BOEING CO

Segment Results of Operations and Financial Condition

Commercial Airplanes

BCA revenues decreased by $2,051 million for the three months ended March 31, 2024 compared with the same period in 2023 driven by lower 737 deliveries and 737-9 customer considerations.

Commercial airplane deliveries, including intercompany deliveries, were as follows:

• Intercompany deliveries identified by parentheses.

Loss From Operations

BCA loss from operations was $1,143 million for the three months ended March 31, 2024 compared with $615 million in the same period in 2023 reflecting lower 737 deliveries and 737-9 customer considerations, partially offset by lower abnormal production costs.

Backlog

Our total backlog represents the estimated transaction prices on unsatisfied and partially satisfied performance obligations to our customers where we believe it is probable that we will collect the consideration due and where no contingencies remain before we and the customer are required to perform. Backlog does not include prospective orders where customer-controlled contingencies remain, such as the customer receiving approval from its board of directors, shareholders or government or completing financing arrangements. All such contingencies must be satisfied or have expired prior to recording a new firm order even if satisfying such conditions is highly probable. Backlog excludes options and customer financing orders as well as orders where customers have the unilateral right to terminate. A number of our customers may have contractual remedies, including rights to reject individual airplane deliveries if the actual delivery date is significantly later than the contractual delivery date. We address customer claims and requests for other contractual relief as they arise. The value of orders in backlog is adjusted as changes to price and schedule are agreed to with customers and is reported in accordance with the requirements of Accounting Standards Codification (ASC) 606.

BCA total backlog increased from $440,507 million as of December 31, 2023 to $447,533 million at March 31, 2024 reflecting new orders in excess of deliveries. Aircraft order cancellations and net ASC 606 adjustments during the three months ended March 31, 2024 were not significant. ASC 606 adjustments include consideration of aircraft orders where a customer-controlled contingency may exist, as well as an assessment of whether the customer is committed to perform, impacts of geopolitical events or related sanctions, or whether it is probable that the customer will pay the full amount of consideration when it is due. We may experience reductions to backlog and/or significant order cancellations due to production disruptions and/or further delays to entry into service of the 777X, 737-7 and/or 737-10.

Accounting Quantity

The following table provides details of the accounting quantities and firm orders by program. Cumulative firm orders represent the cumulative number of commercial jet aircraft deliveries plus undelivered firm orders. Firm orders include certain military derivative aircraft that are not included in program accounting quantities. All revenues and costs associated with military derivative aircraft production are reported in the BDS segment.

† Customer financing aircraft orders are identified in parentheses.

*Approximate undelivered orders by minor model: 737-7 (7%), 737-8 (65%), 737-9 (3%) and 737-10 (25%).

Program Highlights

737 Program On January 10, 2024, the FAA notified Boeing that it had initiated an investigation into the 737 quality control system (737-9 Production Audit). This was followed by the FAA announcing actions to increase its oversight of Boeing, including conducting:

1. An audit involving the 737-9 production line and its suppliers to evaluate Boeing’s compliance with approved quality procedures,

2. Increased monitoring of Boeing’s 737-9 in-service events, and

3. An assessment of safety risks around delegated authority and quality oversight, and examination of options to move these functions under independent third parties.

On January 24, 2024, the FAA stated it will not approve production rate increases or additional production lines for the 737 MAX until it is satisfied that Boeing is in full compliance with required quality control procedures.

The FAA communicated its findings from the 737-9 Production Audit of Boeing and Spirit AeroSystems (Spirit) on February 28, 2024. The FAA found multiple instances where the companies failed to comply with manufacturing quality control requirements and provided 90 days from March 1, 2024 to submit a corrective action plan. We are working to develop a comprehensive action plan to address the issues identified by the FAA.

Our planned production rates are dependent on our suppliers' ability to support our operations and our ability to meet heightened quality control requirements. Prior to the Alaska Airlines accident, we were operating at a production rate of 38 per month. During the first quarter of 2024, as part of our plan to address the issues identified, we slowed production rates to reduce traveled work in our factory, as well as at our suppliers. We are now conducting fuselage inspections at Spirit to ensure quality prior to shipment to Boeing.

We are following the lead of the FAA as we work through the certification process of the 737-7 and 737-10 models. During the first quarter of 2024, the 737-10 program completed the first phase of FAA certification flight testing. As of March 31, 2024, we had approximately 35 737-7 and 737-10 aircraft in inventory. We are planning to incorporate engineering solutions to the de-icing systems on the 737-7 and 737-10 prior to certification, which will delay certification and first deliveries.

As of March 31, 2024, we had approximately 110 737-8 aircraft in inventory that were produced prior to 2023, including approximately 70 aircraft for customers in China. We expect to deliver most of the aircraft in inventory by the end of 2024.

The production slow-down and certification delays had an adverse impact on our financial position, results of operations and cash flows during the first quarter of 2024. This is expected to continue until production rates recover. In the event that we are unable to deliver aircraft and/or increase future production rates consistent with our assumptions, our financial position, results of operations and cash flows will continue to be adversely affected.

See further discussion of the 737 MAX in Note 9 and Note 16 to our Condensed Consolidated Financial Statements.

767 Program The 767 assembly line includes the commercial program and a derivative to support the KC-46A Tanker program. The commercial program has near break-even gross margins. We are currently at a production rate of 3 aircraft per month.

777 and 777X Programs We are currently at a combined production rate of 4 per month for the 777/777X programs.

We are following the lead of the FAA as we work through the certification process including obtaining approval from the FAA to begin certification flight testing. We expect the first delivery of the 777-9 to occur in 2025 and the 777-8 freighter to occur in 2027. First delivery of the 777-8 passenger aircraft is not expected to occur before 2030.

The level of profitability on the 777X program will be subject to a number of factors. These factors include aircraft certification requirements and timing, change incorporation on completed aircraft, production disruption due to labor instability and supply chain disruption, customer negotiations, further production rate adjustments for the 777X or other commercial aircraft programs, and contraction of the accounting quantity. One or more of these factors could result in reach-forward losses in future periods.

787 Program We are slowing near-term production to below 5 per month due to supply chain constraints, which are also impacting 2024 deliveries. As of March 31, 2024, we had approximately 40 aircraft in inventory that require rework which we expect to complete by the end of 2024. The inspections and rework costs on inventoried aircraft are accounted for as abnormal production costs, and we expensed $80 million in the three months ended March 31, 2024.

On March 1, 2024, we confirmed that we were engaged in preliminary discussions with Spirit regarding a potential acquisition of its business. We believe that a deal on reasonable terms would allow for the reintegration of our and Spirit’s manufacturing operations and would further strengthen aviation safety, improve quality and serve the interests of our customers, employees, and shareholders. We continue to engage with Spirit regarding a potential acquisition; however, we have not entered into a definitive agreement, and no assurances can be made that we will reach a definitive agreement and complete the potential acquisition.