly that we're going to start paying it down. Now at what rate we pay it down is the real question. But when we get to some form of stability at these production rates, and I believe we will, we'll be in good shape to begin that process of returning money to our lenders.\"\n ]\n },\n {\n \"name\": \"Douglas S. Harned\",\n \"speech\": [\n \"Okay, great. Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Ron Epstein with Bank of America. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Ronald J. Epstein\",\n \"speech\": [\n \"Good morning, guys.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Good morning, Ron.\"\n ]\n },\n {\n \"name\": \"Ronald J. Epstein\",\n \"speech\": [\n \"Maybe changing the focus a little bit to product strategy. With the Embraer deal not playing out and then NMA being off the table, how do you think about competing against Airbus who has a product at the lower end of the market and a product at the higher end of the narrow-body market, where it seems like that the MAX is -- it's fine, but it's -- how can say it, sandwiched [Phonetic] between aircraft that are optimized on both ends of the market by your competitor, so particularly in an environment where you're constrained on your R&D expense and your development expense?\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Well, with respect to the MAX, I have a lot more confidence in the MAX and its place in the market than maybe the question implies. We have a value prop that actually is still pretty good in some ways if airplane loads want to get smaller as a result of a maybe a smaller set of passengers flying on them in the next several years, it might actually play to us. We have a robust backlog with it and we're not out of the product development business, we're definitely in it. We are invested in capabilities with respect to manufacturing and engineering that we believe will offer a very differentiated product in whatever strategy we choose and we're fast at work at that stuff and we continue to be at work on it.\",\n \"It will probably not be applied to an NMA and I think we've conveyed that to the marketplace. But this time actually in some of these market changes and then those important technologies we're investing in, and actually, I have a lot of faith both in the product that we currently started with and then secondly, the capabilities we'll bring to whatever we eventually develop as a next-gen. And in the meantime, on wide-body world and in particularly in the freighter world, we like our strategies, we're going to continue to invest in it, and I believe at the moment, that's our -- probably our biggest priority.\",\n \"And then at the low end, Embraer is not going away. They're going to fight tooth and nail to win at that low end of the marketplace and they'll battle Airbus, the former Bombardier in doing so. And I don't think that's going to move the market in any significant way and/or affect the future of Boeing in any significant way. So anyway, that's probably it in a nutshell.\"\n ]\n },\n {\n \"name\": \"Ronald J. Epstein\",\n \"speech\": [\n \"All right. Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Sheila Kahyaoglu with Jefferies. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Hi, good morning, Dave and Greg. Thank you for the time.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Good morning, Sheila.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Dave, you mentioned on wide-bodies, I'm just following up on this. You seem pretty comfortable that the bottom of demand is in. Given this is largely a replacement market and granted not uniform, what type of retirement rates are you thinking for the industry?\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Well, I don't have a retirement number on the tip of my tongue. Suffice to say there are going to -- the retirements are going to accelerate in my view considerably and airplanes are going to get put down permanently at a faster rate, that's the most important part of this, that they get down -- they get put down permanently, not that they just get parked. And so, I do think that actually is going to play to our favor.\",\n \"I love where our product line is, I think it's fundamentally advantage. Unfortunately, just this international route structure I just think is going to take longer to recover, and as a result we'll suffer with respect to ramp. But I do feel very good about it and I do think retirements are going to fuel a fair amount of our demand.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah. And just to add to it, Sheila, as you know very well, when you look at the number of airplanes that are 20-plus years old and it's a significant amount of them, to Dave's point, at least what we've been picking up on the customer side, they will be put down and won't be coming back up. And then when you look at what we have in the pipeline or in the backlog to some of those customers from an efficiency point of view, obviously there is significant improvements and it crosses the entire product line. So we'll see how it goes, but I think across the globe, we're hearing a lot more commitment to retiring that aged fleet, and to Dave's point, retiring it for good and not bringing it back.\",\n \"And we'll continue to monitor that obviously. We will take that into account as we think about our production schedules going forward.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Greg, just on that point, should we think about production in line with deliveries? So production equates to deliveries for wide-bodies in 2020 and '21 and beyond?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah, I think the only one that may be a little off is the transition from the 777 to 777X through that period, as we're building the balance of the flight-test airplanes. But outside of that, pretty good correlation production rate to delivery rate.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Okay, thank you.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Of course, MAX -- MAX being unique, as we talked earlier. Yeah. Good, thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Our next question is from Jon Raviv with Citi. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Jonathan Raviv\",\n \"speech\": [\n \"Hey, good morning. Just to ask a question about the 45% of the business that is defense right now. I think on the last call you mentioned that defense cash flow might be little bit down year-on-year this year due to timing mostly, but how do you see that playing out going forward? And I asked on the context also have a lot of the gross items in your defense portfolio being related to very new programs, you've taken on some risk on the front end in terms of investments. How do you see those dynamics playing out over the next few years as a way to plug some of the hole being created by aero clearly being down here?\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Greg, do you want to take that one, or you want me to?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Sorry, I missed part of it, I apologize. It cut out on me.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"This is with respect to our defense business, and I'll start with it.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"You are in fact correct. 2019, where we did have some balance, the defense business was 45%. This year, of course, the defense business will probably be bigger than the commercial business and that will probably hold for a little while, of course, with these new rates and deliveries. So that's an important part of our company that I'm not sure a lot of people reflect. The risk elements associated with our defense portfolio, now I'm going to knock on wood while I say it, but I believe we've de-risked much of our portfolio, largely as a result of the significant issues we've had on tanker, and of course the continuous write-offs that we've had to experience. I do believe that that program now is exactly where it needs to be, we're going to finish well, importantly, our customer is going to feel like we have finished well and we've delivered a product that is second to none.\",\n \"So I do believe that even the tanker future is significantly brighter than the one we've experienced up until now. And then our fighter aircraft, we will continue to supplement or attempt to supplement our order stream and production build and largely with the help of a defense department whose posture is to want to do those kinds of things, particularly in this moment in time. So again and I feel good about that. And on the development front, our development programs at the early stages are all looking quite good. We're not, we're really not off-plan on anything. And usually by now, we have a sniff that we might be.\",\n \"So again, I feel pretty good about the risk profile of our defense business, despite the difficulties that we've attempted to overcome in just the last couple of years. Greg, I'm not sure if you want to add anything to that?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah, no, I agree with everything you said, Dave. And obviously when you look at the portfolio mix, Jon, that MAX ramp up, that's where it will start to differentiate, go back to a richer mix on the commercial side. But outside of that, I think it's pretty much the way Dave outlined it. And on the development program, Dave said, we've tried to de-risk a lot of these upfront, especially some of those wins that we had most recently. And outside of that, the portfolio is actually performing well, as is the BGS government services side of the business. So we got to keep that keep that engine running smoothly as well.\"\n ]\n },\n {\n \"name\": \"Jonathan Raviv\",\n \"speech\": [\n \"Thanks. I'll keep it to one.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"Okay. Operator, we have --.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Thanks, Jon.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"Time for one more question.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And that will be from Myles Walton with UBS. Please go ahead.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"Thanks, good morning. Thanks for taking the question.\"\n ]\n },\n {\n \"name\": \"David L. Calhoun\",\n \"speech\": [\n \"Good morning.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"Greg, in a prior question, I think you talked about 2022 cash flow -- free cash flow as being kind of pointing north for us to look at. I'm just curious in '21, is there any reason we shouldn't expect that to be a sizable positive cash flow year given the liquidation you're talking about on the MAX, or are the advances headwinds enough for '21 to also be negative?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah, no, definitely '21 is at least as we have a forecast today much better than '20. A lot of the key elements in that is certainly the MAX again, the profile of the MAX deliveries coming off the ramp in the production. There is more impact on the progress payments side, but again, as I talked about operationally on the 787, we're still seeing good cash conversion on the program. And then, like I said, 777X has improved from a cash burn in '21 as well. So lots of moving pieces as there always is, but the single biggest driver in there is MAX -- the rate ramp on MAX and that's what'll contribute to a much more improved 2021 versus 2020.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"But -- sorry, Greg, just to underline that they'll improve, is it positive? Do you kind of feel comfortable enough to say that?\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"Yeah. Our current forecast based on all the rate discussions we just had today is a positive 2021 cash flow.\"\n ]\n },\n {\n \"name\": \"Myles Walton\",\n \"speech\": [\n \"Okay, thank you.\"\n ]\n },\n {\n \"name\": \"Greg Smith\",\n \"speech\": [\n \"You're welcome.\"\n ]\n },\n {\n \"name\": \"Maurita Sutedja\",\n \"speech\": [\n \"All right. So that completes Boeing Company's first quarter 2020 earnings conference call. Thank you all for joining.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"[Operator Closing Remarks]\"\n ]\n }\n]","isConversational":false}}},{"rowIdx":699,"cells":{"ticker":{"kind":"string","value":"BA"},"date":{"kind":"string","value":"2018-07-25"},"participants":{"kind":"list like","value":[{"description":"Vice President of Investor Relations","name":"Maurita B. Sutedja","position":"Executive"},{"description":"Chairman, President, and Chief Executive Officer","name":"Dennis A. Muilenburg","position":"Executive"},{"description":"Chief Financial Officer, Executive Vice President of Enterprise Performance and Strategy","name":"Gregory D. Smith","position":"Executive"},{"description":"-- Senior Vice President and Chief Communications Officer","name":"Phil Musser","position":"Executive"},{"description":"Sanford C. Bernstein & Co. LLC -- Analyst","name":"Douglas Stuart Harned","position":"Analyst"},{"description":"Credit Suisse Securities (USA) LLC -- Analyst","name":"Robert M. Spingarn","position":"Analyst"},{"description":"Barclays Capital, Inc. -- Analyst","name":"David Strauss","position":"Analyst"},{"description":"Wells Fargo Securities LLC -- Analyst","name":"Samuel Joel Pearlstein","position":"Analyst"},{"description":"Bank of America Merrill Lynch -- Analyst","name":"Ronald Epstein","position":"Analyst"},{"description":"Goldman Sachs & Co. LLC -- Analyst","name":"Noah Poponak","position":"Analyst"},{"description":"Melius Research LLC -- Analyst","name":"Carter Copeland","position":"Analyst"},{"description":"The Wall Street Journal, Inc. -- Analyst","name":"Andrew Tangel","position":"Analyst"},{"description":"TheStreet -- Media","name":"Brian Sozzi","position":"Other"},{"description":"J.P. Morgan & Co. -- -- Analyst","name":"Seth Seifman","position":"Analyst"},{"description":"Jefferies LLC -- Analyst","name":"Sheila Kahyaoglu","position":"Analyst"},{"description":"Morgan Stanley & Co. LLC -- Analyst","name":"Rajeev Lalwani","position":"Analyst"},{"description":"Bloomberg -- Media","name":"Julie Johnsson","position":"Other"},{"description":"Seattle Times -- Analyst","name":"Dominic Gates","position":"Analyst"},{"description":"Robert W. Baird & Co., Inc. -- Analyst","name":"Peter J. Arment","position":"Analyst"},{"description":"Wolfe Research, LLC -- Analyst","name":"Hunter Keay","position":"Analyst"},{"description":"Canaccord Genuity -- Analyst","name":"Ken Herbert","position":"Analyst"}],"string":"[\n {\n \"description\": \"Vice President of Investor Relations\",\n \"name\": \"Maurita B. Sutedja\",\n \"position\": \"Executive\"\n },\n {\n \"description\": \"Chairman, President, and Chief Executive Officer\",\n \"name\": \"Dennis A. Muilenburg\",\n \"position\": \"Executive\"\n },\n {\n \"description\": \"Chief Financial Officer, Executive Vice President of Enterprise Performance and Strategy\",\n \"name\": \"Gregory D. Smith\",\n \"position\": \"Executive\"\n },\n {\n \"description\": \"-- Senior Vice President and Chief Communications Officer\",\n \"name\": \"Phil Musser\",\n \"position\": \"Executive\"\n },\n {\n \"description\": \"Sanford C. Bernstein & Co. LLC -- Analyst\",\n \"name\": \"Douglas Stuart Harned\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Credit Suisse Securities (USA) LLC -- Analyst\",\n \"name\": \"Robert M. Spingarn\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Barclays Capital, Inc. -- Analyst\",\n \"name\": \"David Strauss\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Wells Fargo Securities LLC -- Analyst\",\n \"name\": \"Samuel Joel Pearlstein\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Bank of America Merrill Lynch -- Analyst\",\n \"name\": \"Ronald Epstein\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Goldman Sachs & Co. LLC -- Analyst\",\n \"name\": \"Noah Poponak\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Melius Research LLC -- Analyst\",\n \"name\": \"Carter Copeland\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"The Wall Street Journal, Inc. -- Analyst\",\n \"name\": \"Andrew Tangel\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"TheStreet -- Media\",\n \"name\": \"Brian Sozzi\",\n \"position\": \"Other\"\n },\n {\n \"description\": \"J.P. Morgan & Co. -- -- Analyst\",\n \"name\": \"Seth Seifman\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Jefferies LLC -- Analyst\",\n \"name\": \"Sheila Kahyaoglu\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Morgan Stanley & Co. LLC -- Analyst\",\n \"name\": \"Rajeev Lalwani\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Bloomberg -- Media\",\n \"name\": \"Julie Johnsson\",\n \"position\": \"Other\"\n },\n {\n \"description\": \"Seattle Times -- Analyst\",\n \"name\": \"Dominic Gates\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Robert W. Baird & Co., Inc. -- Analyst\",\n \"name\": \"Peter J. Arment\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Wolfe Research, LLC -- Analyst\",\n \"name\": \"Hunter Keay\",\n \"position\": \"Analyst\"\n },\n {\n \"description\": \"Canaccord Genuity -- Analyst\",\n \"name\": \"Ken Herbert\",\n \"position\": \"Analyst\"\n }\n]","isConversational":false},"prepared_remarks":{"kind":"list like","value":[{"name":"Operator","speech":["Good day, everyone, and welcome to The Boeing Company's Second Quarter of 2018 Earnings Conference Call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst and media question-and-answer sessions, are being broadcast live over the Internet.","At this time, for opening remarks and introductions, I am turning the call over to Ms. Maurita Sutedja, Vice President of Investor Relations for The Boeing Company. Ms. Sutedja, lease go ahead."]},{"name":"Maurita B. Sutedja","speech":["Thank you, and good morning. Welcome to Boeing's Second Quarter 2018 Earnings Call. I am Maurita Sutedja, and with me today is Dennis Muilenburg, Boeing's Chairman, President and Chief Executive Officer and Greg Smith, Boeing's Chief Financial Officer and Executive Vice President of Enterprise Performance and Strategy.","After management comments, we will take your questions. In fairness to others on the call, we ask that you limit yourself to one question. We have provided detailed financial information in today's press release and you can follow the broadcast and presentation through our website at boeing.com.","Before we begin, I need to remind you that any projections and goals in our discussion today are likely to involve risks which is detailed in our news release, various SEC filings and the forward-looking statement disclaimer in the presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of non-GAAP measures that we use when discussing our results and outlook.","Now, I will turn the call over to Dennis Muilenburg."]},{"name":"Dennis A. Muilenburg","speech":["Thank you, Maurita, and good morning. Let me begin today with a brief overview of our second quarter operating performance, followed by an update on the business environment and our expectations going forward. After that, Greg will walk you through the details of our financial results and outlook.","With that, let's move to Slide 2. Thanks to the dedicated efforts of employees throughout our company, Boeing delivered strong second quarter 2018 financial results that included higher revenue and earnings and strong operating cash flow, driven by solid execution across the company. During the quarter, we generated $4.7 billion of operating cash and repurchased $3.0 billion of Boeing stock. We also paid $1.0 billion in dividends, reflecting a 20% increase in dividends per share from last year.","We continued to deliver on our commitments of returning cash to shareholders while investing in our people, innovation, and future growth. Revenue in the second quarter was $24.3 billion , reflecting higher volume of commercial deliveries and favorable mix, along with services and defense contract volume. Core earnings per share of $3.33 was driven by strong performance across the businesses, volume and mix, and lower tax rate, partially offset by a write-off due to the previously announced Spirit litigation outcome and cost growth on the KC-46 Tanker program, which I'll address shortly","For the full year, we are raising guidance for revenue, to reflect higher volume at BDS and BGS. Additionally, we are adjusting BCA and BDS segment operating margin guidance. Greg will discuss these in more detail in his section.","Before we delve into the second quarter operating performance for our businesses, let me spend a minute on the KC-46 Tanker program. We continue to make steady progress toward final certification for the KC Tanker and recently completed all flight tests required to deliver the first aircraft, which is expected to be in October of this year, as now agreed upon with the U.S. Air Force. This is a significant milestone for us and our customer, representing the culmination of three years of testing and over 3,300 flight hours.","However, the program did see additional cost growth in the quarter of $334 million after tax, primarily due to higher estimated costs of incorporating changes into six flight tests and two early build aircraft, as well as additional costs as we progress through the last stage testing and certification process. Regarding these flight tests and early build aircraft, as flight testing to support the first delivery was completed and final configuration of each aircraft has been defined, the plan to complete manufacturing of these eight aircraft is now clear and firmed up.","While there is still a lot of work ahead of us, we now have a very clear line of sight on what is needed to deliver these highly mission capable aircraft to our customers. We remain confident in the long-term value of this franchise, a program that's going to have a production run measured in hundreds of airplanes and decades of follow-on support and training.","With that, now let's look at Commercial Airplanes. For the quarter, Commercial Airplanes generated revenue of $14.5 billion, reflecting 194 deliveries with operating margins of 11.4%. Continued healthy sales activity contributed to 239 net new airplane orders worth $16 billion during the quarter, including 91 wide-body orders, adding to our robust backlog that stands at more than 5,900 airplanes and is worth $416 billion. Year-to-date, we have captured over 900 net new orders and commitments.","The 737 MAZ program marked its one-year anniversary of entering revenue flight service in the quarter, and its production ramp up continued. To date, we have delivered 163 MAXs, with 52 of them delivered in the quarter.","As for the 777X program, in the quarter, we moved the first two test airplanes into the low-rate initial production line in the main factory. We also began the systems testing for this exciting development program. We will remain on track for first 777X deliver in 2020.","Now, over to Defense, Space, and Security. BDS reported second quarter revenue of $5.6 billion, reflecting the Kuwait F-18 production contract award and higher weapons volume, with operating margins 9.3%. The $7 billion of new orders booked by BDS during the quarter demonstrates the value we bring to our customers across our Defense, Space, and Security portfolio. These orders included finalization of the production contract for 28 F-18 Super Hornets to Kuwait, an additional order for 18 F-18 Super Hornets for the U.S. Navy, three P-8 Poseidon aircraft for the U.S. Navy, as well as a multiyear contract for 58 V-22 Osprey aircraft.","Key milestones for BDS included induction of the first F-18 aircraft into the service life modification program, two successful tests for the U.S. Air Force's Minuteman III, and production of the 100th P-8 aircraft. On the commercial satellite side, we successfully completed the O3BM power preliminary design review with SES.","Turning to Global Services, our integrated services business completed its first full year of operation at the end of the quarter. BGS reported second quarter revenue of $4.1 billion with operating margins of 14.7%, reflecting higher volume along with product and services mix. During the quarter, BGS won new business totaling approximately $4 billion. That demonstrates the value that we bring to our broad range of commercial and government customers. These included an F-18 Depot maintenance contract for the U.S. Navy and Marine Corps, a global fleet care contract for Primera Air's 737 fleet, and performance-based logistics contracts to support The Netherlands' Rotorcraft fleet. These orders highlight the strength of our One Boeing offerings.","Additionally, BGS delivered its first 737 Boeing Converted Freighter in the quarter. As part of our growth strategy of complimenting organic investments with selection strategic acquisitions, in May we announced our agreement to acquire KLX, a major provider of aviation parts and services. By combining the talent and product offerings of our Aviall business and KLX, we will provide a one-stop shop that will benefit our supply chain and our customers in a meaningful way. Also in the quarter, we announced a proposed partnership with Safran to jointly design, build, and service auxiliary power units. This move will strengthen Boeing's vertical capabilities as we continue to expand our services portfolio and make strategic investments that accelerate our growth plans.","In summary, we delivered another quarter of strong operating performance, captured noteworthy additions to our large and diverse backlog, returned significant cash to shareholders, and complimented our organic growth with planned strategic and organic investments.","With that, let's turn to the business environment on Slide 3. We continue to see healthy global demand in our commercial, defense, space, and services markets. We have recently revised the size of these growing markets upward to $8.1 trillion over the next 10 years. In the commercial airplanes market, airlines continue to report robust profits and strong passenger traffic, outpacing global GDP. Passenger traffic in 2018 grew 6.8% through May. Meanwhile, cargo traffic maintained its strong momentum, growing by 5.3% in 2018 through May, as we see trade and industrial production growing in all regions.","Our global customers continue to recognize the compelling value proposition that our new more fuel-efficient product family brings to the market, as reflected in the healthy new order intake we've seen year-to-date. We continue to see the trend of diverse and balanced demand from a geographical perspective, as well as across the spectrum of airline business models. The changing nature of travel, with the expansion of network city pairs and rising middle class population in emerging markets, have fundamentally expanded traffic patterns and underpinned sustained growth. There also is more balanced demand between fleet growth and replacement of older aircraft, and we are seeing more consistent and stable customer purchasing patterns.","We believe the evolution in key market dynamics in the aggregate is driving greater stability and far less cyclicality for our industry. Over the long term, we remain highly confident in our commercial market outlook, which now forecasts demand for nearly 43,000 new airplanes over the next 20 years, up from our previous outlook of approximately 41,000 airplanes. This is comprised of more than 31,000 aircraft in the narrow-body market and approximately 9,000 aircraft in the wide-body market. These deliveries, of which 44% will be driven by replacement demand, will double the size of the global fleet. This long-term demand, combined with healthy market conditions and a robust backlog, provides a solid foundation for our planned production rates.","Turning to our product segments. Starting with the narrow-body, our production rate of 52 per month, starting June of this year, and planned increase to 57 in 2019, is based on our backlog of more than 4,700 aircraft and a production skyline that is sold out into early next decade. We continue to assess the upward pressure on the 737 production rate.","In the wide-body segment, we have seen steady orders for the 787 and 777 airplanes and have high confidence in a meaningful increase in wide-body replacement demand early next decade. For the current generation 777, we've received 19 net new orders in the quarter, bringing the backlog to 96 aircraft. The renewed strength in the air cargo sector has provided support for the 777 bridge, as highlighted by recent orders, which included incremental freighters for FedEx and DHL. Additionally, earlier this month, we finalized Qatar Airways' order for five 777 freighters and received a letter of intent for 29 777 freighters from Volga-Dnepr and CargoLogicHolding. As we transition production to the 777X, we expect 777 deliveries of approximately 3.5 per month in 2018 and 2019, as previously announced.","As you can see from the recent activities, we continue to make good progress on the 777 bridge. And, while we still have some work to do in filling the remaining 777 production slots, in particular for 2020 and beyond, based on our progress of capturing new orders and commitments, managing the skyline, and working new campaigns, we continue to believe the rate plan we put in place establishes a floor for the program and supports our production bridge from the current 777 to the 777X. As we look forward to the 777X, we have a strong foundation of 340 orders and commitments that support our plan for ramping up production and delivery of this new aircraft.","We also captured 59 orders for the 787 Dreamliner family in the quarter, a solid platform for long-term production. With more than 650 firm orders in our backlog, our plan to increase Dreamliner production to 14 airplanes a month in 2019 is well supported. We continue to see repeat orders for the 787 Dreamliner, including from Qantas, Bank of China Aviation, and United. These repeat orders, coupled with continuing the traction from new carriers such as Bamboo Airways' recent commitment for 20 787s highlight the strong market preference for the 787 and its superior value.","Turning to our 747 and 767 programs. With our unmatched freighter product lines, we are well positioned to capture the increased cargo demand. During the quarter, FedEx announced an order for 12 incremental 767 freighters. This further supports our 767 production rate increase from 2.5 per month to three per month in 2020. We remain focused on the strong long-term aerospace industry fundamentals as highlighted by the continued strength of traffic. It is important to have this in perspective as we navigate through global trade discussions.","As a global company with operations around the world supporting commercial and government customers in more than 150 countries, Boeing maintains strong relationships with our customers, suppliers, and other key stakeholders around the world. We will continue to engage with leaders in these countries to urge a productive dialogue to resolve trade differences, highlighting the mutual economic benefits of a strong and prosperous aerospace industry.","Turning to Defense, Space, and Security. We continue to see solid demand for our major platforms and programs. The final appropriation bill for fiscal year 2018 U.S. federal budget funded our key programs across our fixed wing, rotorcraft, commercial derivative aircraft, and our missile, space and satellite products. Boeing continues to see strong support for our key products in the fiscal year 2019 President's budget and in Congress, including increased procurement of 110 F-18 Super Hornets across the future year defense plan, support for a fourth multiyear procurement for the F-18, and increases for various programs in our weapons and rotorcraft portfolios. The BDS portfolio is well positioned with mature, world-class platforms to address current needs.","International demand for our defense and space offerings remains high as well, in particular for rotorcraft, commercial derivatives, fighters, and satellites. As I mentioned earlier, we finalized a production contract for 28 F-18 Super Hornets for Kuwait and received a multiyear contract for the V-22 Osprey, which includes four aircraft for the government of Japan. Recently, New Zealand selected the Boeing P-8 Poseidon aircraft as its new maritime patrol aircraft. We are making progress toward completing other previously announced international sales including additional Chinook helicopters for Spain and Saudi Arabia.","Our investment in future growth and new sales continues in areas that are priorities for our customers such as commercial derivatives, rotorcrafts, satellites, services, human space exploration, and autonomous systems. Much of that investment supports the priority we have placed on capturing future franchise programs, where we are also leveraging capabilities and technologies from across the enterprise for the T-X trainer, ground-based strategic deterrent, and the unmanned carrier-based MQ-25A, along with several other important opportunities.","Turning to the services sector. We see the $2.8 trillion services market over the next 10 years as a significant growth opportunity for our company. BGS provides agile, cost competitive services to our customers worldwide. We aim to grow faster than the average services market growth rate of 3.5% as we further expand our broad portfolio of services offerings and continue to gain market share.","Strong orders of $4 billion in the quarter reflect our customers' recognition of our value proposition in helping them optimize the performance of their fleets and reduce operational costs through the lifecycle. These activities stretch across BGS's four capability areas including parts, engineering mods and maintenance, digital aviation and analytics, and training and professional services. Our digital solutions, powered by Boeing AnalytX provide airlines with advanced optimization and analysis as illustrated by a recent contract from Etihad Airways to implement our crew management solutions to support the planning and operations of the 7,500 crew members.","The flexibility and strength of our optimization in the crew management suite will allow Etihad to solve complex issues with ease and support their decision-making process with detailed quantifications of risks and costs.","Our focus remains on optimizing the businesses and expanding our portfolio offerings through organic growth investments such as strengthening our vertical capabilities, complemented by strategic acquisitions, to position BGS for long-term sustained and profitable growth. Our expertise, the global reach of our business, and our strong customer partnerships have us well positioned to compete and win in this important sector.","Before I close this business environment section, I'd like to spend some time on Embraer. Consistent with our enterprise strategy of pursuing strategic investment opportunities where they demonstrate real value and accelerate our organic growth plans, earlier this month we signed an MOU with Embraer for formation of a joint venture comprising the commercial aircraft and services business of Embraer. This proposed partnership will strategically align with Boeing's commercial development, production, marketing, and life cycle services operations, strengthen the vertical capabilities of Boeing, and enhance value for our customers through industry leading products and services.","Additionally, we will create another joint venture to promote and develop new markets and applications for defense products and services, especially the KC-390 multi mission aircraft. This comprehensive enterprise wide collaboration with Embraer will create the most important strategic partnership in the aerospace industry, strengthening both companies' leadership in the global market and creating more value for both companies' customers, shareholders, and employees. While this agreement is a significant step, a considerable amount of work remains. In the coming months, we'll continue to work with Embraer and its shareholders, the Brazilian government, and regulators -- among others -- to complete the transaction.","In summary, with growing markets and opportunities ahead, our team remains intensely focused on growth, innovation, and accelerating productivity improvement to fuel our investments in the future.","With that, Greg, over to you for our financial results."]},{"name":"Gregory D. Smith","speech":["Thanks, Dennis, and good morning, everyone. Let's turn to Slide 4 and we'll discuss our second quarter results. Revenue for the quarter was strong at $24.3 billion, reflecting higher volume of commercial deliveries, favorable mix, along with along with an increased volume at both Defense, Space, and Security, as well as Boeing Global Services businesses. Core earnings per share of $3.33 reflect solid execution across the business, higher volume and improved mix, along with a lower tax rate. The results were partially offset by an after-tax charge of $124 million related to a receivable write-off due to the previously announced Spirit litigation outcome and cost growths of $334 million after tax on the KC-46 tanker program.","As Dennis mentioned, we're raising our full year revenue guidance to reflect higher volume at Defense, Space, and Security and global services. Additionally, we are adjusting Commercial Airplane and Defense, Space, and Security segment operating margins. I'll provide more details on our 2018 further in my remarks.","Now, let's now discuss Commercial Airplanes on Slide 5. Our Commercial Airplane business revenue increased to $14.5 billion during the quarter, reflecting higher deliveries and improved mix. BCA operating margins increased to 11.4%, driven by strong operating performance on production programs, higher 787 margins, and timing of some period expense partially offset by a $307 million pre-tax charge on the KC-46 tanker program. Second quarter BCA operating margins, excluding the tanker charge, were 13.3%. BCA captured $16 billion in net orders during the second quarter and the backlog remains very strong at $416 billion and nearly 5,900 aircraft, equating to approximately seven years of production.","On the 787 program, we delivered 38 aircraft and booked 59 net orders in the quarter and additionally we extended the 787 accounting block by 100 units. This resulted in higher margins on the program and therefore moderated the decline of deferred production balance this quarter. The overall cash profile of this program continues to improve due to the improved mix, supplier step-down pricing, and our team's day-to-day focus on improving 787 profitability and cash generation.","Let's now turn to Defense, Space, and Security results on Slide 6. Second quarter revenue increased to $5.6 billion, driven by FA-18 production contract award for Kuwait and higher weapons volume. BDS margins growing 9.3% reflected our continued focus on productivity and execution offset by a $111 million pre tax charge on the KC-46 tanker program. Second quarter BDS operating margin, excluding the tanker charge, were 11.2%. During the quarter, BDS won key contract awards worth $7 billion and our backlog stands at $52 billion with 35% of that from international customers.","Turning now to Boeing Global Services results on Slide 7. In the second quarter, Global Services revenue increased to $4.1 billion, reflecting higher volume, predominantly driven by increased parts sales. Year-over-year growth of 15% for the quarter, and 11% in the first half of the year, more than meets our objective to outpace the average annual services market growth rate of 3.5%.","BGS operating margins were solid at 14.7%, reflecting ongoing productivity efforts as well as mix of products and services in the quarter. During the quarter, BGS won key contract awards worth approximately $4 billion and our backlog now stands at $20 billion. This month marked the one-year anniversary of the launch of Boeing Global Services business and we're proud of the team's accomplishments. BGS results year-to-date are a testament to the team and the enterprise focus on achieving top-line growth while maintaining disciplined execution. The key wins this year underscore the strength of the One Boeing offerings to our customers.","Let's now turn to cash flow on Slide 8. Operating cash flow for the second quarter was strong at $4.7 billion, driven by planned higher commercial airplane rates, stronger operating performance across the business, and timing of receipts and expenditures. Year-to-date cash flow remains strong at $7.8 billion. We remain focused and on track with our balanced cash deployment strategy. In the second quarter we repurchased $3 billion of Boeing stock and paid $1 billion in dividends, reflecting a 20% increase in dividend per share from last year.","We continue to anticipate completing the remaining $12 billion repurchase authorization over the next 18-24 months. Since the end of 2012, we've returned $48 billion to our shareholders through dividend and share repurchase. At the same time, we've invested more than $30 billion in key strategic areas to ensure long-term sustainable growth for Boeing and our customers. We remain committed to returning approximately 100% of free cash flow to investors, while continuing to invest in future growth opportunities.","Let's move now to cash and debt balance on Slide 9. We ended the quarter with nearly $10 billion of cash and marketable securities, lower debt levels, and stable credit ratings. Our cash position continues to provide us with the flexibility to invest in innovation and profitable growth opportunities while again returning value to shareholders.","Let's turn now to Slide 10, we'll discuss our outlook for 2018. For full-year guidance, we're raising revenue guidance by $1 billion, to now be between $97-99 billion, from our prior guidance of between $96-98 billion. The increase in revenue reflects the growth from key international fighter awards and higher weapons revenue for BDS and higher parts revenue for BGS. As a result, we're increasing guidance by $500 million, to be between $22-23 billion for BDS, and between $15.5-16 billion for BGS.","We're also updating full-year BCA and BDS segment operating margin guidance to reflect BCA's strong performance and cost growth on the KC-46 tanker program this quarter. BCA margin guidance is increased to now be greater than 11.5% from our prior guidance of approximately 11.5%, again reflecting strong performance and offsetting the growth on the tanker program this quarter. BDS margin guidance is reduced to now be between 10-105% from our prior guidance of approximately 11%, again primarily due to the reflecting of the impact of the KC-46 tanker growth.","The rest of the full-year guidance, including EPS, cash flow, and aircraft deliveries remain unchanged. And, by holding EPS and cash flow guidance, we are absorbing the impact of the tanker cost growth and Spirit litigation charge, offsetting that with performance.","As we look toward the remainder of the year, we remain focused on strong execution, including development programs, and risk mitigation within our company and throughout our supply chain. In summary, our core operating engine continues to deliver strong results. We will continue to use a three-business unit strategy as a key differentiator in the marketplace, make prudent investments, and leverage talent and innovation across the company. At the same time, we will set challenging goals and objectives around elements of operations and support functions tied to profitability and efficiency to generate cash and improve working capital while delivering value to our customers. All of these will help us achieve our goal to grow year-over-year revenue, cash flow, and margins.","With that, I'll turn it back over to Dennis for some closing comments."]},{"name":"Dennis A. Muilenburg","speech":["Thank you, Greg. With a strong couple of quarters providing solid momentum for the year, our team remains focused on further driving both growth and productivity. We would not have been able to achieve these strong results without the hard work and dedication of our employees and the great partnership we enjoy with our customers and suppliers.","In addition to the strong commercial airplane market dynamics I mentioned earlier in my remarks, we've taken our own actions to reduce cyclicality in our business. This includes remaining disciplined in our production rate decisions, de-risking our pension liabilities, strategically phasing our research and development spending, creating labor stability with long-term contracts, and expanding our services business, which is also less cyclical.","We have executed on our long-term strategy of robust and continuing organic growth investment and returning value to shareholders, complemented by strategic acquisitions and partnerships that enhance and accelerate our growth plans. The recently announced planned strategic partnerships with Embraer and Safran, and agreement to acquire KLX Aerospace, are entirely consistent with this strategy. As the world's largest aerospace company, spanning commercial, defense, space, and services, we are as optimistic about our future and the future of our industry as we have ever been.","Our priorities going forward are to leverage our unique One Boeing advantages, continue building strength on strength to deliver and improve on our commitments, and to stretch beyond those plans and sharpen and accelerate our pace of progress on key enterprise growth and productivity efforts.","Achieving these objectives will require a clear and consistent focus on the profitable ramp-up in Commercial Airplane production, continuing to strengthen our Defense and Space business, growing our Integrated Services business, leveraging the power of our three business unit strategy, delivering on our development programs, driving world-class levels of productivity and performance throughout the enterprise to fund our investments in innovation and growth, disciplined leading-edge investments and balanced value-creating cash deployment and continuing to develop and maintain the best team and talent in the industry, all of which position Boeing for continued market leadership, sustained top- and bottom-line growth, and increasing value for our customers, shareholders, employees, and other stakeholders.","...","With that, we'd be happy to take your questions."]}],"string":"[\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Good day, everyone, and welcome to The Boeing Company's Second Quarter of 2018 Earnings Conference Call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst and media question-and-answer sessions, are being broadcast live over the Internet.\",\n \"At this time, for opening remarks and introductions, I am turning the call over to Ms. Maurita Sutedja, Vice President of Investor Relations for The Boeing Company. Ms. Sutedja, lease go ahead.\"\n ]\n },\n {\n \"name\": \"Maurita B. Sutedja\",\n \"speech\": [\n \"Thank you, and good morning. Welcome to Boeing's Second Quarter 2018 Earnings Call. I am Maurita Sutedja, and with me today is Dennis Muilenburg, Boeing's Chairman, President and Chief Executive Officer and Greg Smith, Boeing's Chief Financial Officer and Executive Vice President of Enterprise Performance and Strategy.\",\n \"After management comments, we will take your questions. In fairness to others on the call, we ask that you limit yourself to one question. We have provided detailed financial information in today's press release and you can follow the broadcast and presentation through our website at boeing.com.\",\n \"Before we begin, I need to remind you that any projections and goals in our discussion today are likely to involve risks which is detailed in our news release, various SEC filings and the forward-looking statement disclaimer in the presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of non-GAAP measures that we use when discussing our results and outlook.\",\n \"Now, I will turn the call over to Dennis Muilenburg.\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"Thank you, Maurita, and good morning. Let me begin today with a brief overview of our second quarter operating performance, followed by an update on the business environment and our expectations going forward. After that, Greg will walk you through the details of our financial results and outlook.\",\n \"With that, let's move to Slide 2. Thanks to the dedicated efforts of employees throughout our company, Boeing delivered strong second quarter 2018 financial results that included higher revenue and earnings and strong operating cash flow, driven by solid execution across the company. During the quarter, we generated $4.7 billion of operating cash and repurchased $3.0 billion of Boeing stock. We also paid $1.0 billion in dividends, reflecting a 20% increase in dividends per share from last year.\",\n \"We continued to deliver on our commitments of returning cash to shareholders while investing in our people, innovation, and future growth. Revenue in the second quarter was $24.3 billion , reflecting higher volume of commercial deliveries and favorable mix, along with services and defense contract volume. Core earnings per share of $3.33 was driven by strong performance across the businesses, volume and mix, and lower tax rate, partially offset by a write-off due to the previously announced Spirit litigation outcome and cost growth on the KC-46 Tanker program, which I'll address shortly\",\n \"For the full year, we are raising guidance for revenue, to reflect higher volume at BDS and BGS. Additionally, we are adjusting BCA and BDS segment operating margin guidance. Greg will discuss these in more detail in his section.\",\n \"Before we delve into the second quarter operating performance for our businesses, let me spend a minute on the KC-46 Tanker program. We continue to make steady progress toward final certification for the KC Tanker and recently completed all flight tests required to deliver the first aircraft, which is expected to be in October of this year, as now agreed upon with the U.S. Air Force. This is a significant milestone for us and our customer, representing the culmination of three years of testing and over 3,300 flight hours.\",\n \"However, the program did see additional cost growth in the quarter of $334 million after tax, primarily due to higher estimated costs of incorporating changes into six flight tests and two early build aircraft, as well as additional costs as we progress through the last stage testing and certification process. Regarding these flight tests and early build aircraft, as flight testing to support the first delivery was completed and final configuration of each aircraft has been defined, the plan to complete manufacturing of these eight aircraft is now clear and firmed up.\",\n \"While there is still a lot of work ahead of us, we now have a very clear line of sight on what is needed to deliver these highly mission capable aircraft to our customers. We remain confident in the long-term value of this franchise, a program that's going to have a production run measured in hundreds of airplanes and decades of follow-on support and training.\",\n \"With that, now let's look at Commercial Airplanes. For the quarter, Commercial Airplanes generated revenue of $14.5 billion, reflecting 194 deliveries with operating margins of 11.4%. Continued healthy sales activity contributed to 239 net new airplane orders worth $16 billion during the quarter, including 91 wide-body orders, adding to our robust backlog that stands at more than 5,900 airplanes and is worth $416 billion. Year-to-date, we have captured over 900 net new orders and commitments.\",\n \"The 737 MAZ program marked its one-year anniversary of entering revenue flight service in the quarter, and its production ramp up continued. To date, we have delivered 163 MAXs, with 52 of them delivered in the quarter.\",\n \"As for the 777X program, in the quarter, we moved the first two test airplanes into the low-rate initial production line in the main factory. We also began the systems testing for this exciting development program. We will remain on track for first 777X deliver in 2020.\",\n \"Now, over to Defense, Space, and Security. BDS reported second quarter revenue of $5.6 billion, reflecting the Kuwait F-18 production contract award and higher weapons volume, with operating margins 9.3%. The $7 billion of new orders booked by BDS during the quarter demonstrates the value we bring to our customers across our Defense, Space, and Security portfolio. These orders included finalization of the production contract for 28 F-18 Super Hornets to Kuwait, an additional order for 18 F-18 Super Hornets for the U.S. Navy, three P-8 Poseidon aircraft for the U.S. Navy, as well as a multiyear contract for 58 V-22 Osprey aircraft.\",\n \"Key milestones for BDS included induction of the first F-18 aircraft into the service life modification program, two successful tests for the U.S. Air Force's Minuteman III, and production of the 100th P-8 aircraft. On the commercial satellite side, we successfully completed the O3BM power preliminary design review with SES.\",\n \"Turning to Global Services, our integrated services business completed its first full year of operation at the end of the quarter. BGS reported second quarter revenue of $4.1 billion with operating margins of 14.7%, reflecting higher volume along with product and services mix. During the quarter, BGS won new business totaling approximately $4 billion. That demonstrates the value that we bring to our broad range of commercial and government customers. These included an F-18 Depot maintenance contract for the U.S. Navy and Marine Corps, a global fleet care contract for Primera Air's 737 fleet, and performance-based logistics contracts to support The Netherlands' Rotorcraft fleet. These orders highlight the strength of our One Boeing offerings.\",\n \"Additionally, BGS delivered its first 737 Boeing Converted Freighter in the quarter. As part of our growth strategy of complimenting organic investments with selection strategic acquisitions, in May we announced our agreement to acquire KLX, a major provider of aviation parts and services. By combining the talent and product offerings of our Aviall business and KLX, we will provide a one-stop shop that will benefit our supply chain and our customers in a meaningful way. Also in the quarter, we announced a proposed partnership with Safran to jointly design, build, and service auxiliary power units. This move will strengthen Boeing's vertical capabilities as we continue to expand our services portfolio and make strategic investments that accelerate our growth plans.\",\n \"In summary, we delivered another quarter of strong operating performance, captured noteworthy additions to our large and diverse backlog, returned significant cash to shareholders, and complimented our organic growth with planned strategic and organic investments.\",\n \"With that, let's turn to the business environment on Slide 3. We continue to see healthy global demand in our commercial, defense, space, and services markets. We have recently revised the size of these growing markets upward to $8.1 trillion over the next 10 years. In the commercial airplanes market, airlines continue to report robust profits and strong passenger traffic, outpacing global GDP. Passenger traffic in 2018 grew 6.8% through May. Meanwhile, cargo traffic maintained its strong momentum, growing by 5.3% in 2018 through May, as we see trade and industrial production growing in all regions.\",\n \"Our global customers continue to recognize the compelling value proposition that our new more fuel-efficient product family brings to the market, as reflected in the healthy new order intake we've seen year-to-date. We continue to see the trend of diverse and balanced demand from a geographical perspective, as well as across the spectrum of airline business models. The changing nature of travel, with the expansion of network city pairs and rising middle class population in emerging markets, have fundamentally expanded traffic patterns and underpinned sustained growth. There also is more balanced demand between fleet growth and replacement of older aircraft, and we are seeing more consistent and stable customer purchasing patterns.\",\n \"We believe the evolution in key market dynamics in the aggregate is driving greater stability and far less cyclicality for our industry. Over the long term, we remain highly confident in our commercial market outlook, which now forecasts demand for nearly 43,000 new airplanes over the next 20 years, up from our previous outlook of approximately 41,000 airplanes. This is comprised of more than 31,000 aircraft in the narrow-body market and approximately 9,000 aircraft in the wide-body market. These deliveries, of which 44% will be driven by replacement demand, will double the size of the global fleet. This long-term demand, combined with healthy market conditions and a robust backlog, provides a solid foundation for our planned production rates.\",\n \"Turning to our product segments. Starting with the narrow-body, our production rate of 52 per month, starting June of this year, and planned increase to 57 in 2019, is based on our backlog of more than 4,700 aircraft and a production skyline that is sold out into early next decade. We continue to assess the upward pressure on the 737 production rate.\",\n \"In the wide-body segment, we have seen steady orders for the 787 and 777 airplanes and have high confidence in a meaningful increase in wide-body replacement demand early next decade. For the current generation 777, we've received 19 net new orders in the quarter, bringing the backlog to 96 aircraft. The renewed strength in the air cargo sector has provided support for the 777 bridge, as highlighted by recent orders, which included incremental freighters for FedEx and DHL. Additionally, earlier this month, we finalized Qatar Airways' order for five 777 freighters and received a letter of intent for 29 777 freighters from Volga-Dnepr and CargoLogicHolding. As we transition production to the 777X, we expect 777 deliveries of approximately 3.5 per month in 2018 and 2019, as previously announced.\",\n \"As you can see from the recent activities, we continue to make good progress on the 777 bridge. And, while we still have some work to do in filling the remaining 777 production slots, in particular for 2020 and beyond, based on our progress of capturing new orders and commitments, managing the skyline, and working new campaigns, we continue to believe the rate plan we put in place establishes a floor for the program and supports our production bridge from the current 777 to the 777X. As we look forward to the 777X, we have a strong foundation of 340 orders and commitments that support our plan for ramping up production and delivery of this new aircraft.\",\n \"We also captured 59 orders for the 787 Dreamliner family in the quarter, a solid platform for long-term production. With more than 650 firm orders in our backlog, our plan to increase Dreamliner production to 14 airplanes a month in 2019 is well supported. We continue to see repeat orders for the 787 Dreamliner, including from Qantas, Bank of China Aviation, and United. These repeat orders, coupled with continuing the traction from new carriers such as Bamboo Airways' recent commitment for 20 787s highlight the strong market preference for the 787 and its superior value.\",\n \"Turning to our 747 and 767 programs. With our unmatched freighter product lines, we are well positioned to capture the increased cargo demand. During the quarter, FedEx announced an order for 12 incremental 767 freighters. This further supports our 767 production rate increase from 2.5 per month to three per month in 2020. We remain focused on the strong long-term aerospace industry fundamentals as highlighted by the continued strength of traffic. It is important to have this in perspective as we navigate through global trade discussions.\",\n \"As a global company with operations around the world supporting commercial and government customers in more than 150 countries, Boeing maintains strong relationships with our customers, suppliers, and other key stakeholders around the world. We will continue to engage with leaders in these countries to urge a productive dialogue to resolve trade differences, highlighting the mutual economic benefits of a strong and prosperous aerospace industry.\",\n \"Turning to Defense, Space, and Security. We continue to see solid demand for our major platforms and programs. The final appropriation bill for fiscal year 2018 U.S. federal budget funded our key programs across our fixed wing, rotorcraft, commercial derivative aircraft, and our missile, space and satellite products. Boeing continues to see strong support for our key products in the fiscal year 2019 President's budget and in Congress, including increased procurement of 110 F-18 Super Hornets across the future year defense plan, support for a fourth multiyear procurement for the F-18, and increases for various programs in our weapons and rotorcraft portfolios. The BDS portfolio is well positioned with mature, world-class platforms to address current needs.\",\n \"International demand for our defense and space offerings remains high as well, in particular for rotorcraft, commercial derivatives, fighters, and satellites. As I mentioned earlier, we finalized a production contract for 28 F-18 Super Hornets for Kuwait and received a multiyear contract for the V-22 Osprey, which includes four aircraft for the government of Japan. Recently, New Zealand selected the Boeing P-8 Poseidon aircraft as its new maritime patrol aircraft. We are making progress toward completing other previously announced international sales including additional Chinook helicopters for Spain and Saudi Arabia.\",\n \"Our investment in future growth and new sales continues in areas that are priorities for our customers such as commercial derivatives, rotorcrafts, satellites, services, human space exploration, and autonomous systems. Much of that investment supports the priority we have placed on capturing future franchise programs, where we are also leveraging capabilities and technologies from across the enterprise for the T-X trainer, ground-based strategic deterrent, and the unmanned carrier-based MQ-25A, along with several other important opportunities.\",\n \"Turning to the services sector. We see the $2.8 trillion services market over the next 10 years as a significant growth opportunity for our company. BGS provides agile, cost competitive services to our customers worldwide. We aim to grow faster than the average services market growth rate of 3.5% as we further expand our broad portfolio of services offerings and continue to gain market share.\",\n \"Strong orders of $4 billion in the quarter reflect our customers' recognition of our value proposition in helping them optimize the performance of their fleets and reduce operational costs through the lifecycle. These activities stretch across BGS's four capability areas including parts, engineering mods and maintenance, digital aviation and analytics, and training and professional services. Our digital solutions, powered by Boeing AnalytX provide airlines with advanced optimization and analysis as illustrated by a recent contract from Etihad Airways to implement our crew management solutions to support the planning and operations of the 7,500 crew members.\",\n \"The flexibility and strength of our optimization in the crew management suite will allow Etihad to solve complex issues with ease and support their decision-making process with detailed quantifications of risks and costs.\",\n \"Our focus remains on optimizing the businesses and expanding our portfolio offerings through organic growth investments such as strengthening our vertical capabilities, complemented by strategic acquisitions, to position BGS for long-term sustained and profitable growth. Our expertise, the global reach of our business, and our strong customer partnerships have us well positioned to compete and win in this important sector.\",\n \"Before I close this business environment section, I'd like to spend some time on Embraer. Consistent with our enterprise strategy of pursuing strategic investment opportunities where they demonstrate real value and accelerate our organic growth plans, earlier this month we signed an MOU with Embraer for formation of a joint venture comprising the commercial aircraft and services business of Embraer. This proposed partnership will strategically align with Boeing's commercial development, production, marketing, and life cycle services operations, strengthen the vertical capabilities of Boeing, and enhance value for our customers through industry leading products and services.\",\n \"Additionally, we will create another joint venture to promote and develop new markets and applications for defense products and services, especially the KC-390 multi mission aircraft. This comprehensive enterprise wide collaboration with Embraer will create the most important strategic partnership in the aerospace industry, strengthening both companies' leadership in the global market and creating more value for both companies' customers, shareholders, and employees. While this agreement is a significant step, a considerable amount of work remains. In the coming months, we'll continue to work with Embraer and its shareholders, the Brazilian government, and regulators -- among others -- to complete the transaction.\",\n \"In summary, with growing markets and opportunities ahead, our team remains intensely focused on growth, innovation, and accelerating productivity improvement to fuel our investments in the future.\",\n \"With that, Greg, over to you for our financial results.\"\n ]\n },\n {\n \"name\": \"Gregory D. Smith\",\n \"speech\": [\n \"Thanks, Dennis, and good morning, everyone. Let's turn to Slide 4 and we'll discuss our second quarter results. Revenue for the quarter was strong at $24.3 billion, reflecting higher volume of commercial deliveries, favorable mix, along with along with an increased volume at both Defense, Space, and Security, as well as Boeing Global Services businesses. Core earnings per share of $3.33 reflect solid execution across the business, higher volume and improved mix, along with a lower tax rate. The results were partially offset by an after-tax charge of $124 million related to a receivable write-off due to the previously announced Spirit litigation outcome and cost growths of $334 million after tax on the KC-46 tanker program.\",\n \"As Dennis mentioned, we're raising our full year revenue guidance to reflect higher volume at Defense, Space, and Security and global services. Additionally, we are adjusting Commercial Airplane and Defense, Space, and Security segment operating margins. I'll provide more details on our 2018 further in my remarks.\",\n \"Now, let's now discuss Commercial Airplanes on Slide 5. Our Commercial Airplane business revenue increased to $14.5 billion during the quarter, reflecting higher deliveries and improved mix. BCA operating margins increased to 11.4%, driven by strong operating performance on production programs, higher 787 margins, and timing of some period expense partially offset by a $307 million pre-tax charge on the KC-46 tanker program. Second quarter BCA operating margins, excluding the tanker charge, were 13.3%. BCA captured $16 billion in net orders during the second quarter and the backlog remains very strong at $416 billion and nearly 5,900 aircraft, equating to approximately seven years of production.\",\n \"On the 787 program, we delivered 38 aircraft and booked 59 net orders in the quarter and additionally we extended the 787 accounting block by 100 units. This resulted in higher margins on the program and therefore moderated the decline of deferred production balance this quarter. The overall cash profile of this program continues to improve due to the improved mix, supplier step-down pricing, and our team's day-to-day focus on improving 787 profitability and cash generation.\",\n \"Let's now turn to Defense, Space, and Security results on Slide 6. Second quarter revenue increased to $5.6 billion, driven by FA-18 production contract award for Kuwait and higher weapons volume. BDS margins growing 9.3% reflected our continued focus on productivity and execution offset by a $111 million pre tax charge on the KC-46 tanker program. Second quarter BDS operating margin, excluding the tanker charge, were 11.2%. During the quarter, BDS won key contract awards worth $7 billion and our backlog stands at $52 billion with 35% of that from international customers.\",\n \"Turning now to Boeing Global Services results on Slide 7. In the second quarter, Global Services revenue increased to $4.1 billion, reflecting higher volume, predominantly driven by increased parts sales. Year-over-year growth of 15% for the quarter, and 11% in the first half of the year, more than meets our objective to outpace the average annual services market growth rate of 3.5%.\",\n \"BGS operating margins were solid at 14.7%, reflecting ongoing productivity efforts as well as mix of products and services in the quarter. During the quarter, BGS won key contract awards worth approximately $4 billion and our backlog now stands at $20 billion. This month marked the one-year anniversary of the launch of Boeing Global Services business and we're proud of the team's accomplishments. BGS results year-to-date are a testament to the team and the enterprise focus on achieving top-line growth while maintaining disciplined execution. The key wins this year underscore the strength of the One Boeing offerings to our customers.\",\n \"Let's now turn to cash flow on Slide 8. Operating cash flow for the second quarter was strong at $4.7 billion, driven by planned higher commercial airplane rates, stronger operating performance across the business, and timing of receipts and expenditures. Year-to-date cash flow remains strong at $7.8 billion. We remain focused and on track with our balanced cash deployment strategy. In the second quarter we repurchased $3 billion of Boeing stock and paid $1 billion in dividends, reflecting a 20% increase in dividend per share from last year.\",\n \"We continue to anticipate completing the remaining $12 billion repurchase authorization over the next 18-24 months. Since the end of 2012, we've returned $48 billion to our shareholders through dividend and share repurchase. At the same time, we've invested more than $30 billion in key strategic areas to ensure long-term sustainable growth for Boeing and our customers. We remain committed to returning approximately 100% of free cash flow to investors, while continuing to invest in future growth opportunities.\",\n \"Let's move now to cash and debt balance on Slide 9. We ended the quarter with nearly $10 billion of cash and marketable securities, lower debt levels, and stable credit ratings. Our cash position continues to provide us with the flexibility to invest in innovation and profitable growth opportunities while again returning value to shareholders.\",\n \"Let's turn now to Slide 10, we'll discuss our outlook for 2018. For full-year guidance, we're raising revenue guidance by $1 billion, to now be between $97-99 billion, from our prior guidance of between $96-98 billion. The increase in revenue reflects the growth from key international fighter awards and higher weapons revenue for BDS and higher parts revenue for BGS. As a result, we're increasing guidance by $500 million, to be between $22-23 billion for BDS, and between $15.5-16 billion for BGS.\",\n \"We're also updating full-year BCA and BDS segment operating margin guidance to reflect BCA's strong performance and cost growth on the KC-46 tanker program this quarter. BCA margin guidance is increased to now be greater than 11.5% from our prior guidance of approximately 11.5%, again reflecting strong performance and offsetting the growth on the tanker program this quarter. BDS margin guidance is reduced to now be between 10-105% from our prior guidance of approximately 11%, again primarily due to the reflecting of the impact of the KC-46 tanker growth.\",\n \"The rest of the full-year guidance, including EPS, cash flow, and aircraft deliveries remain unchanged. And, by holding EPS and cash flow guidance, we are absorbing the impact of the tanker cost growth and Spirit litigation charge, offsetting that with performance.\",\n \"As we look toward the remainder of the year, we remain focused on strong execution, including development programs, and risk mitigation within our company and throughout our supply chain. In summary, our core operating engine continues to deliver strong results. We will continue to use a three-business unit strategy as a key differentiator in the marketplace, make prudent investments, and leverage talent and innovation across the company. At the same time, we will set challenging goals and objectives around elements of operations and support functions tied to profitability and efficiency to generate cash and improve working capital while delivering value to our customers. All of these will help us achieve our goal to grow year-over-year revenue, cash flow, and margins.\",\n \"With that, I'll turn it back over to Dennis for some closing comments.\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"Thank you, Greg. With a strong couple of quarters providing solid momentum for the year, our team remains focused on further driving both growth and productivity. We would not have been able to achieve these strong results without the hard work and dedication of our employees and the great partnership we enjoy with our customers and suppliers.\",\n \"In addition to the strong commercial airplane market dynamics I mentioned earlier in my remarks, we've taken our own actions to reduce cyclicality in our business. This includes remaining disciplined in our production rate decisions, de-risking our pension liabilities, strategically phasing our research and development spending, creating labor stability with long-term contracts, and expanding our services business, which is also less cyclical.\",\n \"We have executed on our long-term strategy of robust and continuing organic growth investment and returning value to shareholders, complemented by strategic acquisitions and partnerships that enhance and accelerate our growth plans. The recently announced planned strategic partnerships with Embraer and Safran, and agreement to acquire KLX Aerospace, are entirely consistent with this strategy. As the world's largest aerospace company, spanning commercial, defense, space, and services, we are as optimistic about our future and the future of our industry as we have ever been.\",\n \"Our priorities going forward are to leverage our unique One Boeing advantages, continue building strength on strength to deliver and improve on our commitments, and to stretch beyond those plans and sharpen and accelerate our pace of progress on key enterprise growth and productivity efforts.\",\n \"Achieving these objectives will require a clear and consistent focus on the profitable ramp-up in Commercial Airplane production, continuing to strengthen our Defense and Space business, growing our Integrated Services business, leveraging the power of our three business unit strategy, delivering on our development programs, driving world-class levels of productivity and performance throughout the enterprise to fund our investments in innovation and growth, disciplined leading-edge investments and balanced value-creating cash deployment and continuing to develop and maintain the best team and talent in the industry, all of which position Boeing for continued market leadership, sustained top- and bottom-line growth, and increasing value for our customers, shareholders, employees, and other stakeholders.\",\n \"...\",\n \"With that, we'd be happy to take your questions.\"\n ]\n }\n]","isConversational":false},"questions_and_answers":{"kind":"list like","value":[{"name":"Operator","speech":["[Operator Instructions] First, we'll go to the line of Peter Arment of Robert W. Baird. Your line is open."]},{"name":"Peter J. Arment","speech":["Thanks. Good morning. Dennis, could you address the supply chain readiness, particularly on the narrow-body side? Some of the comments coming out of Farnborough is that the engine OEMs are still studying these higher rates and they don't seem to be ready to commit to them yet. Maybe you can give us some color. Do you still need that 18- to 24-month lead time to make a rate decision? Thanks."]},{"name":"Dennis A. Muilenburg","speech":["First of all, it's very important that we continue to work with our supply chain on our overall production ramp-ups. We just moved to 52 a month on the 737 line as of June. We're still planning to ramp-up to 57 a month next year. We continue to see upward pressure from the marketplace. We are selling and filling skyline out in the 2023 and beyond timeframe. In our current production system, while we see challenges and you've heard from our supply chain on some of the pressure points -- things like fuselages and engines -- which are well acknowledged. Those are items we work on a day-to-day basis. We're continuing to ramp up our supply chain, and it's healthy and we're meeting our customer delivery requirements. I think that's the key. We're continuing to hit on deliveries.","As we contemplate future rate increases, we're going to continue to look at the supply chain in an integrated manner. There are no doubt pressure points as we ramp up. That's why we need to continue to be very deliberate and disciplined in these decisions. We've done that. We've done more than 20 rate breaks since 2010, so we know how to do this. We're going to continue to apply that same disciplined approach. The market pressures indicate upward pressure, and as we approach our decision points with the lead times, we'll do that in a very deliberate and disciplined manner."]},{"name":"Operator","speech":["Next, we have the line of Sheila Kahyaoglu with Jefferies. Your line is open."]},{"name":"Sheila Kahyaoglu","speech":["Good morning. Can we talk about Commercial Aircraft profitability given margins excluding the tanker costs were over 13%? Could you talk about the moving pieces as we move through the remainder of the year?"]},{"name":"Gregory D. Smith","speech":["Yeah. To date, you've seen improvement across the board on the production programs and with the block extension on the 787. We're seeing the results of that this quarter. Going forward, you're going to continue to see a lot of productivity efforts across the programs, but you're going to see some shifts in period experience, in particular R&D. We'll have some more R&D in the back half, and think of that as just timing, primarily driven by 777X. We've also got some investments we're making around productivity in the back half that aren't reflected in the first half.","Those are the big moving pieces. We're seeing great performance across the board -- a lot of focus in particular around taking best practices across the enterprise and bringing them not only to commercial airplanes but across all of the portfolio. So, there is a lot more One Boeing effort going on leveraging best practices and we'll continue to do that as we strive to increase margins and cash flow going forward."]},{"name":"Operator","speech":["Next, we have the line of Seth Seifman with J.P. Morgan. Your line is open."]},{"name":"Seth Seifman","speech":["Thanks very much. Good morning. Could you guys talk a little bit about the cash flow profile of the tanker program from here? Maybe thinking about a couple of the different elements, including any additional cash that might be needed on other aircraft that are in inventory beyond the ones that you mentioned? Any penalties that the Air Force might be entitled to, along with, on the positive side, the inventory reduction that comes from the deliveries?"]},{"name":"Gregory D. Smith","speech":["Yeah. Tanker is going to continue to improve the cash profile going forward as we make more progress and then reach the milestones that Dennis articulated in the first delivery there being in October. We have a number of aircraft in work now, and as we deplete that inventory and start delivery, you'll see improved cash in the years to come. It won't be anything near term. Everything's been contemplated for the near term for the balance of this year. But, even as we talked about cash flow growing going forward, this is a key element of that -- but not a significant moving piece when you think about the broader cash levels of the company."]},{"name":"Dennis A. Muilenburg","speech":["Just to add a little more color on tanker itself, a key thing to note in the quarter is, while we took the charge on those early build aircraft and flight test aircraft, it's very important to not the milestone we achieved in the quarter of completing all of the flight testing associated with first delivery, getting all of our artifacts submitted for final certification, and getting crystal clarity on what is left to build out these aircraft. We have a known configuration, flight testing is completed, and now we need to finish the work to get to delivery. That will produce the results that Greg mentioned."]},{"name":"Operator","speech":["Next, we have the line of Rajeev Lalwani of Morgan Stanley. Your line is open."]},{"name":"Rajeev Lalwani","speech":["Hi. Just staying on the tanker, you've had some challenges on the program. You've managed them reasonably well, but as we look forward to the 777X and the NMA, what are you doing to de-risk those programs so you don't have similar obstacles like you did on the tanker? Is it more of a digital approach? Are you trying to manage a timeline a bit? Just some color there to help us get comfortable with any risk going forward."]},{"name":"Dennis A. Muilenburg","speech":["You bet. Rajeev, we have a very focused effort on enterprise development programs and lessons learned, learning from each of the programs as we execute them. While tanker has had its challenges, we have learned a lot through that process, especially in our commercial derivative lines and how we do development programs that span our commercial production and military certification requirements. Tanker was especially complex because of the multiple certifications required both commercial and military. That's not a complexity that we have on a product like 777X or NMA.","That said, several lessons learned. One includes digitizing our engineering at a more detailed level upfront. This is the model-based engineering initiatives that we have under way, as an example. Also, more significant investments in system integration labs upfront to de-risk development and eliminate downstream discoveries. That's been very effective for us on 777X. Also, some of the early prototyping in the production systems -- again, to de-risk key areas as we move into the production flow. We're seeing that reflected again on 777X as the first two airplanes have now moved into the low-rate initial production line.","All of these early de-risking steps are showing up in a positive way on 777X. We're going to keep a close eye on that as we build out to flight test aircraft and move into flight test. But, given that we're into the heart of 777X right now, we have a healthy development program on track to deliver on 2020 as scheduled. We're seeing clear signs of improvement in our overall development program process. That's our headset going forward and we'll continue to learn. This is one of the benefits of our phased R&D approach. Rather than doing multiple development programs in parallel, we're now doing a much more sequential approach that we can learn program to program and continue to reduce risk going forward."]},{"name":"Operator","speech":["Next, we have the line of Hunter Keay of Wolfe Research. Your line is open."]},{"name":"Hunter Keay","speech":["Thank you. Good morning. You talked about mix driving some pressure on BGS margins, and I think you called out part sales as driver of the topline. As we learn more about this business, what are some of the moving parts that help and hurt mix there that we should think about going forward, and whether that's by end market or contract type? Secondly, as the business spools up, would you be willing to trade a little bit of margin for some topline opportunity? Thanks."]},{"name":"Gregory D. Smith","speech":["You're right. It's a very different portfolio than the other businesses, so you're dealing with thousands of contracts and a couple of million different offerings through parts or other services. With that, just the nature of that business, you're going to end up with some ebbs and flows quarter-to-quarter depending on how that mix plays out. So, the portfolio is very different, obviously, and that's going to drive some of that change.","But, beneath that, the focus continues to be on core operating performance, the cost structure, and the working capital around that business. So, that engine is going to continue to run quarter-over-quarter, week-after-week, month-after-month. But, you are going to end up seeing these movements quarter-to-quarter. But end objective, grow the business as we've talked about and at the same time grow the bottom line and expand margin. That's the underlying objective of this business, and ultimately we think we can serve our customers much better in doing that."]},{"name":"Dennis A. Muilenburg","speech":["We're staying very focused on our overall effort to drive to mid-teen margins across the entire business. To the last part of your question, on margin growth in BGS, we expect margins in BGS to be accretive to our overall enterprise margin. So, this is all about profitable growth."]},{"name":"Operator","speech":["Next up, we have the line of Carter Copeland of Melius. Your line is open."]},{"name":"Carter Copeland","speech":["Just a quick clarification and question expanding on what Seth asked. Greg, can you confirm if the 787 unit versus program was positive or negative in the quarter? And then, on this whole tanker cash flow -- the size of the charge and how we should think about impact in the cash. Are the terms of payment with the customer on that payment upon delivery of the aircraft or milestone based ahead of that? Thanks, guys."]},{"name":"Dennis A. Muilenburg","speech":["Yeah, they're milestone based. Performance milestone based."]},{"name":"Gregory D. Smith","speech":["With regards to the 787, we did see unit improvement this quarter across the board."]},{"name":"Operator","speech":["Next up, we have the line of Doug Harned of Bernstein. Your line is open."]},{"name":"Douglas Stuart Harned","speech":["Good morning. Thank you. I know at Farnborough, you got a number of 777 orders. Can you help us understand where you stand on filling the bridge to the 777X? Then, perhaps give us a sense of what you think that 777X ramp will look like given the planned entry into service in 2020. Along with that, when do you expect we'll likely see more orders for the 777X rather than just the 777?"]},{"name":"Dennis A. Muilenburg","speech":["You bet. The key thing on 777 is we've seen very strong recovery in the freighter market in particular. You see that in the demand in recent orders. We have 24 new orders year-to-date for 777s, through the end of the second quarter. Since the end of the quarter, an additional five for Qatar -- 777 freighters. So, year-to-date 29 new orders for 777s. Beyond that, we have the additional announcements that have been recently made, including the letter of intent from Volga-Dnepr for 29 777s.","We continue to have a number of other campaigns under way as well. So, you really see the strength of the market continuing to build our confidence in filling out the bridge. We're really now focused on skyline slots 2020 and beyond. We still have work to do, but our confidence continues to grow based on recent sales successes and what we see as sustained growth in the freighter market.","Now, as we look beyond that, and headed toward 777X development, a key fact is that today we have 340 orders and commitments in place for the 777X. For the dash-9 variant of that, we have 273 of those 340. If you want to compare that to where we were at the same time on the 777-300ER, back when it was introduced, at that same relative point in time we had 70. So, 273 versus 70. That should give you a sense of the confidence we have in the backlog for 777X.","Now, we still continue to have additional campaigns and high interest in the 777X, but we're in very good shape as we look at our production pipeline and backlog position to ramp-up successfully on the 777X. So, the key focus now is move into flight test on the 777X, finish out the current 777 bridge where we have growing confidence again, and then get to EIS for 777X in 2020. All of the dimensions of that puzzle continue to firm up and we're seeing growing confidence. That's why the production rate plan we put in place, we see that as a very clear floor for the production program. We look forward to moving into the 777X."]},{"name":"Operator","speech":["Next in queue, we have the line of David Strauss of Barclays. Your line is open."]},{"name":"David Strauss","speech":["Thanks. Good morning. About cash flow, I think, Greg, you talked earlier in the year that you saw prepayments as relatively neutral for the year. I think year-to-date, we're running at $3 billion. Are you expecting those to reverse as we go through the second half? And, on inventory, it looks like the ex the drawdown in 787 deferred, you've had about $1 billion inventory build this year. Is that 777X or just related to this 37 ramp? Any color there? Thanks."]},{"name":"Gregory D. Smith","speech":["A little bit of both, David. 777X inventory being the biggest driver, and will continue to be through the balance of the year and into next year. With regards to the advances, you're absolutely right. They move around quarter-to-quarter depending on the PDP schedule. We've seen some this year, more frontloaded, than we will in the back half of the year. We've taken that into consideration with the guide."]},{"name":"Operator","speech":["Next in queue, we have the line of Ron Epstein of Bank of America. Your line is open."]},{"name":"Ronald Epstein","speech":["Good morning. I think at Farnborough, Dennis, you mentioned on the 797 -- I think the quote is, \"We want to be in the 2025 window with maybe a 2019 launch.\" When we think about the 79, or middle market -- whatever it's going to be, should we start building in something of that in our financial forecasts? It seems like the drumbeat's really gaining momentum. Secondly, when we think about it, is it a wide-body? Is it a narrow-body? Where are you guys on that now?"]},{"name":"Dennis A. Muilenburg","speech":["First of all, as you know, we haven't made a launch decision. But, we continue to look at the middle of the market airplane. As you heard at Farnborough, we continue to have very productive customer discussions on that topic. We do see a marketplace there for 4,000-5,000 aircraft and we're very focused now on deliberately going through our business case to make a good launch decision. We are protecting 2025 as the entry into service date and that aligns with our customer's needs and desires. We're doing the appropriate long lead work to protect that delivery date. We're looking at making a launch decision in 2019.","We're going to be very deliberate about that and make sure the business case makes good, solid sense. That's our headset going in. We're not going to predetermine the answer there. We're talking to our supply chain and we're taking a look at every dimension of the program. We have to look at this through a life cycle lens, both in airplane and downstream services, and make sure we're producing value for customers.","In terms of your question about wide-body or narrow-body, as we look at configuration options and details, and begin firming that up, we're hearing from customers that we need something that has the comfort and twin aisle benefit of wide bodies, but has narrow-body economics. That's frankly the challenge of closing the business case. It goes back to all of the work we're doing on transforming our enterprise to drive efficiency in development, production, and support. If we build the confidence in the data we need to make a business case that closes, we'll launch. If we don't, we'll continue down the path with our current product lines."]},{"name":"Ronald Epstein","speech":["Great. Thank you."]},{"name":"Operator","speech":["Next, we have the line of Robert Spingarn with Credit Suisse. Your line is open."]},{"name":"Robert M. Spingarn","speech":["Good morning. With your very strong margins at BCA, especially ex that charge, you've done a lot with costs. You're going to continue to do that, but I want to ask about the pricing side of the equation, especially in the context of airbus comments last week at the show about pricing opportunity given the scarcity of slots. I know you have to balance that against higher rates, but how should we think about pricing over the next few years?"]},{"name":"Dennis A. Muilenburg","speech":["Rob, when we take a look at that, it's important to note that the pricing is holding up. It's driven by a number of different parameters, including supply versus demand, but also value we generate for our customers and making sure that that value proposition is clear. Everything we do on the pricing front is looking through that customer value lens. That's our focus. And the fact that pricing is holding up and you can see that reflected in our performance is a good sign of the unique value that our product lines are delivering for our customers.","I will say, as you look across our narrow body and wide body product lines, it's very clear that our products deliver operating cost advantage and value advantage for our customers. That's a key part of our equation going forward. We're also keeping in mind the fact that we have this enterprise wide global support and services capability, though in many cases when we think about pricing we're looking at it holistically across airplanes and services, which I think is a unique part of the Boeing value proposition."]},{"name":"Robert M. Spingarn","speech":["Between the pricing and the cost element, do you have a sense of when you can hit this 15% type margin at BCA?"]},{"name":"Dennis A. Muilenburg","speech":["As we said, we're driving toward that mid-teen margin by the end of the decade. That's been our objective. You can see the progress we're making. As we mentioned before, we expect it to be continuing incremental progress. There's not going to be a big step function or a hockey stick. It's continuous, focused, incremental performance. As you can see in our data, Rob, the core BCA margins minus the tanker charge is up over 13%. That ought to give you a good indicator of the progress that we're making. We're going to be relentless on this focus and it's really about driving out costs, driving productivity, working with our supply chain, and being diligent about our production rates."]},{"name":"Robert M. Spingarn","speech":["Thanks, Dennis."]},{"name":"Operator","speech":["Next, we have the line of Noah Poponak of Goldman Sachs. Your line is open."]},{"name":"Noah Poponak","speech":["Good morning. Greg, was the 787 cash unit margin up or down in 2Q versus 1Q? And, any willingness, even if in a wide range, give us an indication of where you've taken that? Similarly, on the program accounting margin, maybe help us out on how big of a change you made in it?"]},{"name":"Gregory D. Smith","speech":["Yeah. Overall, you're seeing 787 improvement across the board. As you look at the big levers in the cost structure that we've talked about, the mix improving, the overall productivity unit-over-unit in our factories, and leveraging the best practices -- looking at the commonality between a nine and a ten, and how that improves productivity in our factory and supply chain is pretty significant. Combined with the supplier step downs that we have in place contractually -- and our own focus internally and even going out into the supply chain, taking our productivity, where we've been successful in area of productivity, and bringing that out to the supply chain to help the overall program improve.","I wouldn't say it's one thing. It's many levers that we're working on and trying to pull. You're seeing that in the unit margin, in the overall cash profile of the program. As we've said a number of times, the way the team looks at this and the way we look at it is unit-over-unit, what do we need to do to improve and be even more competitive in the marketplace? How do we leverage the best practices within our factories combined with services between defense-based security and commercial, and also within the supply chain? That's been the cadence and level of effort that's been going on. That's going to continue.","You're seeing that in the overall cash profile of the program improving combined with going up in rates very smoothly and getting that dash-10 into the production system smoothly. We're going to deliver approximately 14 aircraft this year, dash-10s. Very, very smooth introduction. And that goes to the commonality of that design versus dash-10 and the team's relentless focus on ensuring that we get that into the hands of the customer on time, minimize risk. It's a great example of de-risking how we bring a derivative program into the production system.","So, a lot of different things, but you're going to see that continued effort going forward on this program and all the other ones."]},{"name":"Noah Poponak","speech":["Appreciate that color. Any ability to give us a sense of where the program accounting margin sits at this point?"]},{"name":"Gregory D. Smith","speech":["It's improved. With the block extension, that helped. If you go out in the further block, you're seeing favorable mix, pricing, and supplier stepdown along with our own productivity. As we march through time, you're going to see an improvement overall to that margin incrementally as we move forward in those blocks. Here, day in and day out, it's about unit performance, meeting our targets, utilizing all of our working capital initiatives, and then all of our productivity. But, we're focused unit over unit that ultimately will translate into program margin."]},{"name":"Noah Poponak","speech":["Alright. Thank you."]},{"name":"Operator","speech":["Next, we have the line of Sam Pearlstein with Wells Fargo. Your line is open."]},{"name":"Samuel Joel Pearlstein","speech":["Good morning. Could you talk a little bit more about -- you mentioned the joint venture with Safran and APUs. I'm trying to think about, how do you balance the spend on a new plane with some of the significant nonrecurring engineering in areas like APUs and maybe even avionics, that's typically borne by suppliers. How does that factor into your thinking about eventually launching a new plane?"]},{"name":"Dennis A. Muilenburg","speech":["Sam, we figure that into our overall organic investment profile and that phased R&D plan I mentioned earlier. As part of our organic investment, we're very focused on a few key verticals. We don't need to be vertical everywhere, but there are a few areas where, when we look through a customer value lens, it's clear that we can add value. The work on APUs with Safran is one of those areas. You mentioned avionics. That's another area. Interiors is another area we've looked at and announced a joint venture with Adient.","So, those are very targeted areas, well known investments. As part of our organic profile, those have been feathered in with our broader R&D investments in new platforms and product lines, including things like the 777X and some of our new defense products and services. That's all part of an integrated R&D plan. The way we've laid that into the profile is done in a way to ensure synergy between our verticals that we're building and our future platform products. It's important that we do that in a synergistic way.","But, I would view that as an integrated organic investment plan. Not something where we're trading verticals or platforms. It's doing it together with an eye toward creating value for customers. Where it makes sense, we augment that with inorganic investments. That cash deployment strategy remains constant. As we talked about, while we make those organic and inorganic investments, we've also committed to returning 100% free cash flow to our investors. That commitment remains solid."]},{"name":"Maurita B. Sutedja","speech":["Operator, we have time for one more analyst question."]},{"name":"Operator","speech":["Thank you. Next, we'll go to the line of Ken Herbert with Canaccord. Your line is open."]},{"name":"Ken Herbert","speech":["Good morning. Dennis and Greg, I wanted to follow up on Dennis' comments specifically on -- as you look at everything now much more with a life cycle lens, on the NMA, assuming you move forward there, how does that lens impact your analysis of the business case in terms of the market opportunity? And how might that potentially impact your go-to-market strategy? You obviously have opportunities now to capture economics in a much broader range. Can you provide any more detail as to your thinking around that and how it might specifically get applied or used around the NMA?"]},{"name":"Dennis A. Muilenburg","speech":["Yeah. In particular, as we look at the business case for NMA, we're looking at it both from an airplane and downstream services standpoint. So, an integrated life cycle view. Where can we create value for customers? Depending on the customer set, there's a different value proposition for different airlines. In some cases, we can reduce operating costs. In some cases, we can help them reduce capital investment costs. We're factoring that entire equation into our business case. It does give us more parameters to look at. It gives us more ways to construct a business case for the future. And, taking that holistic life cycle view just gives us a more robust business case.","Also, as you pointed out, it will affect our potential go-to-market approaches, and how we can tailor a value proposition for different customers. And, it will drive different ways of how you might design such an airplane -- again, from the start, thinking about digital solutions and the architecture of the airplane so it can enable optimized services for customers. It's not only something that factors into the business case, it also affects how we would design the airplane. All of that is being done in our business case analysis, and I'll go back to my earlier point that it's important that we get it right. We're going to take the time to get it right. We're protecting the EIS state for our customers at 2025. If we decide to launch this development program, the R&D profile would be on the backside of 777X. It would feather in nicely and be consistent with our overall cash flow priorities."]},{"name":"Operator","speech":["And that does complete the analysts' question-and-answer session for this morning. [Operator Instructions] I will now return you to The Boeing Company for introductory remarks by Mr. Phil Musser, Senior Vice President of Communications. Mr. Musser, please go ahead"]},{"name":"Phil Musser","speech":["Thank you very much, operator. We'll continue now with media questions for Dennis and Greg. If you have questions following this part of the session, please contact our Media Relations team by email or at 312-544-2002. Operator, we're ready for the first question. And, in the interest of time, we'd ask you please that you limit everyone to just one question, please."]},{"name":"Operator","speech":["Certainly. And our first question comes from the line of Julie Johnsson of Bloomberg. Your line is open."]},{"name":"Julie Johnsson","speech":["Hi. Good morning. Just to circle back on narrow-body rate, it seems to me that Boeing's taking a more cautious or measured approach to evaluating rate increases into the 2020s, while your competitor's talking about rate 70 or even rate 75. Can the supply chain actually support the rates that Airbus has been publicly mulling? If they move forward, is Boeing going to have to keep pace, especially given the very strong demand environment?"]},{"name":"Dennis A. Muilenburg","speech":["Let me provide some additional perspective on that. We're going to be very focused on being disciplined about rate decisions and our production ramp-up. We have important work ahead of us. We just moved to 52 a month on the 737 line. We're going to move to 57 a month next year. As we said, the market pressures do indicate upward pressure on that rate. That's a challenge, but it's a good challenge to have. At every one of these steps, we're going to bring our entire supply chain along. I think you see that reflected in our performance. We're continuing to meet our delivery commitments to our customers. That's the lens that we put on these production rate decisions. We see pressure points in the supply chain. We work those on a day-to-day basis, and we're very focused on maintaining our discipline.","We'll make rate decisions not only informed by market pressures, but informed by our ability to execute them successfully. I think our track record of doing 20 successful rate breaks over the last several years speaks to our approach. While I can't comment on our competitor's approach, I can comment on our disciplined approach. We're going to maintain that approach. We're working very closely with our supply chain to bring them along in an integrated fashion. That will continue to be our focus going forward."]},{"name":"Operator","speech":["Next, we have the line of Brian Sozzi of TheStreet. Your line is open."]},{"name":"Brian Sozzi","speech":["Hey, guys. Thanks for taking the question. Dennis, since the last time we talked, we got the Space Force announcement. How are you thinking about it and what type of dollar impact could that potentially new program mean to Boeing? On the services business, real good for you guys. Are you planning to get more aggressive on acquisitions to build that out?"]},{"name":"Dennis A. Muilenburg","speech":["First of all, on Space Force -- and more broadly, on the space business -- I'm very encouraged by what I see as the administration leaning forward on investing in space. All dimensions of the space business -- not only Space Force, but the work that's going into space exploration and the reinvigoration of that entire ecosystem. We've had the opportunity to participate as part of the National Space Council and be on the user advisory group there, partnered with the administration. So, we have industry voice at the table as we shape these potential opportunities.","From that standpoint, I'm very encouraged about the U.S. government leaning forward and investing in space. It's good for business. It creates growth opportunities for us. It's also a great way to develop STEM talent for the future. When we look at our growth opportunities going forward, we do see the space business as an important part of that. And that spans from lower orbit commercial travel and access to the space station, to our satellite business, and to our deep space exploration, including the space launch system with a focus on returning to the moon and then stepping to Mars. We're going to continue to lean forward in that business. It's an important invest area for us.","On services, we continue to see that as a very attractive growth market for us. We've set a high bar target of growing that to be a $50 billion a year business over the 5- to 10-year timeframe. While we're a year into that effort, I think we have some good signs, especially if you look at the growth year-to-date of 11% versus 3.5% in the market. It's good signs that our strategy is working. A lot of work ahead of us and it's an integrated organic and inorganic investment strategy, primarily driven by organic investment, parts, mods and maintenance, our training business, our digital business. Those are all known organic investments. Where it makes sense we'll complement that with inorganic investments. But, we clearly see acquisitions as a bolt on compliment to what is primarily an organic investment strategy."]},{"name":"Operator","speech":["Next, we have the line of Dominic Gates of Seattle Times. Your line is open."]},{"name":"Dominic Gates","speech":["Good morning, everyone. I want to ask about the maturity of the 777X, the new automated technology that you've introduced there. You've posted a new wing center and you've added the wing assembly automated equipment now for that. You've also got the fuselage and robotics. Both of those initially had some issues, challenges, as they were new. Are they now -- both he fuselage and the wing automated systems -- operating the way you want them to? Will you plan to use any of that for NMA?"]},{"name":"Dennis A. Muilenburg","speech":["Dominic, we continue to make very good progress on those automation systems. While I won't declare them to be in final state, it's very clear that we've made progress, both on the fuselage automated systems as well as the wing build system. I think the key thing that you see in our focus here is that, while those automation systems were designed purpose built to be used for 777X production, we've de-risked those systems by pulling them forward in the factory and applying them to the current 777 program where it makes sense.","So, we've been able to use that as a way to de-risk. And, there have been some challenges as we've ramped up those automation capabilities. That's exactly. Why we pulled them forward into the 777 line, to experience and de-risk those systems. We've seen them continue to mature. We're seeing operational efficiency gains in our factory. We're seeing safety benefits for our workforce. We're seeing quality benefits -- all of the things we hoped to get out of the automation are coming to bear. We're going to continue to mature those as we move into the test program for 777X.","If we decide to launch NMA, part of that would leverage the next generation of automation technology. Again, as we digitize our airplanes, it becomes even more straightforward to apply these automation techniques. We're going to see costs and schedule benefits. We're going to see safety benefits for our workforce. This is a key part of how we're transforming the Boeing enterprise for the future."]},{"name":"Phil Musser","speech":["Operator, we have time for one more question from the media."]},{"name":"Operator","speech":["Certainly. Our last question will come from the line of Andrew Tangel of Wall Street Journal. Your line is open."]},{"name":"Andrew Tangel","speech":["Hi. Thanks for taking my question. Chinese carriers and leasers have previously played a significant role in the orders and commitments at the air shows in Paris and Farnborough. But, there weren't that many fresh deals from Chinese companies at the recent air show in Farnborough. By one estimate, almost half of Boeing's new orders and commitments at last year's Paris air show came from Chinese companies. What do you make of the relative absence of a large number of Chinese buyers at this year's air show, especially in light of how much growing demand you expect from China over the next couple of decades? Does this potentially signal that Chinese buyers are holding off making orders or commitments because of some of the trade friction, including between the U.S. and China right now?"]},{"name":"Dennis A. Muilenburg","speech":["A look at our total orders book, very strong. If you look at total orders and commitments year-to-date of more than 900 commercial aircraft, that gives you a sense of the overall strength of the market. I don't find it surprising one way or the other that we may or may not have orders from a particular region or customer at the air show. We don't design our orders profile around air shows. We have some customers who want to make announcements at air shows and we work with them to do that, but our view is much more of a steady, sustained growth and orders throughput. You see that reflected in our month-to-month orders and sales.","Our Chinese customers are exceptionally important to us. They're a big part of the backlog we have, the 5,900 aircraft. They're a strong portion of that. The future market we talked about -- the world needing roughly 43,000 airplanes over the next 20 years -- about 7,200 of those are in China. It's an important customer for us. We're well positioned in China. We're working closely with our customers there. We're ramping up capability in China while we ramp up in the U.S.","I'll go back to my fundamental point. As we think about China/U.S. trade relationships, aerospace is something that's good for both countries. It's mutually beneficial. It creates growth capacity in China. It's helping them grow their economy. It's growing jobs in China. As China grows, it's growing jobs in the U.S. Our 737 production line, for example, as we ramp up building on Chinese demand, that's growing U.S. manufacturing jobs. It's very clear to us that free and open trade environment and good relations between China and the U.S. is not only beneficial to the aerospace business, but in turn the aerospace business is beneficial to the economies and jobs of both countries."]},{"name":"Phil Musser","speech":["Thank you. That concludes our second quarter earnings call. For members of the media, if you have further questions, please contact our media relations team at 312-544-2002 or via email. Thank you very much.","..."]},{"name":"Operator","speech":["Ladies and gentlemen still connected, that does conclude the presentation for this morning. Again, we do thank you very much for your participation and for using our executive teleconference service. You may now disconnect."]},{"name":"Ken Herbert","speech":["More BA analysis","This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see ourTerms and Conditionsfor additional details, including our Obligatory Capitalized Disclaimers of Liability."]}],"string":"[\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"[Operator Instructions] First, we'll go to the line of Peter Arment of Robert W. Baird. Your line is open.\"\n ]\n },\n {\n \"name\": \"Peter J. Arment\",\n \"speech\": [\n \"Thanks. Good morning. Dennis, could you address the supply chain readiness, particularly on the narrow-body side? Some of the comments coming out of Farnborough is that the engine OEMs are still studying these higher rates and they don't seem to be ready to commit to them yet. Maybe you can give us some color. Do you still need that 18- to 24-month lead time to make a rate decision? Thanks.\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"First of all, it's very important that we continue to work with our supply chain on our overall production ramp-ups. We just moved to 52 a month on the 737 line as of June. We're still planning to ramp-up to 57 a month next year. We continue to see upward pressure from the marketplace. We are selling and filling skyline out in the 2023 and beyond timeframe. In our current production system, while we see challenges and you've heard from our supply chain on some of the pressure points -- things like fuselages and engines -- which are well acknowledged. Those are items we work on a day-to-day basis. We're continuing to ramp up our supply chain, and it's healthy and we're meeting our customer delivery requirements. I think that's the key. We're continuing to hit on deliveries.\",\n \"As we contemplate future rate increases, we're going to continue to look at the supply chain in an integrated manner. There are no doubt pressure points as we ramp up. That's why we need to continue to be very deliberate and disciplined in these decisions. We've done that. We've done more than 20 rate breaks since 2010, so we know how to do this. We're going to continue to apply that same disciplined approach. The market pressures indicate upward pressure, and as we approach our decision points with the lead times, we'll do that in a very deliberate and disciplined manner.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we have the line of Sheila Kahyaoglu with Jefferies. Your line is open.\"\n ]\n },\n {\n \"name\": \"Sheila Kahyaoglu\",\n \"speech\": [\n \"Good morning. Can we talk about Commercial Aircraft profitability given margins excluding the tanker costs were over 13%? Could you talk about the moving pieces as we move through the remainder of the year?\"\n ]\n },\n {\n \"name\": \"Gregory D. Smith\",\n \"speech\": [\n \"Yeah. To date, you've seen improvement across the board on the production programs and with the block extension on the 787. We're seeing the results of that this quarter. Going forward, you're going to continue to see a lot of productivity efforts across the programs, but you're going to see some shifts in period experience, in particular R&D. We'll have some more R&D in the back half, and think of that as just timing, primarily driven by 777X. We've also got some investments we're making around productivity in the back half that aren't reflected in the first half.\",\n \"Those are the big moving pieces. We're seeing great performance across the board -- a lot of focus in particular around taking best practices across the enterprise and bringing them not only to commercial airplanes but across all of the portfolio. So, there is a lot more One Boeing effort going on leveraging best practices and we'll continue to do that as we strive to increase margins and cash flow going forward.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we have the line of Seth Seifman with J.P. Morgan. Your line is open.\"\n ]\n },\n {\n \"name\": \"Seth Seifman\",\n \"speech\": [\n \"Thanks very much. Good morning. Could you guys talk a little bit about the cash flow profile of the tanker program from here? Maybe thinking about a couple of the different elements, including any additional cash that might be needed on other aircraft that are in inventory beyond the ones that you mentioned? Any penalties that the Air Force might be entitled to, along with, on the positive side, the inventory reduction that comes from the deliveries?\"\n ]\n },\n {\n \"name\": \"Gregory D. Smith\",\n \"speech\": [\n \"Yeah. Tanker is going to continue to improve the cash profile going forward as we make more progress and then reach the milestones that Dennis articulated in the first delivery there being in October. We have a number of aircraft in work now, and as we deplete that inventory and start delivery, you'll see improved cash in the years to come. It won't be anything near term. Everything's been contemplated for the near term for the balance of this year. But, even as we talked about cash flow growing going forward, this is a key element of that -- but not a significant moving piece when you think about the broader cash levels of the company.\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"Just to add a little more color on tanker itself, a key thing to note in the quarter is, while we took the charge on those early build aircraft and flight test aircraft, it's very important to not the milestone we achieved in the quarter of completing all of the flight testing associated with first delivery, getting all of our artifacts submitted for final certification, and getting crystal clarity on what is left to build out these aircraft. We have a known configuration, flight testing is completed, and now we need to finish the work to get to delivery. That will produce the results that Greg mentioned.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we have the line of Rajeev Lalwani of Morgan Stanley. Your line is open.\"\n ]\n },\n {\n \"name\": \"Rajeev Lalwani\",\n \"speech\": [\n \"Hi. Just staying on the tanker, you've had some challenges on the program. You've managed them reasonably well, but as we look forward to the 777X and the NMA, what are you doing to de-risk those programs so you don't have similar obstacles like you did on the tanker? Is it more of a digital approach? Are you trying to manage a timeline a bit? Just some color there to help us get comfortable with any risk going forward.\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"You bet. Rajeev, we have a very focused effort on enterprise development programs and lessons learned, learning from each of the programs as we execute them. While tanker has had its challenges, we have learned a lot through that process, especially in our commercial derivative lines and how we do development programs that span our commercial production and military certification requirements. Tanker was especially complex because of the multiple certifications required both commercial and military. That's not a complexity that we have on a product like 777X or NMA.\",\n \"That said, several lessons learned. One includes digitizing our engineering at a more detailed level upfront. This is the model-based engineering initiatives that we have under way, as an example. Also, more significant investments in system integration labs upfront to de-risk development and eliminate downstream discoveries. That's been very effective for us on 777X. Also, some of the early prototyping in the production systems -- again, to de-risk key areas as we move into the production flow. We're seeing that reflected again on 777X as the first two airplanes have now moved into the low-rate initial production line.\",\n \"All of these early de-risking steps are showing up in a positive way on 777X. We're going to keep a close eye on that as we build out to flight test aircraft and move into flight test. But, given that we're into the heart of 777X right now, we have a healthy development program on track to deliver on 2020 as scheduled. We're seeing clear signs of improvement in our overall development program process. That's our headset going forward and we'll continue to learn. This is one of the benefits of our phased R&D approach. Rather than doing multiple development programs in parallel, we're now doing a much more sequential approach that we can learn program to program and continue to reduce risk going forward.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we have the line of Hunter Keay of Wolfe Research. Your line is open.\"\n ]\n },\n {\n \"name\": \"Hunter Keay\",\n \"speech\": [\n \"Thank you. Good morning. You talked about mix driving some pressure on BGS margins, and I think you called out part sales as driver of the topline. As we learn more about this business, what are some of the moving parts that help and hurt mix there that we should think about going forward, and whether that's by end market or contract type? Secondly, as the business spools up, would you be willing to trade a little bit of margin for some topline opportunity? Thanks.\"\n ]\n },\n {\n \"name\": \"Gregory D. Smith\",\n \"speech\": [\n \"You're right. It's a very different portfolio than the other businesses, so you're dealing with thousands of contracts and a couple of million different offerings through parts or other services. With that, just the nature of that business, you're going to end up with some ebbs and flows quarter-to-quarter depending on how that mix plays out. So, the portfolio is very different, obviously, and that's going to drive some of that change.\",\n \"But, beneath that, the focus continues to be on core operating performance, the cost structure, and the working capital around that business. So, that engine is going to continue to run quarter-over-quarter, week-after-week, month-after-month. But, you are going to end up seeing these movements quarter-to-quarter. But end objective, grow the business as we've talked about and at the same time grow the bottom line and expand margin. That's the underlying objective of this business, and ultimately we think we can serve our customers much better in doing that.\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"We're staying very focused on our overall effort to drive to mid-teen margins across the entire business. To the last part of your question, on margin growth in BGS, we expect margins in BGS to be accretive to our overall enterprise margin. So, this is all about profitable growth.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next up, we have the line of Carter Copeland of Melius. Your line is open.\"\n ]\n },\n {\n \"name\": \"Carter Copeland\",\n \"speech\": [\n \"Just a quick clarification and question expanding on what Seth asked. Greg, can you confirm if the 787 unit versus program was positive or negative in the quarter? And then, on this whole tanker cash flow -- the size of the charge and how we should think about impact in the cash. Are the terms of payment with the customer on that payment upon delivery of the aircraft or milestone based ahead of that? Thanks, guys.\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"Yeah, they're milestone based. Performance milestone based.\"\n ]\n },\n {\n \"name\": \"Gregory D. Smith\",\n \"speech\": [\n \"With regards to the 787, we did see unit improvement this quarter across the board.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next up, we have the line of Doug Harned of Bernstein. Your line is open.\"\n ]\n },\n {\n \"name\": \"Douglas Stuart Harned\",\n \"speech\": [\n \"Good morning. Thank you. I know at Farnborough, you got a number of 777 orders. Can you help us understand where you stand on filling the bridge to the 777X? Then, perhaps give us a sense of what you think that 777X ramp will look like given the planned entry into service in 2020. Along with that, when do you expect we'll likely see more orders for the 777X rather than just the 777?\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"You bet. The key thing on 777 is we've seen very strong recovery in the freighter market in particular. You see that in the demand in recent orders. We have 24 new orders year-to-date for 777s, through the end of the second quarter. Since the end of the quarter, an additional five for Qatar -- 777 freighters. So, year-to-date 29 new orders for 777s. Beyond that, we have the additional announcements that have been recently made, including the letter of intent from Volga-Dnepr for 29 777s.\",\n \"We continue to have a number of other campaigns under way as well. So, you really see the strength of the market continuing to build our confidence in filling out the bridge. We're really now focused on skyline slots 2020 and beyond. We still have work to do, but our confidence continues to grow based on recent sales successes and what we see as sustained growth in the freighter market.\",\n \"Now, as we look beyond that, and headed toward 777X development, a key fact is that today we have 340 orders and commitments in place for the 777X. For the dash-9 variant of that, we have 273 of those 340. If you want to compare that to where we were at the same time on the 777-300ER, back when it was introduced, at that same relative point in time we had 70. So, 273 versus 70. That should give you a sense of the confidence we have in the backlog for 777X.\",\n \"Now, we still continue to have additional campaigns and high interest in the 777X, but we're in very good shape as we look at our production pipeline and backlog position to ramp-up successfully on the 777X. So, the key focus now is move into flight test on the 777X, finish out the current 777 bridge where we have growing confidence again, and then get to EIS for 777X in 2020. All of the dimensions of that puzzle continue to firm up and we're seeing growing confidence. That's why the production rate plan we put in place, we see that as a very clear floor for the production program. We look forward to moving into the 777X.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next in queue, we have the line of David Strauss of Barclays. Your line is open.\"\n ]\n },\n {\n \"name\": \"David Strauss\",\n \"speech\": [\n \"Thanks. Good morning. About cash flow, I think, Greg, you talked earlier in the year that you saw prepayments as relatively neutral for the year. I think year-to-date, we're running at $3 billion. Are you expecting those to reverse as we go through the second half? And, on inventory, it looks like the ex the drawdown in 787 deferred, you've had about $1 billion inventory build this year. Is that 777X or just related to this 37 ramp? Any color there? Thanks.\"\n ]\n },\n {\n \"name\": \"Gregory D. Smith\",\n \"speech\": [\n \"A little bit of both, David. 777X inventory being the biggest driver, and will continue to be through the balance of the year and into next year. With regards to the advances, you're absolutely right. They move around quarter-to-quarter depending on the PDP schedule. We've seen some this year, more frontloaded, than we will in the back half of the year. We've taken that into consideration with the guide.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next in queue, we have the line of Ron Epstein of Bank of America. Your line is open.\"\n ]\n },\n {\n \"name\": \"Ronald Epstein\",\n \"speech\": [\n \"Good morning. I think at Farnborough, Dennis, you mentioned on the 797 -- I think the quote is, \\\"We want to be in the 2025 window with maybe a 2019 launch.\\\" When we think about the 79, or middle market -- whatever it's going to be, should we start building in something of that in our financial forecasts? It seems like the drumbeat's really gaining momentum. Secondly, when we think about it, is it a wide-body? Is it a narrow-body? Where are you guys on that now?\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"First of all, as you know, we haven't made a launch decision. But, we continue to look at the middle of the market airplane. As you heard at Farnborough, we continue to have very productive customer discussions on that topic. We do see a marketplace there for 4,000-5,000 aircraft and we're very focused now on deliberately going through our business case to make a good launch decision. We are protecting 2025 as the entry into service date and that aligns with our customer's needs and desires. We're doing the appropriate long lead work to protect that delivery date. We're looking at making a launch decision in 2019.\",\n \"We're going to be very deliberate about that and make sure the business case makes good, solid sense. That's our headset going in. We're not going to predetermine the answer there. We're talking to our supply chain and we're taking a look at every dimension of the program. We have to look at this through a life cycle lens, both in airplane and downstream services, and make sure we're producing value for customers.\",\n \"In terms of your question about wide-body or narrow-body, as we look at configuration options and details, and begin firming that up, we're hearing from customers that we need something that has the comfort and twin aisle benefit of wide bodies, but has narrow-body economics. That's frankly the challenge of closing the business case. It goes back to all of the work we're doing on transforming our enterprise to drive efficiency in development, production, and support. If we build the confidence in the data we need to make a business case that closes, we'll launch. If we don't, we'll continue down the path with our current product lines.\"\n ]\n },\n {\n \"name\": \"Ronald Epstein\",\n \"speech\": [\n \"Great. Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we have the line of Robert Spingarn with Credit Suisse. Your line is open.\"\n ]\n },\n {\n \"name\": \"Robert M. Spingarn\",\n \"speech\": [\n \"Good morning. With your very strong margins at BCA, especially ex that charge, you've done a lot with costs. You're going to continue to do that, but I want to ask about the pricing side of the equation, especially in the context of airbus comments last week at the show about pricing opportunity given the scarcity of slots. I know you have to balance that against higher rates, but how should we think about pricing over the next few years?\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"Rob, when we take a look at that, it's important to note that the pricing is holding up. It's driven by a number of different parameters, including supply versus demand, but also value we generate for our customers and making sure that that value proposition is clear. Everything we do on the pricing front is looking through that customer value lens. That's our focus. And the fact that pricing is holding up and you can see that reflected in our performance is a good sign of the unique value that our product lines are delivering for our customers.\",\n \"I will say, as you look across our narrow body and wide body product lines, it's very clear that our products deliver operating cost advantage and value advantage for our customers. That's a key part of our equation going forward. We're also keeping in mind the fact that we have this enterprise wide global support and services capability, though in many cases when we think about pricing we're looking at it holistically across airplanes and services, which I think is a unique part of the Boeing value proposition.\"\n ]\n },\n {\n \"name\": \"Robert M. Spingarn\",\n \"speech\": [\n \"Between the pricing and the cost element, do you have a sense of when you can hit this 15% type margin at BCA?\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"As we said, we're driving toward that mid-teen margin by the end of the decade. That's been our objective. You can see the progress we're making. As we mentioned before, we expect it to be continuing incremental progress. There's not going to be a big step function or a hockey stick. It's continuous, focused, incremental performance. As you can see in our data, Rob, the core BCA margins minus the tanker charge is up over 13%. That ought to give you a good indicator of the progress that we're making. We're going to be relentless on this focus and it's really about driving out costs, driving productivity, working with our supply chain, and being diligent about our production rates.\"\n ]\n },\n {\n \"name\": \"Robert M. Spingarn\",\n \"speech\": [\n \"Thanks, Dennis.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we have the line of Noah Poponak of Goldman Sachs. Your line is open.\"\n ]\n },\n {\n \"name\": \"Noah Poponak\",\n \"speech\": [\n \"Good morning. Greg, was the 787 cash unit margin up or down in 2Q versus 1Q? And, any willingness, even if in a wide range, give us an indication of where you've taken that? Similarly, on the program accounting margin, maybe help us out on how big of a change you made in it?\"\n ]\n },\n {\n \"name\": \"Gregory D. Smith\",\n \"speech\": [\n \"Yeah. Overall, you're seeing 787 improvement across the board. As you look at the big levers in the cost structure that we've talked about, the mix improving, the overall productivity unit-over-unit in our factories, and leveraging the best practices -- looking at the commonality between a nine and a ten, and how that improves productivity in our factory and supply chain is pretty significant. Combined with the supplier step downs that we have in place contractually -- and our own focus internally and even going out into the supply chain, taking our productivity, where we've been successful in area of productivity, and bringing that out to the supply chain to help the overall program improve.\",\n \"I wouldn't say it's one thing. It's many levers that we're working on and trying to pull. You're seeing that in the unit margin, in the overall cash profile of the program. As we've said a number of times, the way the team looks at this and the way we look at it is unit-over-unit, what do we need to do to improve and be even more competitive in the marketplace? How do we leverage the best practices within our factories combined with services between defense-based security and commercial, and also within the supply chain? That's been the cadence and level of effort that's been going on. That's going to continue.\",\n \"You're seeing that in the overall cash profile of the program improving combined with going up in rates very smoothly and getting that dash-10 into the production system smoothly. We're going to deliver approximately 14 aircraft this year, dash-10s. Very, very smooth introduction. And that goes to the commonality of that design versus dash-10 and the team's relentless focus on ensuring that we get that into the hands of the customer on time, minimize risk. It's a great example of de-risking how we bring a derivative program into the production system.\",\n \"So, a lot of different things, but you're going to see that continued effort going forward on this program and all the other ones.\"\n ]\n },\n {\n \"name\": \"Noah Poponak\",\n \"speech\": [\n \"Appreciate that color. Any ability to give us a sense of where the program accounting margin sits at this point?\"\n ]\n },\n {\n \"name\": \"Gregory D. Smith\",\n \"speech\": [\n \"It's improved. With the block extension, that helped. If you go out in the further block, you're seeing favorable mix, pricing, and supplier stepdown along with our own productivity. As we march through time, you're going to see an improvement overall to that margin incrementally as we move forward in those blocks. Here, day in and day out, it's about unit performance, meeting our targets, utilizing all of our working capital initiatives, and then all of our productivity. But, we're focused unit over unit that ultimately will translate into program margin.\"\n ]\n },\n {\n \"name\": \"Noah Poponak\",\n \"speech\": [\n \"Alright. Thank you.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we have the line of Sam Pearlstein with Wells Fargo. Your line is open.\"\n ]\n },\n {\n \"name\": \"Samuel Joel Pearlstein\",\n \"speech\": [\n \"Good morning. Could you talk a little bit more about -- you mentioned the joint venture with Safran and APUs. I'm trying to think about, how do you balance the spend on a new plane with some of the significant nonrecurring engineering in areas like APUs and maybe even avionics, that's typically borne by suppliers. How does that factor into your thinking about eventually launching a new plane?\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"Sam, we figure that into our overall organic investment profile and that phased R&D plan I mentioned earlier. As part of our organic investment, we're very focused on a few key verticals. We don't need to be vertical everywhere, but there are a few areas where, when we look through a customer value lens, it's clear that we can add value. The work on APUs with Safran is one of those areas. You mentioned avionics. That's another area. Interiors is another area we've looked at and announced a joint venture with Adient.\",\n \"So, those are very targeted areas, well known investments. As part of our organic profile, those have been feathered in with our broader R&D investments in new platforms and product lines, including things like the 777X and some of our new defense products and services. That's all part of an integrated R&D plan. The way we've laid that into the profile is done in a way to ensure synergy between our verticals that we're building and our future platform products. It's important that we do that in a synergistic way.\",\n \"But, I would view that as an integrated organic investment plan. Not something where we're trading verticals or platforms. It's doing it together with an eye toward creating value for customers. Where it makes sense, we augment that with inorganic investments. That cash deployment strategy remains constant. As we talked about, while we make those organic and inorganic investments, we've also committed to returning 100% free cash flow to our investors. That commitment remains solid.\"\n ]\n },\n {\n \"name\": \"Maurita B. Sutedja\",\n \"speech\": [\n \"Operator, we have time for one more analyst question.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Thank you. Next, we'll go to the line of Ken Herbert with Canaccord. Your line is open.\"\n ]\n },\n {\n \"name\": \"Ken Herbert\",\n \"speech\": [\n \"Good morning. Dennis and Greg, I wanted to follow up on Dennis' comments specifically on -- as you look at everything now much more with a life cycle lens, on the NMA, assuming you move forward there, how does that lens impact your analysis of the business case in terms of the market opportunity? And how might that potentially impact your go-to-market strategy? You obviously have opportunities now to capture economics in a much broader range. Can you provide any more detail as to your thinking around that and how it might specifically get applied or used around the NMA?\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"Yeah. In particular, as we look at the business case for NMA, we're looking at it both from an airplane and downstream services standpoint. So, an integrated life cycle view. Where can we create value for customers? Depending on the customer set, there's a different value proposition for different airlines. In some cases, we can reduce operating costs. In some cases, we can help them reduce capital investment costs. We're factoring that entire equation into our business case. It does give us more parameters to look at. It gives us more ways to construct a business case for the future. And, taking that holistic life cycle view just gives us a more robust business case.\",\n \"Also, as you pointed out, it will affect our potential go-to-market approaches, and how we can tailor a value proposition for different customers. And, it will drive different ways of how you might design such an airplane -- again, from the start, thinking about digital solutions and the architecture of the airplane so it can enable optimized services for customers. It's not only something that factors into the business case, it also affects how we would design the airplane. All of that is being done in our business case analysis, and I'll go back to my earlier point that it's important that we get it right. We're going to take the time to get it right. We're protecting the EIS state for our customers at 2025. If we decide to launch this development program, the R&D profile would be on the backside of 777X. It would feather in nicely and be consistent with our overall cash flow priorities.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"And that does complete the analysts' question-and-answer session for this morning. [Operator Instructions] I will now return you to The Boeing Company for introductory remarks by Mr. Phil Musser, Senior Vice President of Communications. Mr. Musser, please go ahead\"\n ]\n },\n {\n \"name\": \"Phil Musser\",\n \"speech\": [\n \"Thank you very much, operator. We'll continue now with media questions for Dennis and Greg. If you have questions following this part of the session, please contact our Media Relations team by email or at 312-544-2002. Operator, we're ready for the first question. And, in the interest of time, we'd ask you please that you limit everyone to just one question, please.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Certainly. And our first question comes from the line of Julie Johnsson of Bloomberg. Your line is open.\"\n ]\n },\n {\n \"name\": \"Julie Johnsson\",\n \"speech\": [\n \"Hi. Good morning. Just to circle back on narrow-body rate, it seems to me that Boeing's taking a more cautious or measured approach to evaluating rate increases into the 2020s, while your competitor's talking about rate 70 or even rate 75. Can the supply chain actually support the rates that Airbus has been publicly mulling? If they move forward, is Boeing going to have to keep pace, especially given the very strong demand environment?\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"Let me provide some additional perspective on that. We're going to be very focused on being disciplined about rate decisions and our production ramp-up. We have important work ahead of us. We just moved to 52 a month on the 737 line. We're going to move to 57 a month next year. As we said, the market pressures do indicate upward pressure on that rate. That's a challenge, but it's a good challenge to have. At every one of these steps, we're going to bring our entire supply chain along. I think you see that reflected in our performance. We're continuing to meet our delivery commitments to our customers. That's the lens that we put on these production rate decisions. We see pressure points in the supply chain. We work those on a day-to-day basis, and we're very focused on maintaining our discipline.\",\n \"We'll make rate decisions not only informed by market pressures, but informed by our ability to execute them successfully. I think our track record of doing 20 successful rate breaks over the last several years speaks to our approach. While I can't comment on our competitor's approach, I can comment on our disciplined approach. We're going to maintain that approach. We're working very closely with our supply chain to bring them along in an integrated fashion. That will continue to be our focus going forward.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we have the line of Brian Sozzi of TheStreet. Your line is open.\"\n ]\n },\n {\n \"name\": \"Brian Sozzi\",\n \"speech\": [\n \"Hey, guys. Thanks for taking the question. Dennis, since the last time we talked, we got the Space Force announcement. How are you thinking about it and what type of dollar impact could that potentially new program mean to Boeing? On the services business, real good for you guys. Are you planning to get more aggressive on acquisitions to build that out?\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"First of all, on Space Force -- and more broadly, on the space business -- I'm very encouraged by what I see as the administration leaning forward on investing in space. All dimensions of the space business -- not only Space Force, but the work that's going into space exploration and the reinvigoration of that entire ecosystem. We've had the opportunity to participate as part of the National Space Council and be on the user advisory group there, partnered with the administration. So, we have industry voice at the table as we shape these potential opportunities.\",\n \"From that standpoint, I'm very encouraged about the U.S. government leaning forward and investing in space. It's good for business. It creates growth opportunities for us. It's also a great way to develop STEM talent for the future. When we look at our growth opportunities going forward, we do see the space business as an important part of that. And that spans from lower orbit commercial travel and access to the space station, to our satellite business, and to our deep space exploration, including the space launch system with a focus on returning to the moon and then stepping to Mars. We're going to continue to lean forward in that business. It's an important invest area for us.\",\n \"On services, we continue to see that as a very attractive growth market for us. We've set a high bar target of growing that to be a $50 billion a year business over the 5- to 10-year timeframe. While we're a year into that effort, I think we have some good signs, especially if you look at the growth year-to-date of 11% versus 3.5% in the market. It's good signs that our strategy is working. A lot of work ahead of us and it's an integrated organic and inorganic investment strategy, primarily driven by organic investment, parts, mods and maintenance, our training business, our digital business. Those are all known organic investments. Where it makes sense we'll complement that with inorganic investments. But, we clearly see acquisitions as a bolt on compliment to what is primarily an organic investment strategy.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Next, we have the line of Dominic Gates of Seattle Times. Your line is open.\"\n ]\n },\n {\n \"name\": \"Dominic Gates\",\n \"speech\": [\n \"Good morning, everyone. I want to ask about the maturity of the 777X, the new automated technology that you've introduced there. You've posted a new wing center and you've added the wing assembly automated equipment now for that. You've also got the fuselage and robotics. Both of those initially had some issues, challenges, as they were new. Are they now -- both he fuselage and the wing automated systems -- operating the way you want them to? Will you plan to use any of that for NMA?\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"Dominic, we continue to make very good progress on those automation systems. While I won't declare them to be in final state, it's very clear that we've made progress, both on the fuselage automated systems as well as the wing build system. I think the key thing that you see in our focus here is that, while those automation systems were designed purpose built to be used for 777X production, we've de-risked those systems by pulling them forward in the factory and applying them to the current 777 program where it makes sense.\",\n \"So, we've been able to use that as a way to de-risk. And, there have been some challenges as we've ramped up those automation capabilities. That's exactly. Why we pulled them forward into the 777 line, to experience and de-risk those systems. We've seen them continue to mature. We're seeing operational efficiency gains in our factory. We're seeing safety benefits for our workforce. We're seeing quality benefits -- all of the things we hoped to get out of the automation are coming to bear. We're going to continue to mature those as we move into the test program for 777X.\",\n \"If we decide to launch NMA, part of that would leverage the next generation of automation technology. Again, as we digitize our airplanes, it becomes even more straightforward to apply these automation techniques. We're going to see costs and schedule benefits. We're going to see safety benefits for our workforce. This is a key part of how we're transforming the Boeing enterprise for the future.\"\n ]\n },\n {\n \"name\": \"Phil Musser\",\n \"speech\": [\n \"Operator, we have time for one more question from the media.\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Certainly. Our last question will come from the line of Andrew Tangel of Wall Street Journal. Your line is open.\"\n ]\n },\n {\n \"name\": \"Andrew Tangel\",\n \"speech\": [\n \"Hi. Thanks for taking my question. Chinese carriers and leasers have previously played a significant role in the orders and commitments at the air shows in Paris and Farnborough. But, there weren't that many fresh deals from Chinese companies at the recent air show in Farnborough. By one estimate, almost half of Boeing's new orders and commitments at last year's Paris air show came from Chinese companies. What do you make of the relative absence of a large number of Chinese buyers at this year's air show, especially in light of how much growing demand you expect from China over the next couple of decades? Does this potentially signal that Chinese buyers are holding off making orders or commitments because of some of the trade friction, including between the U.S. and China right now?\"\n ]\n },\n {\n \"name\": \"Dennis A. Muilenburg\",\n \"speech\": [\n \"A look at our total orders book, very strong. If you look at total orders and commitments year-to-date of more than 900 commercial aircraft, that gives you a sense of the overall strength of the market. I don't find it surprising one way or the other that we may or may not have orders from a particular region or customer at the air show. We don't design our orders profile around air shows. We have some customers who want to make announcements at air shows and we work with them to do that, but our view is much more of a steady, sustained growth and orders throughput. You see that reflected in our month-to-month orders and sales.\",\n \"Our Chinese customers are exceptionally important to us. They're a big part of the backlog we have, the 5,900 aircraft. They're a strong portion of that. The future market we talked about -- the world needing roughly 43,000 airplanes over the next 20 years -- about 7,200 of those are in China. It's an important customer for us. We're well positioned in China. We're working closely with our customers there. We're ramping up capability in China while we ramp up in the U.S.\",\n \"I'll go back to my fundamental point. As we think about China/U.S. trade relationships, aerospace is something that's good for both countries. It's mutually beneficial. It creates growth capacity in China. It's helping them grow their economy. It's growing jobs in China. As China grows, it's growing jobs in the U.S. Our 737 production line, for example, as we ramp up building on Chinese demand, that's growing U.S. manufacturing jobs. It's very clear to us that free and open trade environment and good relations between China and the U.S. is not only beneficial to the aerospace business, but in turn the aerospace business is beneficial to the economies and jobs of both countries.\"\n ]\n },\n {\n \"name\": \"Phil Musser\",\n \"speech\": [\n \"Thank you. That concludes our second quarter earnings call. For members of the media, if you have further questions, please contact our media relations team at 312-544-2002 or via email. Thank you very much.\",\n \"...\"\n ]\n },\n {\n \"name\": \"Operator\",\n \"speech\": [\n \"Ladies and gentlemen still connected, that does conclude the presentation for this morning. Again, we do thank you very much for your participation and for using our executive teleconference service. You may now disconnect.\"\n ]\n },\n {\n \"name\": \"Ken Herbert\",\n \"speech\": [\n \"More BA analysis\",\n \"This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. 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ticker stringclasses 57
values | date stringlengths 10 10 | participants listlengths 2 30 | prepared_remarks listlengths 2 89 | questions_and_answers listlengths 0 192 |
|---|---|---|---|---|
NEE | 2022-04-21 | [
{
"description": "Director of Investor Relations",
"name": "Jessica Aldridge",
"position": "Executive"
},
{
"description": "Executive Vice President and Chief Financial Officer, NextEra Energy",
"name": "Kirk Crews",
"position": "Executive"
},
{
"description": "Chairman and Chief... | [
{
"name": "Operator",
"speech": [
"Good morning and welcome to the NextEra Energy and NextEra Energy Partners first quarter earnings call. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Jessica Jeffrey, director of investor relations. ... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question will come from Steve Fleishman with Wolfe Research. You may now go ahead."
]
},
{
"name": "Steven Fleishman",
"speech": [
"Yeah. Hi. Good morning. Thank you.",
"John, Kirk, congrats on your new ro... |
NEE | 2021-10-20 | [
{
"description": "Director of Investor Relations",
"name": "Jessica Aldridge",
"position": "Executive"
},
{
"description": "Executive Vice President, Finance and Chief Financial Officer",
"name": "Rebecca J. Kujawa",
"position": "Executive"
},
{
"description": "Chairman and Chief... | [
{
"name": "Operator",
"speech": [
"Good morning, everyone, and welcome to the NextEra Energy and NextEra Energy Partners Q3 2021 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] Please also note, today's event is being recorded.",
"At this time, I'd like to ... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions] And our first question comes from Julien Dumoulin-Smith from Bank of America. Please go ahead with your question."
]
},
{
"name": "Julien Dumoulin-Smith",
"speech": [
"Hey, good morning, team. Thank you for the time. I ap... |
NEE | 2018-10-23 | [
{
"description": "Director, Investor Relations",
"name": "Matthew Roskot",
"position": "Executive"
},
{
"description": "Executive Vice President Finance and Chief Financial Officer",
"name": "John Ketchum",
"position": "Executive"
},
{
"description": "Morgan Stanley -- Analyst",
... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to the NextEra Energy Inc. and NextEra Energy Partners, LP Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded.",
"I would now like to turn the conference over... | [
{
"name": "Operator",
"speech": [
"We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from Stephen Byrd with Morgan Stanley. Please go ahead."
]
},
{
"name": "Stephen Byrd",
"speech": [
"Hi, good morning. Thanks for taking my quest... |
NEE | 2020-01-24 | [
{
"description": "Director of Investor Relations",
"name": "Matt Roskot",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "James L. Robo",
"position": "Executive"
},
{
"description": "Executive Vice President, Finance and Chief Financia... | [
{
"name": "Operator",
"speech": [
"Good morning, everyone and welcome to the NextEra Energy and NextEra Energy Partners Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instruct... | [
{
"name": "Operator",
"speech": [
"Ladies and gentlemen, at this time, we'll begin the question-and-answer session. [Operator Instructions] Our first question today comes from Greg Gordon from Evercore ISI. Please go ahead with your question."
]
},
{
"name": "Greg Gordon",
"speech": [
... |
NEE | 2023-10-24 | [
{
"description": "Director, Investor Relations",
"name": "Kristin Rose",
"position": "Executive"
},
{
"description": "Executive Vice President, Chief Financial Officer, NextEra Energy",
"name": "Kirk Crews",
"position": "Executive"
},
{
"description": "Chairman, President, and Ch... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to the NextEra Energy and NextEra Energy Partners, LP third-quarter 2023 earnings conference call. All participants will be in a listen-only mode. [Operator instructions] Please note, this event is being recorded. I would now like to turn th... | [
{
"name": "Operator",
"speech": [
"Thank you. We will now begin the question-and-answer session. [Operator instructions] At this time, we will pause momentarily to assemble our roster. Our first question comes from Steve Fleishman with Wolfe Research.",
"Please go ahead."
]
},
{
"nam... |
NEE | 2023-01-25 | [
{
"description": "Head of Investor Relations",
"name": "Jessica Geoffroy",
"position": "Other"
},
{
"description": "President and Chief Executive Officer",
"name": "John Ketchum",
"position": "Executive"
},
{
"description": "Chairman, President, and Chief Executive Officer of Flo... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to the NextEra Energy and NextEra Energy Partners fourth-quarter 2022 earnings call. All participants will be in listen-only mode. [Operator instructions] After today's presentation, there will be an opportunity to ask questions. Please note... | [
{
"name": "Operator",
"speech": [
"Thank you. We will now begin the question-and-answer session. [Operator instructions] Our first question comes from Steve Fleishman from Wolfe Research. Please go ahead."
]
},
{
"name": "Steve Fleishman",
"speech": [
"Yeah. Hi, good morning. So,... |
NEE | 2019-01-25 | [
{
"description": "-Director of Investor Relations -- Director of Investor Relations",
"name": "Mark Truscott",
"position": "Executive"
},
{
"description": "-Chairman and Chief Executive Officer -- Chairman and Chief Executive Officer",
"name": "Jim Robo",
"position": "Executive"
},
{... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to the NextEra Energy, Inc. and NextEra Energy Partners, LP Q4 and full-year 2018 earnings conference call. [Operator instructions] Please note that this event is being recorded. And now I would like to turn the conference over to Mark Trusc... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] And we will go first to Stephen Byrd of Morgan Stanley."
]
},
{
"name": "Stephen Byrd",
"speech": [
"Hi, good morning."
]
},
{
"name": "John Ketchum",
"speech": [
"Hey, good morning Stephen."
]
... |
NEE | 2021-04-21 | [
{
"description": "Director of Investor Relations",
"name": "Jessica Aldridge",
"position": "Executive"
},
{
"description": "Executive Vice President Finance and Chief Financial Officer",
"name": "Rebecca J. Kujawa",
"position": "Executive"
},
{
"description": "President and Chief... | [
{
"name": "Operator",
"speech": [
"Good day, and welcome to the NextEra Energy and NextEra Energy Partners First Quarter 2021 Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions].",
"I would now like to turn t... | [
{
"name": "Operator",
"speech": [
"Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Shar Pourreza with Guggenheim Partners. Please go ahead."
]
},
{
"name": "Shar Pourreza",
"speech": [
"Hey, good morning, guy... |
NEE | 2019-10-22 | [
{
"description": "Director, Investor Relations",
"name": "Matthew Roskot",
"position": "Executive"
},
{
"description": "Executive Vice President, Finance and Chief Financial Officer",
"name": "Rebecca J. Kujawa",
"position": "Executive"
},
{
"description": "Evercore Group LLC -- ... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to the NextEra Energy and NextEra Energy Partners Conference call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions.",
"[Operator Instructions]",
"I'd now like to turn the conferen... | [
{
"name": "Operator",
"speech": [
"Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Today's first question comes from Greg Gordon of Evercore ISI. Please go ahead."
]
},
{
"name": "Greg Gordon",
"speech": [
"Hey, good morning."
]
},
{... |
NEE | 2020-10-21 | [
{
"description": "Director of Investor Relations",
"name": "Matthew Roskot",
"position": "Executive"
},
{
"description": "Executive Vice President, Finance and Chief Financial Officer",
"name": "Rebecca J. Kujawa",
"position": "Executive"
},
{
"description": "President and Chief ... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to the NextEra Energy, Inc. and NextEra Energy Partners Third Quarter 2020 Earnings Conference Call. [ Operator Instructions]",
"I would now like to turn the conference over to Matt Roskot of Investor Relations. Please go ahead."
]... | [
{
"name": "Operator",
"speech": [
"We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Steve Fleishman of Wolfe Research. Please go ahead."
]
},
{
"name": "Steve Fleishman",
"speech": [
"Thank you. I guess, two question... |
NEE | 2018-01-26 | [
{
"description": "Director, Investor Relations",
"name": "Matthew Roskot",
"position": "Executive"
},
{
"description": "Executive VP of Finance, Chief Financial Officer",
"name": "John Ketchum",
"position": "Executive"
},
{
"description": "President, Chief Executive Officer",
... | [
{
"name": "Operator",
"speech": [
"Good day, everyone, and welcome to the NextEra Energy and NextEra Energy Partners Conference Call. Today's conference is being recorded.",
"At this time for opening remarks, I'd like to turn the call over to Mr. Matthew Roskot. Please go ahead, sir."
]
},... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] We'll take our first question from Stephen Byrd with Morgan Stanley. Please go ahead."
]
},
{
"name": "Stephen Calder Byrd",
"speech": [
"Good morning. Congratulations on good results and a great outlook. I wanted to hit ... |
NEE | 2022-07-22 | [
{
"description": "Head of Investor Relations",
"name": "Jessica Geoffroy",
"position": "Other"
},
{
"description": "Executive Vice President and Chief Financial Officer, NextEra Energy",
"name": "Kirk Crews",
"position": "Executive"
},
{
"description": "Wolfe Research -- Analyst"... | [
{
"name": "Operator",
"speech": [
"Good morning, everyone, and welcome to the NextEra Energy and NextEra Energy Partners Q2 2022 earnings conference call. [Operator instructions] Please note that today's event is being recorded. At this time, I'd like to turn the conference call over to Jessica Geoffr... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] And our first question today comes from Steve Fleishman from Wolfe Research. Please go ahead with your question."
]
},
{
"name": "Steve Fleishman",
"speech": [
"Great. Thanks. I guess a couple of questions. Just a technic... |
NEE | 2020-04-22 | [
{
"description": "Director of Investor Relations",
"name": "Matt Roskot",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "James L. Robo",
"position": "Executive"
},
{
"description": "Executive Vice President, Finance and Chief Financia... | [
{
"name": "Operator",
"speech": [
"Good morning and welcome to the NextEra Energy Inc. and NextEra Energy Partners LP Earnings Conference Call.",
"[Operator Instructions]",
"I would now like to turn the conference over to Matt Roskot, Director of Investor Relations. Please go ahead."
]... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions]",
"Our first question comes from Julien Dumoulin-Smith with Bank of America. Please go ahead. It looks like we're going to go with Shahriar Pourreza with Guggenheim Partners. Please go ahead."
]
},
{
"name": "Shahriar Pourrez... |
NEE | 2020-07-24 | [
{
"description": "Director of Investor Relations",
"name": "Matt Roskot",
"position": "Executive"
},
{
"description": "Executive Vice President, Finance and Chief Financial Officer",
"name": "Rebecca J. Kujawa",
"position": "Executive"
},
{
"description": "Chairman and Chief Exec... | [
{
"name": "Operator",
"speech": [
"Good morning everyone, and welcome to the NextEra Energy, Inc. and NextEra Energy Partners Conference Call. [Operator Instructions] Please note, today's event is being recorded.",
"At this time, I'd like to turn the conference call over to Matt Roskot, Director... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions] And our first question today comes from Julien Smith from Bank of America. Please go ahead with your question."
]
},
{
"name": "Richard Ciciarelli",
"speech": [
"Hey, good morning. This is actually Ritchie here for Julien... |
EXEL | 2023-11-01 | [
{
"description": "Executive Vice President, Public Affairs and Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Mike Morrissey",
"position": "Executive"
},
{
"description": "Chief Financial... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis third quarter 2023 financial results conference call. My name is Gigi, and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call o... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Your first question comes from the line of Michael Schmidt from Guggenheim."
]
},
{
"name": "Michael Schmidt",
"speech": [
"Hey guys, good afternoon. Thanks for taking my questions and congrats on all the progress. I just... |
EXEL | 2023-02-07 | [
{
"description": "Executive Vice President of Public Affairs and Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Mike Morrissey",
"position": "Executive"
},
{
"description": "Chief Financi... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis fourth quarter and full year 2022 financial results conference call. My name is Vaishnavi, and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now lik... | [
{
"name": "Operator",
"speech": [
"Thank you. We will now begin the question-and-answer session. [Operator instructions] At this time, we will pause momentarily to assemble our roster. Our first question comes from Asthika Goonewardene with Truist Securities.",
"Please go ahead."
]
},
{
... |
EXEL | 2022-05-10 | [
{
"description": "Executive Vice President of Public Affairs and Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Mike Morrissey",
"position": "Executive"
},
{
"description": "Chief Financi... | [
{
"name": "Operator",
"speech": [
"Ladies and gentlemen, thank you for standing by, and welcome to the Exelixis Q1 2022 financial results conference call. [Operator instructions]. I would now like to hand the conference over to your speaker, Ms. Susan Hubbard, executive vice president of public affair... | [
{
"name": "Operator",
"speech": [
"[Operator instructions]. Our first question will come from Asthika Goonewardene with Truist. Please go ahead."
]
},
{
"name": "Asthika Goonewardene",
"speech": [
"Hey, guys. Thanks for taking my questions. Check on the gross to net a little bit ... |
EXEL | 2023-08-01 | [
{
"description": "Executive Vice President, Public Affairs and Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Mike Morrissey",
"position": "Executive"
},
{
"description": "Chief Financial... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis second quarter 2023 financial results conference call. My name is Tawanda, and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the ca... | [
{
"name": "Operator",
"speech": [
"Thank you. [Operator instructions] Our first question comes from the line of Asthika Goonewardene with Truist. Your line is open."
]
},
{
"name": "Asthika Goonewardene",
"speech": [
"Hi, guys. Good afternoon, and thanks for taking my question. F... |
EXEL | 2020-02-25 | [
{
"description": "Executive Vice President, Public Affairs and Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Michael M. Morrissey",
"position": "Executive"
},
{
"description": "Executive... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis' Fourth Quarter and Full Year 2019 Financial Results Conference Call. My name is Towanda, and I will be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now li... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions] Your first question comes from the line of Asthika Goonewardene with SunTrust. Your line is open."
]
},
{
"name": "Asthika Goonewardene",
"speech": [
"I want to say congratulations for all the progress you made this year.... |
EXEL | 2022-08-09 | [
{
"description": "Executive Vice President of Public Affairs and Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Mike Morrissey",
"position": "Executive"
},
{
"description": "Chief Financi... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis second quarter 2022 financial results conference call. My name is Sarah, and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call... | [
{
"name": "Operator",
"speech": [
"Thank you. [Operator Instructions] Your first question comes from the line of Asthika Goonewardene with Truist. Please proceed."
]
},
{
"name": "Unknown speaker",
"speech": [
"This is [Inaudible] on for Asthika. First of all, congrats on the qua... |
EXEL | 2023-05-09 | [
{
"description": "Executive Vice President of Public Affairs and Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Mike Morrissey",
"position": "Executive"
},
{
"description": "Chief Financi... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis first-quarter 2023 financial results conference call. My name is Tawanda and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call... | [
{
"name": "Operator",
"speech": [
"Thank you. [Operator instructions] Please stand standby while we compile the Q&A roster. Our first question comes from the line of Asthika Goonewardene with Truist. Your line is open."
]
},
{
"name": "Unknown speaker",
"speech": [
"Well, yes, ju... |
EXEL | 2019-10-30 | [
{
"description": "Executive Vice President, Public Affairs and Investor Relations",
"name": "Susan T. Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Michael M. Morrissey",
"position": "Executive"
},
{
"description": "Execut... | [
{
"name": "Operator",
"speech": [
"Good day ladies and gentlemen and welcome to the Exelixis Third Quarter 2019 Financial Results Conference Call. My name is Gigi and I'll be your operator for today. [Operator Instructions]",
"I would now like to turn the call over to your host for today Ms. Sus... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions] Your first question comes from the line of Andy Hsieh from William Blair. Please proceed."
]
},
{
"name": "Andy Hsieh",
"speech": [
"Great, congrats on the progress and thank you for taking my questions. Just first one ju... |
EXEL | 2020-11-05 | [
{
"description": "Executive Vice President, Public Affairs and Investor Relations",
"name": "Susan T. Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Michael M. Morrissey",
"position": "Executive"
},
{
"description": "Execut... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis Third Quarter 2020 Financial Results Conference Call. My name is Holly, and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call ... | [
{
"name": "Operator",
"speech": [
"Thank you. [Operator Instructions] Our first question is going to come from the line of Asthika Goonewardene with Truist."
]
},
{
"name": "Asthika Goonewardene",
"speech": [
"Hi, guys. Thanks for taking my questions, and then showed a nice quart... |
EXEL | 2021-02-10 | [
{
"description": "Executive Vice President, Public Affairs and Investor Relations",
"name": "Susan T. Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Michael M. Morrissey",
"position": "Executive"
},
{
"description": "Execut... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen and welcome to the Exelixis Fourth Quarter and Full Year 2020 Financial Results Conference Call. My name is, Latif, and I will be your operator for today. As a reminder, this call is being recorded for replay purposes.",
"I would ... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions] Our first question comes from the line of Asthika Goonewardene of Truist Securities. Your line is open."
]
},
{
"name": "Asthika Goonewardene",
"speech": [
"Hi guys. Thanks for taking my questions and congratulations on a... |
EXEL | 2018-05-02 | [
{
"description": "-Executive Vice President, Public Affairs and Investor Relations -- Executive Vice President, Public Affairs and Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "-President and Chief Executive Officer -- President and Chief Executive Of... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis' first-quarter 2018 financial results conference call. My name is Andrew, and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes.I would now like to turn the call... | [
{
"name": "Operator",
"speech": [
"[Operator instructions]. And our first question comes from the line of Eric Schmidt with Cowen."
]
},
{
"name": "Eric Schmidt",
"speech": [
"Chris, on the inventory side for Cabometyx, did I hear you say an $8 million benefit in Q1?"
]
},
... |
EXEL | 2018-02-26 | [
{
"description": "-- Executive Vice President of Public Affairs and Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "Chief Executive Officer",
"name": "Mike Morrissey",
"position": "Executive"
},
{
"description": "Chief Medical Officer",
... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis Fourth Quarter and Full-Year 2017 Financial Results Conference Call. My name is Sabrina and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like t... | [
{
"name": "Operator",
"speech": [
"Thank you. Ladies and gentlemen, if you have a question at this time, please press * and then the 1 key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the * key. To prevent any background no... |
EXEL | 2020-08-06 | [
{
"description": "Executive Vice President, Public Affairs and Investor Relations",
"name": "Susan T. Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Michael M. Morrissey",
"position": "Executive"
},
{
"description": "Execut... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis Second Quarter 2020 Financial Results Conference Call. My name is Gigi, and I'll be your operator for today. [Operator Instructions]",
"I would now like to turn the call over to your host for today, Ms... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions] Our first question comes from the line of Yaron Werber from Cowen. Your line is now open."
]
},
{
"name": "Leo",
"speech": [
"Hey. This is Leo [Phonetic] on for Yaron Werbe. Congrats on the great quarter. I just have one ... |
EXEL | 2022-11-01 | [
{
"description": "Executive Vice President of Public Affairs and Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Mike Morrissey",
"position": "Executive"
},
{
"description": "Chief Financi... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis third quarter 2022 financial results conference call. My name is Chuck, and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call ... | [
{
"name": "Operator",
"speech": [
"Thank you. We'll now begin the question-and-answer session. [Operator instructions] And the first question will come from Asthika Goonewardene with Truist Securities. Please go ahead."
]
},
{
"name": "Asthika Goonewardene",
"speech": [
"Hi, guys... |
EXEL | 2021-11-02 | [
{
"description": "Executive Vice President of Public Affairs and Investor Relations",
"name": "Susan T. Hubbard",
"position": "Executive"
},
{
"description": "Chief Executive Officer, President and Director",
"name": "Michael M. Morrissey",
"position": "Executive"
},
{
"descripti... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis' Third Quarter 2021 Financial Results Conference Call. My name is Jeff, and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call ... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions] Your first question comes from the line of Asthika Goonewardene from Truist Securities."
]
},
{
"name": "Asthika Sarith Goonewardene",
"speech": [
"Hi guys, thanks for taking my question. I have to echo like you said of h... |
EXEL | 2020-05-05 | [
{
"description": "Executive Vice President, Public Affairs and Investor Relations",
"name": "Susan T. Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Michael M. Morrissey",
"position": "Executive"
},
{
"description": "Presid... | [
{
"name": "Operator",
"speech": [
"Good afternoon, ladies and gentlemen, and welcome to the Exelixis First Quarter 2020 Financial Results Conference Call. [Operator Instructions]",
"I would now like to hand the conference over to your host, Ms. Susan Hubbard, EVP of Public Affairs and Investor R... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions] And your first question comes from the line of Asthika Goonewardene with SunTrust."
]
},
{
"name": "Asthika Goonewardene",
"speech": [
"Hi guys, This is Asthika Goonewardene from SunTrust. I want to say congrats on contin... |
EXEL | 2018-11-01 | [
{
"description": "Executive Vice President of Public Affairs and Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Michael Morrissey",
"position": "Executive"
},
{
"description": "Chief Fina... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis' Quarter 2018 Financial Results Conference Call. My name is Justin, and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes.",
"I would now like to turn the ... | [
{
"name": "Operator",
"speech": [
"(Operator Instructions) Our first question comes from Andy Hsieh, William Blair. You may proceed."
]
},
{
"name": "Andy Hsieh",
"speech": [
"Thanks for taking my question, and congratulations on the progress. I got a couple of questions if I may... |
EXEL | 2021-08-05 | [
{
"description": "Executive Vice President Of Public Affairs And Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "President And Chief Executive Officer",
"name": "Michael M. Morrissey",
"position": "Executive"
},
{
"description": "Executi... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to Exelixis Second Quarter 2011 Financial Results Conference Call. My name is Franzie and I will be your operator for today. [Operator Instructions]",
"I would now like to turn the call over to your host for today Ms.... | [
{
"name": "Operator",
"speech": [
"Thank you. [Operator Instructions] Your first question comes from the line of Asthika Goonewardene from Truist. Your line is now open."
]
},
{
"name": "Asthika Goonewardene",
"speech": [
"Hi, guys. Thanks for taking my questions. First, I want t... |
EXEL | 2019-05-01 | [
{
"description": "Executive Vice President of Public Affairs and Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Michael Morrissey",
"position": "Executive"
},
{
"description": "Executive ... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis' First Quarter 2019 Financial Results Conference Call. My name is Gigi, and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes.",
"I would now like to turn ... | [
{
"name": "Operator",
"speech": [
"(Operator Instructions) Your first question comes from the line of Andy Hsieh from William Blair. Please proceed."
]
},
{
"name": "Andy Hsieh",
"speech": [
"Great, thanks for taking my question and congratulations on the quarter. So impressive 7... |
EXEL | 2021-05-06 | [
{
"description": "Executive Vice President, Public Affairs and Investor Relations",
"name": "Susan T. Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Michael M. Morrissey, Ph.D.",
"position": "Executive"
},
{
"description": ... | [
{
"name": "Operator",
"speech": [
"Good morning, ladies and gentlemen, and welcome to the Exelixis First Quarter 2021 Financial Results Conference Call. My name is Daphne, and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes.",
"I would now like to ... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions] Your first question comes from the line of Asthika Goodewarne with Truist Securities."
]
},
{
"name": "Asthika Goodewarne",
"speech": [
"Congrats on the quarter and the strong cabo rebound that we saw. P.J., I was wonderi... |
EXEL | 2019-02-12 | [
{
"description": "Executive Vice President of Public Affairs and Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Michael Morrissey",
"position": "Executive"
},
{
"description": "Chief Fina... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis Fourth Quarter and Full Year 2018 Financial Results Conference Call. My name is Andrew and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to... | [
{
"name": "Operator",
"speech": [
"Ladies and gentlemen, if you have a question at this time, please press \"*1\" on your touchtone telephone. And if your question has been answered or you wish to remove yourself from the queue, please press \"#\".",
"And your first question comes from the line ... |
EXEL | 2019-07-31 | [
{
"description": "Executive Vice President, Public Affairs and Investor Relations",
"name": "Susan T. Hubbard",
"position": "Executive"
},
{
"description": "President and CEO",
"name": "Mike Morrissey",
"position": "Executive"
},
{
"description": "Executive Vice President",
"... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis Second Quarter 2019 Financial Results Conference Call. My name is Gigi, and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call ... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions] Your first question comes from the line of Andy Hsieh from William Blair. Your line is now open."
]
},
{
"name": "Andy Hsieh",
"speech": [
"Great. Thanks for taking my questions and congratulations on kind of building the... |
EXEL | 2022-02-17 | [
{
"description": "Executive Vice President of Public Affairs and Investor Relations",
"name": "Susan Hubbard",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Mike Morrissey",
"position": "Executive"
},
{
"description": "Chief Financi... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Exelixis fourth quarter and full year 2021 financial results conference call. My name is Towanda, and I will be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now lik... | [
{
"name": "Operator",
"speech": [
"Thank you. [Operator instructions] Our first question comes from the line of Jason Gerberry with Bank of America. Your line is open."
]
},
{
"name": "Chi Meng Fong",
"speech": [
"Hi. Good evening, everyone. This is Chi on for Jason. Thanks for t... |
KR | 2022-03-03 | [
{
"description": "Director, Investor Relations",
"name": "Rob Quast",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer",
"name": "Gary Millerchip... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to The Kroger Co. fourth quarter 2021 earnings conference call. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Rob Quast, director, investor relations.",
"Please go ahe... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question comes from Rupesh Parikh with Oppenheimer. Please go ahead."
]
},
{
"name": "Rupesh Parikh",
"speech": [
"Good morning. Thanks for taking our questions. And also, congrats on a really strong quarter."
... |
KR | 2018-09-13 | [
{
"description": "-- Director, Investor Relations",
"name": "Rebekah Manis",
"position": "Executive"
},
{
"description": "-- Chairman & Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "-- Executive Vice President & Chief Financial ... | [
{
"name": "Operator",
"speech": [
"Good morning and welcome to the Kroger Company second quarter 2018 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the * key followed by 0. After today's presentatio... | [
{
"name": "Operator",
"speech": [
"We will now begin the question and answer session. To ask a question, you may press * then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press * then 2. The first q... |
KR | 2022-09-09 | [
{
"description": "Director, Investor Relations",
"name": "Rob Quast",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer",
"name": "Gary Millerchip... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to The Kroger Co. second quarter 2022 earnings conference call. My name is Alex, I'll be coordinating the call today. [Operator instructions] I would now like to turn the conference call over to Rob Quast, director, investor relations.",
... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question for today comes from John Heinbockel of Guggenheim. Your line is now open."
]
},
{
"name": "John Heinbockel",
"speech": [
"Hey, guys. One sort of quickly from -- the improvement you saw in IDs, can you ... |
KR | 2022-06-16 | [
{
"description": "Director, Investor Relations",
"name": "Rob Quast",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer",
"name": "Gary Millerchip... | [
{
"name": "Operator",
"speech": [
"Hello, and welcome to the Kroger Co. first quarter earnings call. My name is Alex, and I'll be coordinating the call today. [Operator instructions] I will now hand over to your host, Rob Quast, director of investor relations.",
"Over to you, Rob."
]
},
... | [
{
"name": "Operator",
"speech": [
"Thank you. [Operator instructions] Our first question for today comes from Robby Ohmes of BofA Global Research. Robby, your line is now open."
]
},
{
"name": "Robby Ohmes",
"speech": [
"Good morning, guys, and great quarter. My question is, I wa... |
KR | 2021-09-10 | [
{
"description": "Director of Investor Relations",
"name": "Rob Quast",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer",
"name": "Gary Millerch... | [
{
"name": "Operator",
"speech": [
"Good day and welcome to The Kroger Co. second-quarter earnings call. [Operator instructions] I would now like to turn the conference over to Rob Quast. Please go ahead."
]
},
{
"name": "Rob Quast",
"speech": [
"Thank you, Sarah. Good morning. Th... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question comes from Greg Badishkanian with Wolfe Research. Please go ahead."
]
},
{
"name": "Spencer Hanus",
"speech": [
"Good morning. This is Spencer Hanus on for Greg. Can you guys talk about the comps that y... |
KR | 2020-03-05 | [
{
"description": "Director, Investor Relations",
"name": "Rebekah Manis",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Officer",
"name": "Gary Millerchip",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer"... | [
{
"name": "Operator",
"speech": [
"Good morning and welcome to the Kroger Company Fourth Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded.",
"I would now like to turn the conference over to Rebek... | [
{
"name": "Operator",
"speech": [
"We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Robby Ohmes with Bank of America Global Research. Please go ahead."
]
},
{
"name": "Robby Ohmes",
"speech": [
"Thanks for taking my question... |
KR | 2019-03-07 | [
{
"description": "Director of Investor Relations",
"name": "Rebekah Manis",
"position": "Executive"
},
{
"description": "Chairman & Chief Executive Officer",
"name": "W. Rodney McMullen",
"position": "Executive"
},
{
"description": "Executive Vice President & Chief Financial Offi... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to the Kroger Company Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please no... | [
{
"name": "Operator",
"speech": [
"We will now begin the question-and-answer session (Operator Instructions) And our first question will come from Karen Short of Barclays."
]
},
{
"name": "Karen Short",
"speech": [
"Hi. Thanks. So, I guess the question I have, and I know you trie... |
KR | 2018-06-21 | [
{
"description": "Director, Investor Relations",
"name": "Rebekah Manis",
"position": "Executive"
},
{
"description": "Chairman & Chief Executive Officer",
"name": "W Rodney McMullen",
"position": "Executive"
},
{
"description": "Executive Vice President & Chief Financial Officer... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to The Kroger Company First Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please n... | [
{
"name": "Operator",
"speech": [
"We will now begin the question and answer session. [Operator Instructions] Our first question will come from Michael Lasser of UBS."
]
},
{
"name": "Michael Lasser",
"speech": [
"Good morning. Thanks for taking my question. Why is buy versus bui... |
KR | 2023-06-15 | [
{
"description": "Director, Investor Relations",
"name": "Rob Quast",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer",
"name": "Gary Millerchip... | [
{
"name": "Operator",
"speech": [
"Good morning and welcome to the Kroger Co. first quarter 2023 earnings conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Rob Quast, senior director, investor relations.",
"Please ... | [
{
"name": "Operator",
"speech": [
"Thank you. [Operator instructions] Our first question for today comes from Chuck Cerankosky from Northcoast Research. Chuck, your line is now open. Please go ahead."
]
},
{
"name": "Chuck Cerankosky",
"speech": [
"Good morning, everyone. Nice qu... |
KR | 2018-03-08 | [
{
"description": "Director, Investor Relations",
"name": "Kate Ward",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Executive Vice President and Chief Financial Officer",... | [
{
"name": "Operator",
"speech": [
"Good morning and welcome to the Kroger Company Fourth Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing \"*0\". After today's presentation, there will be ... | [
{
"name": "Operator",
"speech": [
"We will now begin the question-and-answer session. To ask a question, you may press \"*1\" on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press \"*2\". Our first questi... |
KR | 2020-12-03 | [
{
"description": "Director, Investor Relations",
"name": "Rebekah Manis",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer",
"name": "Gary Miller... | [
{
"name": "Operator",
"speech": [
"Good morning and welcome to The Kroger Company third-quarter 2020 earnings conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Rebekah Manis, director, investor relations. Please go ahead... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question is from Simeon Gutman with Morgan Stanley. Please go ahead."
]
},
{
"name": "Simeon Gutman",
"speech": [
"Hey. Good morning. Thanks, everyone. I wanted to ask around e-commerce.",
"It doesn't look... |
KR | 2023-11-30 | [
{
"description": "Senior Director of Investor Relations",
"name": "Rob Quast",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer",
"name": "Gary M... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to The Kroger Co. third-quarter earnings conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Rob Quast, senior director, investor relations.",
"Please go a... | [
{
"name": "Operator",
"speech": [
"Thank you. [Operator instructions] While preparing to ask your question, please ensure your phone is unmuted locally. We ask you please limit yourself to one question and one follow-up. Our first question goes to Dean Rosenblum of Bernstein.",
"Dean, please go ... |
KR | 2018-12-06 | [
{
"description": "-- Director, Investor Relations",
"name": "Rebekah Manis",
"position": "Executive"
},
{
"description": "-- Chairman & Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "-- Executive Vice President & Chief Financial ... | [
{
"name": "Operator",
"speech": [
"Good morning and welcome to the Kroger Company third quarter earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the * key followed by zero. After today's presentation, ... | [
{
"name": "Operator",
"speech": [
"We will now begin the question and answer session. To ask a question, you may press * then 1 on your touchstone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press * then 2. At this time... |
KR | 2021-03-04 | [
{
"description": "Director of Investor Relations",
"name": "Rebekah Manis",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer and Senior Vice Presiden... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to The Kroger Company fourth-quarter 2020 earnings conference call. [Operator instructions] I would now like to turn the conference over to Rebekah Manis, director of investor relations. Please go ahead."
]
},
{
"name": "Rebekah ... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question is from John Heinbockel with Guggenheim Securities. Please go ahead."
]
},
{
"name": "John Heinbockel",
"speech": [
"Hey, Rodney. Can you -- to start with, can you at least directionally parse out, when... |
KR | 2017-11-30 | [
{
"description": "Director, Investor Relations",
"name": "Kate Ward",
"position": "Executive"
},
{
"description": "Chief Executive Officer and Chairman",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer and Executive Vice President",... | [
{
"name": "Operator",
"speech": [
"Good morning everyone, and welcome to the Kroger Company's Third-Quarter Earnings Conference Call. All participants will be in the listen-only mode. Should you need assistance, please signal our conference specialist by pressing the * key, followed by 0. After today'... | [
{
"name": "Operator",
"speech": [
"Ladies and gentlemen, at this time we will begin the question-and-answer session. To ask a question, you may press * and then 1. To remove yourself from the question queue, you may press * and 2. If you are using a speakerphone, we do ask you please pick up the hands... |
KR | 2020-09-11 | [
{
"description": "Director of Investor Relations",
"name": "Rebekah Manis",
"position": "Executive"
},
{
"description": "Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief People Officer",
"name": ... | [
{
"name": "Operator",
"speech": [
"Good morning and welcome to the Kroger Co. second-quarter 2020 earnings conference call. [Operator instructions] I would now like to turn the conference over to Rebekah Manis, director of investor relations. Please go ahead."
]
},
{
"name": "Rebekah Manis... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question comes from Greg Badishkanian with Wolfe Research. Please go ahead."
]
},
{
"name": "Spencer Hanus",
"speech": [
"Good morning. This is actually Spencer Hanus on for Greg. My first question is just can y... |
KR | 2023-09-08 | [
{
"description": "Senior Director, Investor Relations",
"name": "Rob Quast",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer",
"name": "Gary Mil... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to the Kroger Co. second-quarter 2023 earnings conference call. Please note this event is being recorded. I would now like to turn the conference over to Rob Quast, senior director of investor relations.",
"Please go ahead."
]
},... | [
{
"name": "Operator",
"speech": [
"Thank you. [Operator instructions] Our first question is from Simeon Gutman from Morgan Stanley. Simeon, your line is now open. Please go ahead."
]
},
{
"name": "Simeon Gutman",
"speech": [
"Hi. Good morning, everyone. I'm going to ask one and a... |
KR | 2020-06-18 | [
{
"description": "Director, Investor Relations",
"name": "Rebekah Manis",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "W. Rodney McMullen",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Offic... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to the Kroger Company First Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.",
"I would now like to turn the conference over to Rebekah Manis, Director of Investor Relations. Plea... | [
{
"name": "Operator",
"speech": [
"We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Rupesh Parikh with Oppenheimer. Please go ahead."
]
},
{
"name": "Rupesh Parikh",
"speech": [
"Good morning. Thank you for taking my questio... |
KR | 2019-09-12 | [
{
"description": "Investor Relations",
"name": "Rebekah Manis",
"position": "Other"
},
{
"description": "Chairman & Chief Executive Officer",
"name": "W. Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer",
"name": "Gary Millerchip",
"p... | [
{
"name": "Operator",
"speech": [
"Good morning and welcome to the Kroger Company Second Quarter 2019 Earnings Conference Call. [Operator Instructions]",
"I would now like to turn the conference over to Rebekah Manis, Director of Investor Relations. Please go ahead."
]
},
{
"name": "... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions] Our first question comes from Rupesh Parikh with Oppenheimer. Please go ahead."
]
},
{
"name": "Rupesh Parikh",
"speech": [
"Good morning and thanks for taking my question and also congrats on this quarter."
]
},
... |
KR | 2023-03-02 | [
{
"description": "Director, Investor Relations",
"name": "Rob Quast",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer",
"name": "Gary Millerchip... | [
{
"name": "Operator",
"speech": [
"Good morning and welcome to the Kroger Co. fourth quarter and full year 2022 earnings conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Rob Quast, senior director of investor relations.... | [
{
"name": "Operator",
"speech": [
"Thank you. [Operator instructions] Our first question for today comes from John Heinbockel of Guggenheim Partners. John, your line is now open. Please go ahead."
]
},
{
"name": "John Heinbockel",
"speech": [
"Hey, Rodney. I wanted to start with,... |
KR | 2019-06-20 | [
{
"description": "Director, Investor Relations",
"name": "Rebekah Manis",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "W. Rodney McMullen",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Offic... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to The Kroger Company First Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Pleas... | [
{
"name": "Operator",
"speech": [
"We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from Robby Ohmes with Bank of America Merrill Lynch. Please go ahead."
]
},
{
"name": "Robby Ohmes",
"speech": [
"Well, thanks. Good morning, guy... |
KR | 2019-12-05 | [
{
"description": "Director of Investor Relations",
"name": "Rebekah Manis",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "W. Rodney McMullen",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Off... | [
{
"name": "Operator",
"speech": [
"Good morning and welcome to The Kroger Co. Third Quarter 2019 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Rebekah Manis, Director, Investor Relations. Please go ahead."
]
},
{
"name": "Rebekah Manis",
... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions] The first question is from Edward Kelly with Wells Fargo. Please go ahead."
]
},
{
"name": "Edward Kelly",
"speech": [
"Hi guys, good morning."
]
},
{
"name": "W. Rodney McMullen",
"speech": [
"Good ... |
KR | 2021-06-17 | [
{
"description": "Director, Investor Relations",
"name": "Rebekah Manis",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer",
"name": "Gary Miller... | [
{
"name": "Operator",
"speech": [
"Good morning and welcome to The Kroger Company's first-quarter 2021 earnings conference call. [Operator instructions] I would now like to turn the conference over to Rebekah Manis, director of investor relations. Please go ahead."
]
},
{
"name": "Rebekah ... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] As a reminder, please limit your questions to one with a single follow-up. Our first question comes from Edward Kelly with Wells Fargo. Please go ahead."
]
},
{
"name": "Edward Kelly",
"speech": [
"Hi, guys. Good morning.... |
KR | 2021-12-02 | [
{
"description": "Director of Investor Relations",
"name": "Rob Quast",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer",
"name": "Gary Millerch... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to The Kroger Co. third quarter 2021 earnings conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Rob Quast, director, investor relations.",
"Please go ahe... | [
{
"name": "Operator",
"speech": [
"We will now begin the question-and-answer session. [Operator instructions] Our first question is from Robert Moskow with Credit Suisse. Please go ahead."
]
},
{
"name": "Robert Moskow",
"speech": [
"Hi. Thank you for the question. You've obvious... |
KR | 2022-12-01 | [
{
"description": "Director, Investor Relations",
"name": "Rob Quast",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Rodney McMullen",
"position": "Executive"
},
{
"description": "Chief Financial Officer",
"name": "Gary Millerchip... | [
{
"name": "Operator",
"speech": [
"Good morning, and welcome to the Kroger Co. third quarter 2022 earnings conference call. My name is Nadia, and I'll be coordinating the call today. [Operator instructions] Please note, this event is being recorded.",
"I would now like to turn the conference ove... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] And our first question today goes to Michael Montani of Evercore ISI. Michael, please go ahead. Your line is open."
]
},
{
"name": "Michael Montani",
"speech": [
"Great. Thank you for taking the question. Just wanted to f... |
HON | 2019-04-18 | [
{
"description": "Vice President of Investor Relations",
"name": "Mark Macaluso",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "SVP and Chief Financial Officer",
"nam... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to Honeywell's First Quarter 2019 Earnings Release Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. (Operator... | [
{
"name": "Operator",
"speech": [
"Thank you. (Operator Instructions) Our first question is coming from Steve Tusa with JPMorgan. Please go ahead."
]
},
{
"name": "Steve Tusa",
"speech": [
"Hey, guys. Good morning."
]
},
{
"name": "Darius Adamczyk",
"speech": [
... |
HON | 2019-10-17 | [
{
"description": "Vice President, Investor Relations",
"name": "Mark Bendza",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Offi... | [
{
"name": "Operator",
"speech": [
"Good day, everyone. Ladies and gentlemen, and welcome to Honeywell's Third Quarter Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Inst... | [
{
"name": "Operator",
"speech": [
"Thank you. The floor is now open for questions. [Operator Instructions] Our first question is coming from Sheila Kahyaoglu with Jefferies. Please go ahead."
]
},
{
"name": "Sheila Kahyaoglu",
"speech": [
"Hi, yeah, good morning everyone and than... |
HON | 2020-05-01 | [
{
"description": "Vice President of Investor Relations",
"name": "Mark Bendza",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Of... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to Honeywell's First Quarter Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] ... | [
{
"name": "Operator",
"speech": [
"The floor is now open for questions. [Operator Instructions] Our first question will come from Steve Tusa with J.P. Morgan. Please go ahead."
]
},
{
"name": "Stephen Tusa",
"speech": [
"Hey, guys. Good morning."
]
},
{
"name": "Greg ... |
HON | 2018-07-20 | [
{
"description": "Vice President of Investor Relations",
"name": "Mark Macaluso",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial ... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to Honeywell's Second Quarter Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. If you would like to as... | [
{
"name": "Operator",
"speech": [
"Thank you. The floor is now open for your questions. At this time, if you have a question or comment, please press \"*1\" on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing \"*2\". We ask that ... |
HON | 2022-02-03 | [
{
"description": "Vice President, Investor Relations",
"name": "Sean Meakim",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Offi... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen and welcome to Honeywell's fourth quarter earnings release and 2022 outlook call. [Operator instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Sean Meakim, vic... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] We will now take our first question from Scott Davis from Melius Research. Scott, good morning and over to you."
]
},
{
"name": "Scott Davis",
"speech": [
"Hi. Good morning, buddy. Can you hear me?"
]
},
{
"na... |
HON | 2021-07-23 | [
{
"description": "Director, Investor Relations",
"name": "Reena Vaidya",
"position": "Executive"
},
{
"description": "Chairman & Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Chief Financial Officer & Senior Vice President",
... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to Honeywell's second-quarter earnings release. [Operator instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Reena Vaidya, director of investor re... | [
{
"name": "Operator",
"speech": [
"Yes. [Operator instructions] We will begin with Jeff Sprague with Vertical Research."
]
},
{
"name": "Jeff Sprague",
"speech": [
"Thank you. Good morning, everyone."
]
},
{
"name": "Darius Adamczyk",
"speech": [
"Good morni... |
HON | 2019-02-01 | [
{
"description": "Vice President, Investor Relations",
"name": "Mark Macaluso",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial O... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen and welcome to Honeywell's Fourth Quarter Earnings and 2019 Outlook Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. (Operat... | [
{
"name": "Operator",
"speech": [
"Thank you. (Operator Instructions). We can now take our first question. Peter Arment from Baird. Please go ahead."
]
},
{
"name": "Peter Arment",
"speech": [
"Yeah. Thanks. Good morning, Darius and Greg."
]
},
{
"name": "Gregory P. L... |
HON | 2023-10-26 | [
{
"description": "Vice President, Investor Relations",
"name": "Sean Meakim",
"position": "Executive"
},
{
"description": "President and Chief Operating Officer",
"name": "Vimal Kapur",
"position": "Executive"
},
{
"description": "Senior Vice President, Chief Financial Officer",
... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by, and welcome to the Honeywell third-quarter 2023 earnings conference call. [Operator instructions] Please be advised that today's call is being recorded. I would now like to hand the call over to Sean Meakim, vice president of investor relat... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question comes from the line of Julian Mitchell of Barclays."
]
},
{
"name": "Julian Mitchell",
"speech": [
"Hi. Good morning. Maybe just wanted to start off with a question on the fourth-quarter margin outlook.... |
HON | 2018-10-19 | [
{
"description": "Vice President of Investor Relations",
"name": "Mark Macaluso",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial ... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to Honeywell's third quarter earnings conference call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to as... | [
{
"name": "Operator",
"speech": [
"Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press *1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing *2. We ask that when you pose... |
HON | 2019-07-18 | [
{
"description": "Vice President of Investor Relations",
"name": "Mark Macaluso",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial ... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to Honeywell's Second Quarter 2019 Earnings Release Conference Call. [Operator Instructions]",
"I would now like to introduce your host for today's conference, Mark Macaluso, Vice President of Investor Relations."
... | [
{
"name": "Operator",
"speech": [
"Thank you. The floor is now open for questions. (Operator Instructions) Thank you. Our first question is coming from Joe Ritchie from Goldman Sachs."
]
},
{
"name": "Joseph Alfred Ritchie",
"speech": [
"Thanks. Good morning, everyone."
]
}... |
HON | 2018-04-20 | [
{
"description": "Vice President, Investor Relations",
"name": "Mark Macaluso",
"position": "Executive"
},
{
"description": "-- President and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financia... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen. Welcome to Honeywell's First Quarter Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. If you would like to ask a q... | [
{
"name": "Mark Macaluso",
"speech": [
"Thanks, Tom. Darius and Tom are now available to answer your questions. Kathy, if you could, please open the line for Q&A."
]
},
{
"name": "Operator",
"speech": [
"Certainly. Thank you. The floor is now open for questions. At this time, if ... |
HON | 2021-04-23 | [
{
"description": "Vice President of Investor Relations",
"name": "Mark Bendza",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Of... | [
{
"name": "Operator",
"speech": [
"Ladies and gentlemen, please stand by. Good day, and welcome to the Honeywell's first-quarter earnings release. [Operator instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Mark Bendza, vice... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] We will begin with Steve Tusa with J.P. Morgan."
]
},
{
"name": "Steve Tusa",
"speech": [
"Hey, guys. Good morning."
]
},
{
"name": "Darius Adamczyk",
"speech": [
"Good morning."
]
},
{
"... |
HON | 2021-10-22 | [
{
"description": "Director of Investor Relations",
"name": "Reena Vaidya",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Officer... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen and welcome to Honeywell's third-quarter earnings release. [Operator instructions] I would now like to introduce your host for today's conference, Reena Vaidya, director of investor relations. Reena, please go ahead."
]
},
{
... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] We will now take our first question from Steve Tusa from J.P. Morgan. Steve, over to you."
]
},
{
"name": "Steve Tusa",
"speech": [
"Hi. Good morning. Can you hear me OK?"
]
},
{
"name": "Darius Adamczyk",
... |
HON | 2020-10-30 | [
{
"description": "President of Investor Relations",
"name": "Mark Bendza",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Officer... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to Honeywell's third-quarter earnings conference call. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mark Bendza, vice preside... | [
{
"name": "Operator",
"speech": [
"With pleasure, sir. [Operator instructions] And we will begin with our first question from Scott Davis with Melius Research. Please go ahead."
]
},
{
"name": "Scott Davis",
"speech": [
"Good morning, guys."
]
},
{
"name": "Darius Ada... |
HON | 2020-01-31 | [
{
"description": "Vice President, Investor Relations",
"name": "Mark Bendza",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Offi... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to Honeywell's Fourth Quarter Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions]... | [
{
"name": "Operator",
"speech": [
"Thank you. [Operator Instructions] And our first question is coming from Steve Tusa with J.P. Morgan."
]
},
{
"name": "Stephen Tusa",
"speech": [
"Hey, guys, good morning."
]
},
{
"name": "Darius Adamczyk",
"speech": [
"Goo... |
HON | 2023-02-02 | [
{
"description": "Vice President, Investor Relations",
"name": "Sean Meakim",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "President and Chief Operating Officer",
"n... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by, and welcome to the Honeywell fourth quarter 2022 earnings conference call. [Operator instructions] Please be advised that today's call is being recorded. I would now like to hand the call over to Sean Meakim, vice president of investor rela... | [
{
"name": "Operator",
"speech": [
"Thank you. At this time, we will conduct the question-and-answer session. [Operator instructions] And our first question will come from Julian Mitchell from Barclays. Your line is open."
]
},
{
"name": "Julian Mitchell",
"speech": [
"Hi. Good mo... |
HON | 2022-07-28 | [
{
"description": "Vice President of Investor Relations",
"name": "Sean Meakim",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Of... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by. And welcome to Honeywell's second quarter fiscal year 2022 earnings conference call. [Operator instructions] I would now like to hand the call over to, Sean Meakim. Please go ahead."
]
},
{
"name": "Sean Meakim",
"speech": [... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question comes from the line of Steve Tusa of J.P. Morgan. Steve Tusa, your line is open."
]
},
{
"name": "Steve Tusa",
"speech": [
"Hey, guys. Good morning."
]
},
{
"name": "Darius Adamczyk",
"s... |
HON | 2023-04-27 | [
{
"description": "Senior Vice President, Investor Relations",
"name": "Sean Meakim",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "President and Chief Operating Officer",... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by, and welcome to the Honeywell first-quarter 2023 earnings conference call. [Operator instructions] Please be advised that today's call is being recorded. I would now like to hand the call over to Sean Meakim, vice president of investor relat... | [
{
"name": "Operator",
"speech": [
"Our first question comes from the line of Steve Tusa at J.P. Morgan."
]
},
{
"name": "Steve Tusa",
"speech": [
"Thanks. Good morning."
]
},
{
"name": "Vimal Kapur",
"speech": [
"Good morning."
]
},
{
"name": "St... |
HON | 2022-04-29 | [
{
"description": "Vice President of Investor Relations",
"name": "Sean Meakim",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Of... | [
{
"name": "Operator",
"speech": [
"Good day and thank you for standing by. Welcome to the Honeywell first quarter 2022 earnings conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to turn the conference over to ... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question is from Julian Mitchell with Barclays. Your line is open."
]
},
{
"name": "Julian Mitchell",
"speech": [
"Hi. Good morning. Just wanted to understand maybe on the margins first. So you're guiding for so... |
HON | 2022-10-27 | [
{
"description": "Vice President, Investor Relations",
"name": "Sean Meakim",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "President and Chief Operating Officer",
"n... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by and welcome to the Honeywell third quarter 2022 earnings conference call. [Operator instructions] Please be advised that today's call is being recorded. I would now like to hand the call over to Sean Meakim, vice president of investor relati... | [
{
"name": "Operator",
"speech": [
"Our first question comes from the line of Steve Tusa at J.P. Morgan. Steve, your line is now open."
]
},
{
"name": "Steve Tusa",
"speech": [
"Hey. Good morning."
]
},
{
"name": "Greg Lewis",
"speech": [
"Good morning."
... |
HON | 2021-01-29 | [
{
"description": "Vice President of Investor Relations",
"name": "Mark Bendza",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Of... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to the Honeywell's fourth-quarter earnings release and 2021 outlook. [Operator instructions] As a reminder this conference is being recorded. I would now like to introduce your host for today's conference, Mark Bendza, vice... | [
{
"name": "Operator",
"speech": [
"Absolutely, sir."
]
},
{
"name": "Mark Bendza",
"speech": [
"OK. Darius and Greg are now available to answer your questions. [Operator instructions] Stephen, please open the line for Q&A. Thank you."
]
},
{
"name": "Operator",
"s... |
HON | 2023-07-27 | [
{
"description": "Vice President, Investor Relations",
"name": "Sean Meakim",
"position": "Executive"
},
{
"description": "President and Chief Operating Officer",
"name": "Vimal Kapur",
"position": "Executive"
},
{
"description": "Senior Vice President, Chief Financial Officer",
... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by and welcome to the Honeywell's second-quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that toda... | [
{
"name": "Operator",
"speech": [
"Our first question comes from the line of Andrew Obin with Bank of America. Andrew, your line is now open."
]
},
{
"name": "Andrew Obin",
"speech": [
"Can you hear me? Yeah, Can you hear me?"
]
},
{
"name": "Sean Meakim",
"speech... |
HON | 2020-07-24 | [
{
"description": "Vice President of Investor Relations",
"name": "Mark Bendza",
"position": "Executive"
},
{
"description": "Chairman and Chief Executive Officer",
"name": "Darius Adamczyk",
"position": "Executive"
},
{
"description": "Senior Vice President and Chief Financial Of... | [
{
"name": "Operator",
"speech": [
"Good day, ladies and gentlemen, and welcome to Honeywell's second-quarter earnings conference call. [Operator instructions] As a reminder, this conference is being recorded. I would now like to turn -- introduce your host for today's conference, Mark Bendza, vice pre... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] And our first question is coming from Jeff Sprague with Vertical Research."
]
},
{
"name": "Jeff Sprague",
"speech": [
"Thank you, good morning everyone. Two from me if I could. Very clear on the cost out, what you expect... |
BA | 2021-01-27 | [
{
"description": "Vice President of Investor Relations",
"name": "Maurita Sutedja",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "David Calhoun",
"position": "Executive"
},
{
"description": "Executive Vice President of Enterprise Op... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by. Good day, everyone, and welcome to the Boeing Company's fourth-quarter 2020 earnings conference call. Today's call is being recorded. The management discussion and slide presentation plus the analyst question-and-answer session are being br... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question comes from Carter Copeland with Melius Research. Please go ahead."
]
},
{
"name": "Carter Copeland",
"speech": [
"Hey, good morning guys. Greg, I wondered if you could just give us some more color on th... |
BA | 2019-07-24 | [
{
"description": "Vice President of Investor Relations",
"name": "Maurita Sutedja",
"position": "Executive"
},
{
"description": "Chairman, President and Chief Executive Officer",
"name": "Dennis A. Muilenburg",
"position": "Executive"
},
{
"description": "Chief Financial Officer ... | [
{
"name": "Operator",
"speech": [
"Good day, everyone, and welcome to The Boeing Company's Second Quarter 2019 Earnings Conference Call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst and media question-and-answer sessions are being broadcast live ov... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions] Our first question comes from the line of Carter Copeland with Melius Research. Please go ahead."
]
},
{
"name": "Carter Copeland",
"speech": [
"Hi. Good morning, gentlemen."
]
},
{
"name": "Dennis A. Muilenbu... |
BA | 2021-04-28 | [
{
"description": "Vice President of Investor Relations",
"name": "Maurita Sutedja",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Dave Calhoun",
"position": "Executive"
},
{
"description": "Executive Vice President of Enterprise Ope... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by. Good day, everyone, and welcome to the Boeing Company's first-quarter 2021 earnings conference call. Today's call is being recorded. The management discussion and slide presentation plus the analyst question-and-answer session are being bro... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question comes from Sheila Kahyaoglu with Jefferies. Please go ahead."
]
},
{
"name": "Sheila Kahyaoglu",
"speech": [
"Thank you. Good morning, everyone, plus Dave and Greg. Greg, congratulations, and we look fo... |
BA | 2022-04-27 | [
{
"description": "Vice President of Investor Relations",
"name": "Matt Welch",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Dave Calhoun",
"position": "Executive"
},
{
"description": "Executive Vice President and Chief Financial Of... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by. Good day, everyone, and welcome to The Boeing Company's first quarter 2022 earnings conference call. Today's call is being recorded. The management discussion and slide presentation plus the analyst question-and-answer session are being bro... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] One moment for our first question. And that's from Noah Poponak with Goldman Sachs. Please go ahead"
]
},
{
"name": "Noah Poponak",
"speech": [
"Good morning, everyone. A lot of questions, but I guess the two most importa... |
BA | 2018-10-24 | [
{
"description": "Vice President of Investor Relations",
"name": "Maurita Sutedja",
"position": "Executive"
},
{
"description": "Chairman, President and Chief Executive Officer",
"name": "Dennis Muilenburg",
"position": "Executive"
},
{
"description": "Chief Financial Officer and... | [
{
"name": "Operator",
"speech": [
"Good day, everyone and welcome to The Boeing Company's Third Quarter 2018 Earnings Conference Call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst and media question-and-answer sessions, are being broadcast live ove... | [
{
"name": "Operator",
"speech": [
"(Operator Instructions) And first to the line of Doug Harned with Bernstein. Please go ahead, sir."
]
},
{
"name": "Doug Harned",
"speech": [
"Thank you. Good morning."
]
},
{
"name": "Dennis Muilenburg",
"speech": [
"Hey, ... |
BA | 2021-10-27 | [
{
"description": "Vice President, Investor Relations",
"name": "Matt Welch",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Dave Calhoun",
"position": "Executive"
},
{
"description": "Executive Vice President and Chief Financial Offi... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by. Good day, everyone, and welcome to The Boeing Company's third-quarter 2021 earnings conference call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst question-and-answer session, are being b... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question is from Doug Harned with Bernstein. Please go ahead."
]
},
{
"name": "Doug Harned",
"speech": [
"Good morning. Thank you."
]
},
{
"name": "Dave Calhoun",
"speech": [
"Hi, Doug."
... |
BA | 2021-07-28 | [
{
"description": "Vice President of Investor Relations",
"name": "Maurita Sutedja",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Dave Calhoun",
"position": "Executive"
},
{
"description": "Chief Financial Officer",
"name": "Dav... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by. Good day, everyone, and welcome to the Boeing Company's second-quarter 2021 earnings conference call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst question-and-answer session, are being ... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question comes from Noah Poponak with Goldman Sachs. Please go ahead."
]
},
{
"name": "Noah Poponak",
"speech": [
"Hi. Good morning, everyone."
]
},
{
"name": "Dave Calhoun",
"speech": [
"H... |
BA | 2022-07-27 | [
{
"description": "Vice President of Investor Relations",
"name": "Matt Welch",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Dave Calhoun",
"position": "Executive"
},
{
"description": "Executive Vice President and Chief Financial Of... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by. Good day, everyone, and welcome to The Boeing Company's second quarter 2022 earnings conference call. Today's call is being recorded. The management discussion and slide presentation plus the analyst question-and-answer session are being br... | [
{
"name": "Operator",
"speech": [
"And this is John with AT&T, please continue."
]
},
{
"name": "Dave Calhoun",
"speech": [
"Start over? OK. Sorry, we were muted. It's good to be with all of you. Thanks, Matt, for the intro.",
"I want to start my brief comments upfront with... |
BA | 2019-04-24 | [
{
"description": "Vice President of Investor Relations",
"name": "Maurita Sutedja",
"position": "Executive"
},
{
"description": "Chairman, President, and Chief Executive Officer",
"name": "Dennis Muilenburg",
"position": "Executive"
},
{
"description": "Chief Financial Officer an... | [
{
"name": "Operator",
"speech": [
"Ladies and gentlemen, thank you for standing by. Welcome to The Boeing Company's First Quarter 2019 Earnings Conference Call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst and media question-and-answer sessions, ar... | [
{
"name": "Operator",
"speech": [
"(Operator Instructions) And first in line, we have Myles Walton with UBS. Please go ahead."
]
},
{
"name": "Myles Walton",
"speech": [
"Thanks. Good morning. Dennis or Greg, how is the 737 return-to-service effort disrupting or influencing both ... |
BA | 2019-01-30 | [
{
"description": "-Vice President of Investor Relations -- Vice President of Investor Relations",
"name": "Maurita Sutedja",
"position": "Executive"
},
{
"description": "-Chairman, President, and Chief Executive Officer -- Chairman, President, and Chief Executive Officer",
"name": "Dennis Mu... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by. Good day, everyone, and welcome to The Boeing Company's fourth-quarter 2018 earnings conference call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst and media question-and-answer sessions,... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question comes from Rajeev Lalwani with Morgan Stanley. Please go ahead."
]
},
{
"name": "Rajeev Lalwani",
"speech": [
"On the 737, at what point do you expect to be caught up on deliveries? And where are the pr... |
BA | 2020-01-29 | [
{
"description": "Vice President of Investor Relations",
"name": "Maurita Sutedja",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "David L. Calhoun",
"position": "Executive"
},
{
"description": "Chief Financial Officer and Executive ... | [
{
"name": "Operator",
"speech": [
"Good day everyone, and welcome to The Boeing Company's Fourth Quarter 2019 Earnings Conference Call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst question-and-answer session are being broadcast live over the Inter... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions]",
"Our first question comes from the line of Carter Copeland from Melius Research. Please go ahead."
]
},
{
"name": "Carter Copeland",
"speech": [
"Thanks, gentlemen. Can you hear me?"
]
},
{
"name": "Da... |
BA | 2020-10-28 | [
{
"description": "Vice President of Investor Relations",
"name": "Maurita Sutedja",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Dave Calhoun",
"position": "Executive"
},
{
"description": "Executive Vice President of Enterprise Ope... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by. Good day, everyone, and welcome to the Boeing Company's third-quarter 2020 earnings conference call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst question-and-answer session, are being b... | [
{
"name": "Operator",
"speech": [
"Certainly. [Operator instructions] Our first question comes from Doug Harned with Bernstein. Please go ahead."
]
},
{
"name": "Doug Harned",
"speech": [
"Good morning. Thank you."
]
},
{
"name": "Greg Smith",
"speech": [
"G... |
BA | 2023-01-25 | [
{
"description": "Vice President, Investor Relations",
"name": "Matt Welch",
"position": "Executive"
},
{
"description": "President and Chief Executive Officer",
"name": "Dave Calhoun",
"position": "Executive"
},
{
"description": "Executive Vice President and Chief Financial Offi... | [
{
"name": "Operator",
"speech": [
"Thank you for standing by. Good day, everyone, and welcome to The Boeing Company's fourth quarter 2022 earnings conference call. Today's call is being recorded. The management's discussion and slide presentation, plus the analyst question-and-answer session, are bein... | [
{
"name": "Operator",
"speech": [
"[Operator instructions] Our first question will be from Peter Arment with Baird. Please go ahead."
]
},
{
"name": "Peter Arment",
"speech": [
"Yeah. Good morning, Dave and Brian. Hey. So, congrats on the progress in deliveries in the fourth quar... |
BA | 2020-04-29 | [
{
"description": "Investor Relations",
"name": "Maurita Sutedja",
"position": "Other"
},
{
"description": "President and Chief Executive Officer",
"name": "David L. Calhoun",
"position": "Executive"
},
{
"description": "Chief Financial Officer and Executive Vice President, Enterp... | [
{
"name": "Operator",
"speech": [
"Good day everyone, and welcome to The Boeing Company's First Quarter 2020 Earnings Conference Call.",
"Today's call is being recorded. The management discussion and slide presentation, plus the analyst question-and-answer session are being broadcast live over t... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions]",
"Our first question comes from Peter Arment with Baird. Please go ahead."
]
},
{
"name": "Peter Arment",
"speech": [
"Good morning, Dave, Greg. Thanks for your time."
]
},
{
"name": "David L. Calhoun",... |
BA | 2018-07-25 | [
{
"description": "Vice President of Investor Relations",
"name": "Maurita B. Sutedja",
"position": "Executive"
},
{
"description": "Chairman, President, and Chief Executive Officer",
"name": "Dennis A. Muilenburg",
"position": "Executive"
},
{
"description": "Chief Financial Offi... | [
{
"name": "Operator",
"speech": [
"Good day, everyone, and welcome to The Boeing Company's Second Quarter of 2018 Earnings Conference Call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst and media question-and-answer sessions, are being broadcast liv... | [
{
"name": "Operator",
"speech": [
"[Operator Instructions] First, we'll go to the line of Peter Arment of Robert W. Baird. Your line is open."
]
},
{
"name": "Peter J. Arment",
"speech": [
"Thanks. Good morning. Dennis, could you address the supply chain readiness, particularly o... |
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