BOEING CO

Segment Results of Operations and Financial Condition

Commercial Airplanes

BCA revenues decreased by $4,888 million for the six months ended June 30, 2024, compared with the same period in 2023 driven by lower 737 and 787 deliveries and 737-9 customer considerations related to the January 2024 grounding. BCA revenues decreased by $2,837 million for the three months ended June 30, 2024, compared with the same period in 2023 driven by lower 787 and 737 deliveries.

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

• Intercompany deliveries identified by parentheses.

Loss From Operations

BCA loss from operations was $1,858 million for the six months ended June 30, 2024, compared with $998 million in the same period in 2023 reflecting lower deliveries, lower margins driven by production disruption, and 737-9 customer considerations related to the January 2024 grounding, partially offset by lower abnormal production costs. BCA loss from operations was $715 million for the three months ended June 30, 2024, compared with $383 million in the same period in 2023 reflecting lower deliveries and lower margins driven by production disruption, 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 decreased from $440,507 million as of December 31, 2023, to $436,574 million at June 30, 2024 reflecting an increase in the value of existing orders that, in our assessment, do not meet the accounting requirements of ASC 606 for inclusion in backlog and cancellations, partially offset by new orders in excess of deliveries. Aircraft order cancellations during the six months ended June 30, 2024 totaled $2,400 million and primarily relate to 737 aircraft. Net ASC 606 adjustments during the six months ended June 30, 2024 totaled $4,784 million and primarily related to 737 aircraft. 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 (5%) and 737-10 (23%).

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 Holdings, Inc. (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. On May 30, 2024, we submitted our safety and quality 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 half of 2024, as part of our plan to address the issues identified, we slowed production rates and delayed planned production rate increases to reduce traveled work in our factory, as well as at our suppliers. During the first quarter of 2024, we began conducting fuselage inspections at Spirit to improve quality prior to shipment to Boeing. In the second quarter of 2024, production rates gradually increased as we implemented new processes as part of our safety and quality plan. We are working to return to 38 per month by the end of 2024.

As of June 30, 2024, we had approximately 90 737-8 aircraft in inventory that were produced prior to 2023, including approximately 65 aircraft for customers in China. We expect to deliver most of the aircraft in inventory by the end of 2024.

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 program completed the first phase of FAA certification flight testing for the 737-10. As of June 30, 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 has delayed certification and first deliveries.

The production slow-down and certification delays had an adverse impact on our financial position, results of operations and cash flows during the first half 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 10 and Note 18 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 approximately 3 aircraft per month. We are continuing to experience factory disruption, including supply chain delays and quality issues. We have slowed production in 2024 to reduce traveled work in our factory and enable supply chain recovery, resulting in higher near-term production costs. See further discussion of the KC-46A Tanker program in Note 10 to our Condensed Consolidated Financial Statements.

777 and 777X Programs We are currently at a combined production rate of 4 per month for the 777/777X programs. In the fourth quarter of 2023, the 777X program resumed production. The programs are experiencing factory disruption including supply chain delays and challenges associated with the resumption of 777X production.

We are following the lead of the FAA as we work through the certification process. In July 2024, we obtained approval from the FAA to begin the first phase of FAA 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 777X program had near break-even gross margins at June 30, 2024. 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 delivery timing and 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 In the first half of 2024, we slowed production to below 5 per month primarily reflecting supply chain constraints and production issues. Delays associated with business class seats are also adversely impacting 2024 deliveries. As of June 30, 2024, we had approximately 35 aircraft in inventory that were produced prior to 2023 and required 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 $157 million in the six months ended June 30, 2024.

On June 30, 2024, we entered into an agreement to acquire Spirit. See Note 2 to our Condensed Consolidated Financial Statements

We are currently in contract negotiations with the International Association of Machinists and Aerospace Workers District 751 (IAM 751). IAM 751 represents over 30,000 Boeing manufacturing employees primarily located in Washington state. The current contract will expire on September 12, 2024. If we are unable to successfully negotiate a new contract with IAM 751 and/or experience work stoppages or other disruptions, our financial position, results of operations and cash flows could be adversely impacted.