What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-10-27 compared with 2021-07-28 · 208 added, 178 removed, 434 unchanged (47% of the section changed)

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Consolidated Results of Operations and Financial Condition

The global outbreak of COVID-19 and the residual impacts of the 737 MAX grounding in 2019 continue to have significant adverse impacts on our business and are expected to continue to negatively impact revenue, earnings and operating cash flow in future quarters.

The global outbreak of COVID-19, 787 production issues and associated rework, and the residual impacts of the 737 MAX grounding in 2019 continue to have significant adverse impacts on our business and are expected to continue to negatively impact revenue, earnings and operating cash flow in future quarters.

They are also having a significant impact on our liquidity - see Liquidity Matters in Note 1 to our Condensed Consolidated Financial Statements for a further discussion of liquidity and additional actions we are taking in response to these challenges.

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The latest International Air Transport Association (IATA) forecast projects recovery of passenger traffic in 2021 to approximately 40% of 2019 levels, as international markets see continued reopening challenges.

Additionally, global economic activity remains slow due to COVID-19, and governments continue to severely restrict travel to contain the spread of the virus.

Additionally, global economic activity is improving, but continues to be impacted by COVID-19, and governments continue to severely restrict travel to contain the spread of the virus.

While recovery is accelerating, we continue to expect that that it will remain uneven as travel restrictions and varying regional travel protocols continue to impact air travel.

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As a result, we expect the narrow-body market to recover faster than the wide-body market.

Also, the pace of the commercial market recovery will be heavily dependent on COVID-19 infection rates, progress on vaccine distribution, and government travel and other restrictions on trade and commercial activity.

Also, the pace of the commercial market recovery will be heavily dependent on COVID-19 infection rates, vaccination rates, and government travel and other restrictions on trade and commercial activity.

Demand for dedicated freighters continues to be strong, underpinned by a strong recovery in global trade and overall air cargo growth.

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Airline financial performance, which also plays a role in the demand for new capacity, has been adversely impacted by the COVID-19 pandemic.

According to IATA, net losses for the airline industry are expected to be approximately $126 billion in 2020 and approximately $48 billion in 2021.

According to IATA, net losses for the airline industry were $138 billion in 2020 and are expected to be approximately $52 billion in 2021.

Our customers are taking actions to combat the effects of the COVID-19 pandemic on the market by preserving liquidity.

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Notwithstanding the changes we have made to production rates, risk remains that further reductions will be required.

Additionally, if we are unable to make timely deliveries of the large number of aircraft in inventory as of June 30, 2021, future revenues, earnings and cash flows will be adversely impacted.

Additionally, if we are unable to make timely deliveries of the large number of aircraft in inventory as of September 30, 2021, future revenues, earnings and cash flows will be adversely impacted.

Deliveries and production have also been impacted by production issues and associated rework.

For example, in early April 2021, we notified the FAA that we recommended to operators that certain 737 MAX airplanes be temporarily removed from service to address issues that could affect the operation of the electrical power system.

During the second quarter of 2021, we worked with the FAA to finalize the required actions to address the issues and resumed deliveries in May.

Deliveries of the 787 are currently paused and the production rate has been temporarily reduced while we focus on inspections and rework and continue to engage in detailed discussions with the FAA on verification methodology.

Risk remains that these issues may impact the timing of delivery of airplanes in inventory and/or our ability to achieve planned production rates.

For example, deliveries of the 787 are currently paused and the production rate has been reduced while we focus on inspections and rework and continue to engage in detailed discussions with the Federal Aviation Administration (FAA) regarding required actions for resuming deliveries.

Risk remains that these issues may continue to impact the timing of delivery of airplanes in inventory and/or our ability to achieve planned production rates.

Revenues, earnings, and cash flows will continue to be impacted until we are able to resume timely deliveries.

The long-term outlook for the industry remains positive due to the fundamental drivers of air travel demand:

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The industry remains vulnerable to exogenous developments including fuel price spikes, credit market shocks, acts of terrorism, natural disasters, conflicts, epidemics, pandemics and increased global environmental regulations.

Deliveries of the 737 MAX resumed in the fourth quarter of 2020, when the Federal Aviation Administration (FAA) rescinded the order that grounded 737 MAX aircraft in the U.S.

The Continuing Resolution (CR), enacted by U.S.

Congress on September 30, 2021, continues federal funding at FY21 appropriated levels through December 3, 2021.

Congress and the President must enact either full-year FY22 appropriations bills or an additional CR to fund government departments and agencies beyond December 3, 2021 or a government shutdown could result, which may impact the Company’s operations.

Deliveries of the 737 MAX resumed in the fourth quarter of 2020, when the FAA rescinded the order that grounded 737 MAX aircraft in the U.S.

In addition, other non-U.S.

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Our suppliers are also experiencing liquidity pressures and disruptions to their operations as a result of COVID-19.

We continue to monitor the health and stability of the supply chain as we ramp up production.

We also continue to have large numbers of employees working from home.

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We expect further adverse impacts in future quarters.

On September 9, 2021, President Biden signed an Executive Order mandating vaccinations for the federal workforce and federal contractors.

On September 24, 2021, the Administration released implementation guidelines, which require that all federal contractors and other workers at federal contractor workplaces either be fully vaccinated or have an approved reasonable accommodation for disability or sincerely held religious belief, and requirements to follow CDC guidance at contractor workplaces.

Boeing is requiring our U.S.-based workers to be fully vaccinated or have an approved reasonable accommodation by December 8, 2021.

We will be monitoring these requirements and their implementation for any potential impacts to our operations.

In July 2020, we announced business transformation efforts to assess our business across five key pillars:

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We continue to make progress across all five key pillars as we utilize a lower production rate environment to transform and improve our business processes.

Within the infrastructure

pillar we are assessing our overall facility requirements in light of reduced demand in our commercial businesses and remote and virtual work opportunities for large numbers of our workforce.

Within the infrastructure pillar we are assessing our overall facility requirements in light of reduced demand in our commercial businesses and remote and virtual work opportunities for large numbers of our workforce.

The consolidation of the 787 production in South Carolina during the first quarter of 2021 is an example of this.

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The following table summarizes key indicators of consolidated results of operations:

(Dollars in millions, except per share data) Six months ended June 30 Three months ended June 30

(Dollars in millions, except per share data) Nine months ended September 30 Three months ended September 30

2021 2020 2021 2020

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Effective income tax rate 62.2 % 40.1 % 57.4 % 49.6 %

Net earnings/(loss) attributable to Boeing Shareholders $50 ($3,004) $587 ($2,376)

Diluted earnings/(loss) per share $0.09 ($5.31) $1.00 ($4.20)

Net loss attributable to Boeing Shareholders ($59) ($3,453) ($109) ($449)

Diluted loss per share ($0.10) ($6.10) ($0.19) ($0.79)

Core operating earnings/(loss) $461 ($5,773) $59 ($754)

Core operating margins 1.0 % (13.5) % 0.4 % (5.3) %

Core (loss)/earnings per share ($1.12) ($6.49) $0.40 ($4.79)

Core loss per share ($1.72) ($7.88) ($0.60) ($1.39)

(1) These measures exclude certain components of pension and other postretirement benefit expense.

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The following table summarizes Revenues:

(Dollars in millions) Six months ended June 30 Three months ended June 30

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2021 2020 2021 2020

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Total $47,493 $42,854 $15,278 $14,139

Revenues for the six months ended June 30, 2021 increased by $3,500 million compared with the same period in 2020 driven by higher revenues at BCA and BDS, partially offset by lower revenues at BGS.

Revenues for the nine months ended September 30, 2021 increased by $4,639 million compared with the same period in 2020 driven by higher revenues at BCA, BDS, and BGS.

BCA revenues increased by $3,309 million primarily driven by higher 737 MAX deliveries due to recertification and return to service in many jurisdictions and $370 million of charges for 737 MAX customer considerations in 2020, partially offset by lower 787 deliveries.

BDS revenues increased by $1,200 million primarily from higher revenue on the KC-46A Tanker program and the absence of charges related to the KC-46A Tanker program in 2021.

BGS revenues decreased by $300 million primarily due to lower commercial services revenue, partially offset by higher government volume.

Commercial services revenue is lower in 2021 as the COVID-19 pandemic had minimal impact on commercial services revenue in the first quarter of 2020.

Revenues will continue to be significantly impacted until deliveries ramp up and the commercial airline industry recovers from the impacts of COVID-19.

Revenues for the three months ended June 30, 2021 increased by $5,191 million driven by higher revenues at BCA, BDS, and BGS.

BCA revenues increased by $4,382 million primarily driven by higher narrow-body and wide-body deliveries due to 737 MAX recertification and return to service in many jurisdictions and COVID-19 recovery, as well as $551 million of charges for 737 MAX customer considerations in 2020.

BDS revenues increased by $288 million primarily due to higher military derivative aircraft revenues.

BGS revenues increased by $227 million primarily due to higher commercial services and government services volume.

While commercial services volume is beginning to recover, it remains below pre-pandemic levels.

Revenues for the three months ended September 30, 2021 increased by $1,139 million driven by higher revenues at BCA and BGS, partially offset by lower revenues at BDS.

BCA revenues increased by $863 million primarily driven by higher 737 MAX deliveries due to recertification and return to service in many jurisdictions, partially offset by lower 787 deliveries.

BDS revenues decreased by $231 million primarily

due to changes on Commercial Crew in 2021 and net lower volume.

BGS revenues increased by $527 million primarily due to higher commercial services volume.

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The following table summarizes Earnings/(loss) from operations:

(Dollars in millions) Six months ended June 30 Three months ended June 30

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2021 2020 2021 2020

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See pages 57-59.

Earnings from operations for the six months ended June 30, 2021 were $940 million, compared with a loss of $4,317 million during the same period in 2020.

BCA loss from operations decreased by $3,502 million due to lower period expense, higher 737 deliveries and lower research and development spending.

BDS earnings from operations increased by $954 million largely due to the absence of charges related to the KC-46A Tanker program in 2021.

BGS earnings from operations increased by $936 million primarily due to charges incurred in the second quarter of 2020 as a result of the COVID-19 pandemic.

Charges in the second quarter of 2020 included $370 million for higher expected credit losses primarily driven by customer liquidity issues, $237 million of inventory write-downs and $153 million of related impairments of distribution rights primarily driven by airlines' decisions to retire certain aircraft, $99 million of contract termination and facility impairments charges, and $64 million for severance costs.

Earnings from operations for the nine months ended September 30, 2021 were $1,269 million, compared with a loss of $4,718 million during the same period in 2020.

BCA loss from operations decreased by $4,178 million due to higher 737 MAX deliveries, lower period expense, lower 737 MAX customer considerations and lower research and development spending, partially offset by lower 787 deliveries.

BDS earnings from operations increased by $762 million largely due to the absence of charges related to the KC-46A Tanker program in 2021.The increase was partially offset by a $185 million increase to the reach-forward loss on Commercial Crew in the third quarter of 2021 driven by the second uncrewed Orbital Flight Test now anticipated in 2022 and the latest assessment of remaining work, and higher charges in 2021 on VC-25B.

BGS earnings from operations increased by $1,309 million primarily due to charges incurred in the second quarter of 2020 as a result of the COVID-19 pandemic, higher commercial services volume and severance costs of $130 million in 2020.

Earnings from operations for the three months ended September 30, 2021 were $329 million, compared with a loss of $401 million during the same period in 2020.

BCA loss from operations decreased by $676 million due to higher 737 MAX deliveries, lower period expense, partially offset by favorable 737 MAX customer considerations in 2020 and lower 787 deliveries.

BDS earnings from operations decreased by $192 million, primarily due to the $185 million charge on Commercial Crew.

BGS earnings from operations increased by $373 million, primarily due to higher commercial services volume and severance charges incurred in 2020.

Lower commercial airplane deliveries and the COVID-19 pandemic will continue to have a significant adverse impact on future earnings and margins until deliveries ramp up and return to historical levels.

Earnings from operations for the three months ended June 30, 2021 were $1,023 million, compared with a loss of $2,964 million during the same period in 2020.

BCA loss from operations decreased by $2,290 million due to lower period expense, higher narrow-body and wide-body deliveries and lower research and development spending.

BDS earnings from operations increased by $358 million, primarily due to higher favorable net contract cumulative catch-up adjustments, largely due to a favorable adjustment in 2021 on a non-U.S.

contract and the absence of charges in 2021 related to KC-46A Tanker.

BGS earnings from operations for the three months ended June 30, 2021 were $531 million compared with a loss of $672 million for the same period in 2020, primarily due to charges incurred in the second quarter of 2020 and higher commercial services volume.

Core operating earnings for the six and three months ended June 30, 2021 were $402 million and $755 million, compared with core operating losses of $5,019 million and $3,319 million during the same periods in 2020, primarily due to earnings and losses from operations at BCA, BDS and BGS as described above.

Core operating earnings for the nine and three months ended September 30, 2021 were $461 million and $59 million, compared with core operating losses of $5,773 million and $754 million during the same periods in 2020, primarily due to earnings and losses from operations at BCA, BDS and BGS as described above.

Unallocated Items, Eliminations and Other

The most significant items included in Unallocated items, eliminations and other are shown in the following table:

(Dollars in millions) Six months ended June 30 Three months ended June 30

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2021 2020 2021 2020

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Unallocated items, eliminations and other ($1,032) ($965) ($370) ($314)

Share-based plans expense for the six and three months ended June 30, 2021 increased by $99 million and decreased by $11 million compared with the same periods in 2020.

The higher expense during the first half of 2021 was primarily related to a one-time stock grant of Restricted Stock Units to most employees in December 2020.

Share-based plans expense for the nine and three months ended September 30, 2021 increased by $91 million and decreased by $8 million compared with the same periods in 2020.

The higher expense during the nine months ended September 30, 2021 was primarily related to a one-time stock grant of Restricted Stock Units to most employees in December 2020.

This grant was in lieu of a 2021 salary merit increase.

Deferred compensation expense for the six and three months ended June 30, 2021 increased by $167 million and decreased by $78 million compared with income in the same periods in 2020 primarily driven by broad market conditions and changes in our stock price.

Unallocated research and development expense for the six and three months ended June 30, 2021 decreased by $31 million and $19 million compared with the same periods in 2020 primarily due to lower spending on enterprise investments in product development.

Eliminations and other unallocated items for the six and three months ended June 30, 2021 decreased by $218 million and $67 million compared with the same periods in 2020 primarily due to the timing of expense allocations, as well as higher income on operating investments in 2021.

Deferred compensation expense was $86 million for the nine months ended September 30, 2021 compared with income of $34 million in the same period in 2020.

Deferred compensation was income of $8 million for the three months ended September 30, 2021 compared with expense of $39 million in the same period in 2020.

Changes in deferred compensation were primarily driven by broad market conditions and changes in our stock price.

Unallocated research and development expense for the nine and three months ended September 30, 2021 were relatively consistent with the same periods in 2020 and primarily related to enterprise investments in product development.

Eliminations and other unallocated items for the nine months ended September 30, 2021 decreased by $125 million compared with the same period in 2020 primarily due to higher income on operating investments in 2021.

Eliminations and other unallocated items for the three months ended September 30, 2021 increased by $93 million compared with the same period in 2020 primarily due to the timing of expense allocations, partially offset by higher income on operating investments in 2021.

Net periodic pension benefit costs included in Earnings/(loss) from operations were as follows:

(Dollars in millions) Six months ended June 30 Three months ended June 30

(Dollars in millions) Nine months ended September 30 Three months ended September 30

Pension Plans 2021 2020 2021 2020

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Net periodic benefit cost included in Earnings/(loss) from operations ($2) ($2) $— ($1)

The pension FAS/CAS service cost adjustment recognized in Earnings/(loss) from operations during the six and three months ended June 30, 2021 decreased by $129 million and $67 million compared with the same periods in the prior year, primarily due to reductions in allocated pension cost year over year.

The pension FAS/CAS service cost adjustment recognized in Earnings/(loss) from operations during the nine and three months ended September 30, 2021 decreased by $197 million and $68 million compared with the same periods in the prior year, due to reductions in allocated pension cost year over year.

The net periodic benefit cost included in Earnings/(loss) from operations during 2021 and 2020 reflects the fact that nonunion and the majority of union employees have transitioned to company funded defined contribution retirement savings plans and do not generate ongoing Financial Accounting Standards (FAS) service costs.

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Other Earnings Items

(Dollars in millions) Six months ended June 30 Three months ended June 30

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2021 2020 2021 2020

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Interest and debt expense (2,021) (1,458) (669) (643)

(Loss)/earnings before income taxes (23) (4,926) 549 (3,423)

Loss before income taxes (333) (5,851) (310) (925)

Income tax benefit 207 2,349 178 459

Net earnings/(loss) from continuing operations 6 (3,036) 567 (2,395)

Net loss from continuing operations (126) (3,502) (132) (466)

Net loss attributable to noncontrolling interest (67) (49) (23) (17)

Net earnings/(loss) attributable to Boeing Shareholders $50 ($3,004) $587 ($2,376)

Other income, net increased by $183 million and $105 million during the six and three months ended June 30, 2021, primarily due to higher non-operating pension income.

Non-operating pension income was $352 million and $175 million during the six and three months ended June 30, 2021 compared with $171 million and $84 million during the same periods in 2020, primarily due to higher expected return on plan assets and lower interest cost, partially offset by higher amortization of actuarial losses.

Non-operating postretirement income was $10 million and $5 million during the six and three months ended June 30, 2021 compared with $27 million and $14 million of expense during the same periods in 2020.

Higher Interest and debt expense for the six and three months ended June 30, 2021 is primarily a result of higher debt balances.

Net loss attributable to Boeing Shareholders ($59) ($3,453) ($109) ($449)

Other income, net increased by $94 million and decreased by $89 million during the nine and three months ended September 30, 2021 compared with the same periods in the prior year, primarily due to changes in non-operating pension income.

Non-operating pension income increased $126 million during the nine months ended September 30, 2021 compared with the same period in 2020 primarily due to lower interest cost and higher expected return on plan assets, partially offset by higher settlement charges and higher amortization of net actuarial losses.

Non-operating pension income decreased $55 million during the three months ended September 30, 2021 compared with the same period in 2020 primarily due to higher settlement charges and higher amortization of actuarial losses, partially offset by lower interest cost and higher expected return on plan assets.

Non-operating postretirement income was $16 million and $6 million during the nine and three months ended September 30, 2021 compared with $37 million and $10 million of expense during the same periods in 2020.

Interest and debt expense for the nine and three months ended September 30, 2021 was higher compared with the same periods in the prior year primarily as a result of higher debt balances.

For discussion related to Income Taxes, see Note 3 to our Condensed Consolidated Financial Statements.

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The following table summarizes cost of sales:

(Dollars in millions) Six months ended June 30 Three months ended June 30

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2021 2020 Change 2021 2020 Change

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88.4 % 100.0 % (11.6) % 88.8 % 92.7 % (3.9) %

Cost of sales for the six months ended June 30, 2021 decreased by $1,350 million, or 5% compared with the same period in 2020, primarily due to lower period expense at BCA and BGS, and charges recorded at BDS in 2020 on the KC-46A Tanker program, partially offset by higher revenues at BCA and BDS.

Cost of sales for the three months ended June 30, 2021 increased by $1,610 million, or 12% compared with the same period in 2020, primarily due to higher revenues, partially offset by lower period expenses at BCA and BGS.

Cost of sales as a percentage of Revenues decreased during the six and three months

ended June 30, 2021 compared with the same periods in 2020 primarily due to lower period expense at BCA and BGS and KC-46A Tanker charges recorded at BDS in 2020.

Cost of sales for the nine months ended September 30, 2021 decreased by $889 million, or 2% compared with the same period in 2020, primarily due to higher period expense at BCA and BGS in 2020 and charges recorded at BDS in 2020 on the KC-46A Tanker program, partially offset by higher revenues in 2021.

Cost of sales for the three months ended September 30, 2021 increased by $461 million, or 4% compared with the same period in 2020, primarily due to higher BCA and BGS revenues in 2021, partially offset by lower period expenses at BCA.

Cost of sales as a percentage of Revenues decreased during the nine months ended September 30, 2021 compared with the same period in 2020 primarily due to higher period expense at BCA and BGS in 2020, higher revenues in 2021 and KC-46A Tanker charges recorded at BDS in 2020.

Cost of sales as a percentage of Revenues decreased during the three months ended September 30, 2021 compared with the same period in 2020 primarily due to higher revenues at BCA and BGS in 2021.

Research and Development

The following table summarizes our Research and development expense:

(Dollars in millions) Six months ended June 30 Three months ended June 30

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2021 2020 2021 2020

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Total $1,571 $1,871 $575 $574

Research and development expense decreased by $301 million and $128 million during the six and three months ended June 30, 2021 compared to the same periods in 2020, primarily due to lower spending on the 777X program and lower BCA and enterprise investments in product development.

(Dollars in millions) June 30

Research and development expense decreased by $300 million during the nine months ended September 30, 2021 compared to the same period in 2020, primarily due to lower spending on the 777X program and lower BCA and enterprise investments in product development.

Research and development expense during the three months ended September 30, 2021 was consistent with the same period in 2020.

(Dollars in millions) September 30

2021 December 31

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government contract funding.

The increase during the six months ended June 30, 2021 was primarily due to orders in excess of deliveries, changes in price escalation, and changes in orders that in our assessment do not meet the accounting requirements of Accounting Standards Codification (ASC) 606 for inclusion in backlog, partially offset by cancellations.

During 2020, we received fewer new 737 MAX orders than we were receiving prior to the grounding.

If 737 MAX aircraft remain grounded in certain jurisdictions for an extended period of time and/or if entry into service of the 777X, 737 MAX 7 and/or 737 MAX 10 is further delayed, we may experience additional reductions to backlog and/or significant order cancellations.

The increase during the nine months ended September 30, 2021 was primarily due to orders in excess of deliveries, changes in price escalation, and changes in orders that in our assessment do not meet the accounting requirements of Accounting Standards Codification (ASC) 606 for inclusion in backlog, partially offset by cancellations.

During 2021, we have had higher ASC 606 adjustments of 787 orders as a result of delivery delays related to the inspections and rework.

If 737 MAX aircraft remain grounded in certain jurisdictions for an extended period of time, 787 aircraft deliveries continue to be paused, and/or if entry into service of the 777X, 737 MAX 7 and/or 737 MAX 10 is further delayed, we may experience additional reductions to backlog and/or significant order cancellations.

Additionally, we may continue to experience fewer new orders and increased cancellations across all of our commercial airplane programs as a result of the COVID-19 pandemic and associated impacts on demand.

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government definitive contracts for which funding has not been authorized.

The decrease during the six months ended June 30, 2021 was primarily due to reclassifications to contractual backlog related to BDS and BGS contracts, partially offset by contract awards.

The decrease during the nine months ended September 30, 2021 was primarily due to reclassifications to contractual backlog related to BDS and BGS contracts, partially offset by contract awards.

Additional Considerations

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Government, Mexico and Canada reached an agreement to end the steel and aluminum tariffs between these countries.

Implementation of the U.S./Mexico/Canada Free Trade Agreement (USMCA) will also result in lower tariffs.

Implementation of the U.S./

Mexico/Canada Free Trade Agreement (USMCA) will also result in lower tariffs.

We continue to monitor the potential for any extra costs that may result from the remaining global tariffs.

The current status of U.S.-Russia relations is creating an adverse climate for our business.

Government continues to impose and/or consider imposing sanctions on certain businesses and individuals in Russia.

Although our operations or sales in Russia have not been impacted to date, we continue to monitor additional sanctions that may be imposed by the U.S.

Government and any responses from Russia that could affect our supply chain, business partners or customers.

We continue to monitor and evaluate additional sanctions and export restrictions that may be imposed by the U.S.

Government and any responses from Russia that could directly affect our supply chain, business partners or customers.

We also continue to support the 737 MAX return to service in Russia.

and European Union (EU) have been engaged in two long-running disputes at the World Trade Organization (WTO) relating to large civil aircraft.

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Results of Operations

(Dollars in millions) Six months ended June 30 Three months ended June 30

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2021 2020 2021 2020

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Operating margins (13.7) % (54.2) % (15.5) % (38.1) %

BCA revenues increased by $2,446 million for the six months ended June 30, 2021 compared with the same period in 2020 primarily driven by higher 737 MAX deliveries due to recertification and return to service in many jurisdictions, partially offset by lower 787 deliveries.

Revenue was also lower in the prior year period due to $521 million of 737 MAX customer considerations.

BCA revenues increased by $4,382 million for the three months ended June 30, 2021 compared with the same period in 2020 primarily driven by higher narrow-body and wide-body deliveries due to 737 MAX recertification and return to service in many jurisdictions and COVID-19 recovery.

BCA revenues increased by $3,309 million for the nine months ended September 30, 2021 compared with the same period in 2020 primarily driven by higher 737 MAX deliveries due to recertification and return to service in many jurisdictions, partially offset by lower 787 deliveries.

Revenue was also lower in the prior year period due to $370 million of 737 MAX customer considerations.

BCA revenues increased by $863 million for the three months ended September 30, 2021 compared with the same period in 2020 primarily driven by higher 737 MAX deliveries due to recertification and return to service in many jurisdictions, partially offset by lower 787 deliveries.

While we resumed deliveries of 737 MAX aircraft in December 2020, the 737 MAX grounding is still in effect in certain non-U.S.

jurisdictions.

jurisdictions and 787 deliveries are currently paused.

Revenues will continue to be significantly impacted until deliveries ramp up and the commercial airline industry recovers from the impacts of COVID-19.

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737 * 747 767 * 777 787 Total

Deliveries during the first six months of 2021 113 (8) 2 13 (4) 14 14 156

Deliveries during the first six months of 2020 9 (7) 1 14 (6) 10 36 70

Deliveries during the second quarter of 2021 50 (3) 1 8 (3) 8 12 79

Deliveries during the second quarter of 2020 4 (4) 1 4 (1) 4 7 20

Deliveries during the first nine months of 2021 179 (12) 4 24 (9) 20 14 241

Deliveries during the first nine months of 2020 12 (10) 2 20 (8) 15 49 98

Deliveries during the third quarter of 2021 66 (4) 2 11 (5) 6 0 85

Deliveries during the third quarter of 2020 3 (3) 1 6 (2) 5 13 28

Cumulative deliveries as of 9/30/2021 7,661 1,564 1,230 1,673 1,006

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Loss From Operations

BCA loss from operations was $1,328 million for six months ended June 30, 2021 compared with $4,830 million in the same period in 2020 reflecting lower period expense, higher 737 deliveries and lower research and development spending.

Period expense for the six months ended June 30, 2021 included $1,083 million of abnormal production costs related to 737 MAX.

Period expense for the six months ended June 30, 2020, included $1,509 million of abnormal production costs related to 737 MAX, $521 million of charges for 737 MAX customer considerations, $468 million of severance costs, $270 million of abnormal production costs from the temporary suspension of Puget Sound operations in response to COVID-19, and a $336 million charge related to 737NG frame fitting component repair costs.

BCA loss from operations was $472 million for three months ended June 30, 2021 compared with $2,762 million in the same period in 2020 reflecting lower period expense, higher narrow-body and wide-body deliveries and lower research and development spending.

Period expense for the three months ended June 30, 2021 included $515 million of abnormal production costs related to 737 MAX.

Period expense for the three months ended June 30, 2020, included $712 million of abnormal production costs related to 737 MAX, $551 million of charges for 737 MAX customer considerations, $468 million of severance costs and $133 million of abnormal production costs from the temporary suspension of Puget Sound operations in response to COVID-19.

BCA loss from operations was $2,021 million for nine months ended September 30, 2021 compared with $6,199 million in the same period in 2020 reflecting higher 737 MAX deliveries, lower period expense, lower 737 MAX customer considerations and lower research and development spending, partially offset by lower 787 deliveries.

Period expense for the nine months ended September 30, 2021 included $1,501 million of abnormal production costs related to 737 MAX and $183 million of abnormal production costs related to the 787 program.

Period expense for the nine months ended September 30, 2020, included $2,099 million of abnormal production costs related to 737 MAX, $610 million of severance costs, $270 million of abnormal production costs from the temporary suspension of Puget Sound operations in response to COVID-19, and a $336 million charge related to 737NG frame fitting component repair costs.

BCA loss from operations was $693 million for three months ended September 30, 2021 compared with $1,369 million in the same period in 2020 reflecting higher 737 MAX deliveries, lower period expense, partially offset by favorable 737 MAX customer considerations in 2020 and lower 787 deliveries.

Period expense for the three months ended September 30, 2021 included $418 million of abnormal production costs related to 737 MAX and $183 million of abnormal production costs related to the 787 program.

Period expense for the three months ended September 30, 2020, included $590 million of abnormal production costs related to 737 MAX and $142 million of severance costs.

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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 Topic 606.

BCA total backlog increased from $281,588 million as of December 31, 2020 to $285,332 million at June 30, 2021 reflecting new orders in excess of deliveries, changes in projected price escalation and changes in orders that in our assessment do not meet the accounting requirements of ASC 606 for inclusion in backlog, partially offset by aircraft order cancellations.

Aircraft order cancellations during the six months ended June 30, 2021 totaled $21,626 million and primarily relate to 737 MAX and 787 aircraft.

ASC 606 adjustments for the six months ended June 30, 2021 resulted in an increase to backlog of $2,737 million primarily due to 777X aircraft, partially offset by 737 MAX and 787 aircraft.

BCA total backlog increased from $281,588 million as of December 31, 2020 to $289,644 million at September 30, 2021 reflecting new orders in excess of deliveries, changes in projected price escalation and changes in orders that in our assessment do not meet the accounting requirements of ASC 606 for inclusion in backlog, partially offset by aircraft order cancellations.

Aircraft order cancellations during the nine months ended September 30, 2021 totaled $25,376 million and primarily relate to 737 MAX and 787 aircraft.

ASC 606 adjustments for the nine months ended September 30, 2021 resulted in an increase to

backlog of $3,846 million primarily due to 777X aircraft, partially offset by 737 MAX and 787 aircraft.

The ASC 606 adjustments include aircraft orders where a customer controlled contingency now exists, as well as orders where we can no longer assert that the customer is committed to perform or that it is probable that the customer will pay the full amount of consideration when it is due.

Additionally, we may continue to experience fewer new orders and increased cancellations across all of our commercial airplane programs as a result the COVID-19 pandemic and associated impacts on demand.

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Program Highlights

737 Program The accounting quantity for the 737 program increased by 400 and 200 units during the six and three months ended June 30, 2021 due to the program's normal progress of obtaining additional orders and delivering airplanes.

737 Program The accounting quantity for the 737 program increased by 400 during the nine months ended September 30, 2021 due to the program's normal progress of obtaining additional orders and delivering airplanes.

We continue to make progress on the certification of the 737 MAX 7 and 737 MAX 10.

We currently anticipate the first delivery of 737 MAX 7 in 2022 and the 737 MAX 10 in 2023.

See further discussion of the 737 MAX Grounding and COVID-19 Impacts in Note 9 to our Condensed Consolidated Financial Statements .

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We believe that ending production of the 747 will not have a material impact on our financial position, results of operations or cash flows.

767 Program The accounting quantity for the 767 program increased by 24 units during the three months ended June 30, 2021 due to the program's normal progress of obtaining additional orders and delivering airplanes.

767 Program The accounting quantity for the 767 program increased by 36 and 12 units during the nine and three months ended September 30, 2021 due to the program's normal progress of obtaining additional orders and delivering airplanes.

The 767 assembly line includes the commercial program and a derivative to support the tanker program.

The commercial program has near breakeven gross margins.

The commercial program has near break-even gross margins.

We are currently producing at a rate of 3 aircraft per month.

777 and 777X Programs There were no changes to the accounting quantities for the 777 and 777X programs during the first or second quarter of 2021.

777 and 777X Programs The accounting quantity for the 777 program increased by 40 units during the three months ended September 30, 2021 due to the program's normal progress of obtaining additional orders and delivering airplanes.

There were no changes to the accounting quantity for the 777X program during the nine months ended September 30, 2021.

The production rate expectation for the combined 777/777X program remains at 2 per month in 2021.

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We recorded a $6.5 billion reach-forward loss on the 777X program in the fourth quarter of 2020.

We did not record an increase to the reach-forward loss in the first or second quarter of 2021.

We did not record an increase to the reach-forward loss in the first three quarters of 2021.

The 777X fourth quarter 2020 revised schedule and reach-forward loss reflected a number of factors, including an updated assessment of global certification requirements informed by continued discussions with regulators and a management decision in the fourth quarter of 2020 to make modifications to the aircraft’s design, an updated assessment of COVID-19 impacts on market demand, and discussions with our customers with respect to aircraft delivery timing.

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We delivered 12 aircraft in the second quarter prior to deliveries being paused in May 2021.

At June 30, 2021 we have approximately 100 aircraft in inventory.

We are conducting inspections and rework and continue to engage in detailed discussions with the FAA on verification methodology for 787.

In July 2021, we reprioritized production resources to support inspections and rework.

While production resources focus on inspections and rework, the production rate will be temporarily below 5 per month.

We expect the production rate to gradually return to 5 per month.

We expect fewer than half of the 100 aircraft in inventory at June 30, 2021 to be delivered by the end of 2021.

We continue to work with customers and implement changes in the production process designed to

ensure that newly-built airplanes meet our specifications and do not require further inspections.

Deliveries remained paused during the third quarter of 2021.

At September 30, 2021 we have approximately 105 aircraft in inventory.

We have identified production quality issues, including in our supply chain, which have contributed to the pause in 787 deliveries.

In July 2021, we announced that we were reprioritizing production resources to support inspections and rework.

We continue to conduct inspections and rework and are engaging in detailed discussions with the FAA regarding required actions for resuming delivery of the 787.

We are currently producing at a rate of 2 per month and now expect to continue to produce at this rate until deliveries resume.

We have determined that in the current environment a production rate of 2 per month represents an abnormally low production rate, and we have also determined that rework costs are excessive and should also be accounted for as abnormal production costs that are being expensed as incurred.

As a result of ongoing rework and lower production rates, we expect to incur approximately $1 billion of abnormal production costs on a cumulative basis.

We expect the production rate to return to 5 per month over time after deliveries resume.

When deliveries resume, we plan to prioritize delivering aircraft from inventory.

We continue to work with customers and suppliers regarding timing of future deliveries and production rate changes.

We are also continuing to implement changes in the production process designed to ensure that newly-built airplanes meet our specifications and do not require further inspections.

The exact timing of deliveries and future production rates will depend upon ongoing inspections and rework, ongoing customer and supplier engagement, production stability and our activities with the FAA.

During the first quarter of 2021, we consolidated 787 production in South Carolina, in line with our previous assumptions, which did not have a significant financial impact on the program.

The 787 program has near breakeven gross margins.

The production issues and associated rework, as well as the temporary rate reduction and delivery pause, are pressuring gross margins.

China is a significant market for the 787 program, and if the program is unable to obtain orders from China in future quarters, we may be required to adjust production rate assumptions.

The 787 program

has near break-even gross margins.

The production issues and associated rework, as well as the temporary rate reduction and delivery pause, are pressuring gross margins and, as discussed above, are expected to result in further abnormal costs in future quarters that will be expensed as incurred.

China is a significant market for the 787 program, and if the program is unable to obtain orders from China in future quarters, we may be required to further adjust production rate assumptions in future periods.

If we are required to further reduce the accounting quantity and/or production rates, experience further delivery delays, or experience other factors that result in lower margins, the program could record a reach-forward loss in future periods.

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The development and ongoing production of commercial aircraft is extremely complex, involving extensive coordination and integration with suppliers and highly-skilled labor from employees and other partners.

Meeting or exceeding our performance and reliability standards, as well as those of customers and regulators, can be costly and technologically challenging.

Meeting or exceeding our performance and reliability standards, as well as those of customers and regulators, can be costly and technologically challenging, such as the 787 production issues and associated rework.

In addition, the introduction of new aircraft and derivatives, such as the 777X and 737 MAX derivatives, involves increased risks associated with meeting development, production and certification schedules.

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The Omnibus appropriations acts for fiscal year 2021 (FY21), enacted in December 2020, provided FY21 appropriations for government departments and agencies, including $704 billion for the United States Department of Defense (U.S.

DoD), $23 billion for the National Aeronautics and Space Administration (NASA) and $18 billion for the Federal Aviation Administration (FAA).

DoD), $23 billion for the National Aeronautics and Space Administration (NASA) and $18 billion for the FAA.

FY21 appropriations included funding for Boeing’s major programs, such as the F/A-18 Super Hornet, F-15EX, CH-47 Chinook, AH-64 Apache, V-22 Osprey, KC-46A Tanker, P-8 Poseidon and Space Launch System.

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DoD, $25 billion in funding for NASA and $19 billion for the FAA.

While the President’s Budget request for FY22 includes funding for a majority of Boeing’s programs, it did not include funding for F/A-18 Super Hornet, P-8 Poseidon and H-47F Block II production aircraft.

While there is some continued congressional support for F/A-18 and H-47F Block II production aircraft for FY22, there is ongoing uncertainty with respect to these and other program-level appropriations for FY22 and future fiscal years.

Future budget cuts or investment priority changes, including changes associated with the authorizations and appropriations process, could result in reductions, cancellations, and/or delays of existing contracts or programs.

Any of these impacts could have a material effect on our results of operations, financial position, and/or cash flows.

While the President’s budget request for FY22 includes funding for a majority of Boeing’s programs, it did not include funding for F/A-18 Super Hornet, P-8 Poseidon and CH-47F Block II production aircraft.

While there is some continued congressional support for F/A-18 and CH-47F Block II production aircraft for FY22, there is ongoing uncertainty with respect to these and other program-level appropriations for FY22 and future fiscal years.

These programs also continue to pursue non-U.S.

sales opportunities.

The Continuing Resolution (CR), enacted by U.S.

Congress on September 30, 2021, continues federal funding at FY21 appropriated levels through December 3, 2021.

Any of these impacts could have a material effect on our results of operations, financial position, and/or cash flows.

Results of Operations

(Dollars in millions) Six months ended June 30 Three months ended June 30

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2021 2020 2021 2020

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Deliveries of units for new-build production aircraft, including remanufactures and modifications, were as follows:

Six months ended June 30 Three months ended June 30

Nine months ended September 30 Three months ended September 30

2021 2020 2021 2020

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P-8 Models 11 9 5 3

KC-46A Tanker 4 6 2 1

KC-46 Tanker 7 10 3 4

Total 122 120 37 37

BDS revenues for the six months ended June 30, 2021 increased by $1,431 million compared with the same period in 2020, primarily due to higher revenue on the KC-46A Tanker program due to new orders for 27 aircraft received during the first quarter of 2021, and the absence of charges related to the KC-46A Tanker program in 2021, which reduced revenue in 2020.

Favorable cumulative contract catch-up adjustments for the six months ended June 30, 2021 were $466 million higher than the comparable period in the prior year due to the absence of Tanker charges.

BDS revenues for the three months ended June 30, 2021 increased by $288 million compared with the same period in 2020, primarily due to higher military derivative aircraft revenues.

Additionally, favorable cumulative contract catch-up adjustments for the three months ended June 30, 2021 compared with the same period in 2020 were $80 million higher than the comparable period largely due to a favorable non-U.S.

contract adjustment.

BDS revenues for the nine months ended September 30, 2021 increased by $1,200 million compared with the same period in 2020, primarily due to higher revenue on the KC-46A Tanker program due to new orders for 27 aircraft received during the first quarter of 2021, and the absence of charges related to the KC-46A Tanker program in 2021, which reduced revenue in 2020.

Cumulative contract catch-up adjustments for the nine months ended September 30, 2021 were $432 million less unfavorable than the comparable period in the prior year due to the absence of Tanker charges.

BDS revenues for the three months ended September 30, 2021 decreased by $231 million compared with the same period in 2020, primarily due higher net unfavorable cumulative contract adjustments of $34 million compared to the prior year period.

This was largely to due changes on Commercial Crew during the quarter, discussed below.

Net lower volume also contributed to the decrease.

Earnings From Operations

BDS earnings from operations for the six months ended June 30, 2021 increased by $954 million largely due to the absence of charges related to the KC-46A Tanker program.

BDS earnings from operations for the nine months ended September 30, 2021 increased by $762 million largely due to the absence of charges related to the KC-46A Tanker program.

The first quarter of 2020 included charges of $827 million and $168 million related to KC-46A Tanker and VC-25B.

The first quarter of 2021 included an increase to the reach-forward loss on VC-25B of $318 million, which is largely due to COVID-19 impacts and performance issues at a key supplier.

As a result, the net unfavorable cumulative contract catch-up adjustments for the six months ended June 30, 2021 were $744 million lower than the comparable period in the prior year.

BDS earnings from operations for the three months ended June 30, 2021 increased $358 million compared with the same period in 2020 largely due to higher favorable net contract cumulative catch-up adjustments which were $130 million more favorable than the prior year period largely due to a favorable adjustment in 2021 on a non-U.S.

contract and the absence of charges in 2021 related to KC-46A Tanker.

BDS earnings from operations includes equity earnings of $37 million and $30 million for the six and three months ended June 30, 2021 compared with equity earnings of $35 million and equity loss of $2 million for the same periods in 2020.

The year over year variance reflect higher earnings from our United Launch Alliance joint venture.

BDS backlog decreased from $60,847 million as of December 31, 2020 to $58,705 million at June 30, 2021, primarily due to revenue recognized on contracts awarded in prior periods.

The third quarter of 2021 included an increase to the reach-forward loss on Commercial Crew of $185 million driven by the second uncrewed Orbital Flight Test now anticipated in 2022 and the latest assessment of remaining work.

As a result, the net unfavorable cumulative contract catch-up adjustments for the nine months ended September 30, 2021 were $707 million lower than the comparable period in the prior year.

BDS earnings from operations for the three months ended September 30, 2021 decreased $192 million compared with the same period in 2020 largely due to higher unfavorable net contract cumulative catch-up adjustments which were $37 million more unfavorable than the prior year period largely due to the $185 million charge on Commercial Crew.

BDS earnings from operations includes equity earnings of $48 million and $11 million for the nine and three months ended September 30, 2021 compared with equity earnings of $45 million and $10 million for the same periods in 2020.

BDS backlog decreased from $60,847 million as of December 31, 2020 to $58,435 million at September 30, 2021, primarily due to revenue recognized on contracts awarded in prior periods.

Additional Considerations

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Results of Operations

(Dollars in millions) Six months ended June 30 Three months ended June 30

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2021 2020 2021 2020

Revenues $12,037 $11,810 $4,221 $3,694

Earnings/(loss) from operations $972 $36 $531 ($672)

Earnings from operations $1,616 $307 $644 $271

Operating margins 13.4 % 2.6 % 15.3 % 7.3 %

BGS revenues for the six months ended June 30, 2021 decreased by $300 million compared with the same period in 2020 primarily due to lower commercial services revenue, partially offset by higher government volume.

Commercial services revenue is lower in 2021 as the COVID-19 pandemic had minimal impact on commercial services revenue in the first quarter of 2020.

The net favorable impact of cumulative contract catch-up adjustments for the six months ended June 30, 2021 were $54 million higher than the comparable period in the prior year.

BGS revenues for the nine months ended September 30, 2021 increased by $227 million compared with the same period in 2020 primarily due to higher commercial services and government services volume.

While commercial services volume is beginning to recover, it remains below pre-pandemic levels.

The net favorable impact of cumulative contract catch-up adjustments for the nine months ended September 30, 2021 were consistent with the comparable period in the prior year.

We expect the impacts of the COVID-19 pandemic to continue to have an adverse impact on BGS commercial revenues in future quarters until the commercial airline industry environment recovers.

BGS revenues for the three months ended June 30, 2021 increased by $579 million compared with the same period in 2020 primarily due to higher commercial services volume.

While commercial services volume is beginning to recover in the second quarter of 2021, it remains below pre-pandemic levels.

The net favorable impact of cumulative contract catch-up adjustments for the three months ended June 30, 2021 were $1 million lower than the comparable period in the prior year.

BGS revenues for the three months ended September 30, 2021 increased by $527 million compared with the same period in 2020 primarily due to higher commercial services volume.

While commercial services volume is beginning to recover, it remains below pre-pandemic levels.

The net favorable impact of cumulative contract catch-up adjustments for the three months ended September 30, 2021 were $54 million lower than the comparable period in the prior year.

We expect the impacts of the COVID-19 pandemic to continue to have an adverse impact on BGS commercial revenues in future quarters until the commercial airline industry environment recovers.

Earnings From Operations

BGS earnings from operations for the six months ended June 30, 2021 increased by $936 million compared with the same period in 2020, primarily due to charges incurred in the second quarter of 2020 due to the COVID-19 pandemic.

The net favorable impact of cumulative contract catch-up adjustments for the six months ended June 30, 2021 were $63 million higher than the comparable period in the prior year.

BGS earnings from operations for the three months ended June 30, 2021 was $531 million compared with a loss of $672 million during the same period in 2020, primarily due to charges incurred in the second quarter of 2020 due to the COVID-19 pandemic and higher commercial services revenue.

The net favorable impact of cumulative contract catch-up adjustments for the three months ended June 30, 2021 were $14 million higher than the comparable period in the prior year.

BGS backlog decreased from $20,632 million as of December 31, 2020 to $19,029 million at June 30, 2021, primarily due to revenue recognized on contracts awarded in prior years.

BGS earnings from operations for the nine months ended September 30, 2021 increased by $1,309 million compared with the same period in 2020, primarily due to charges incurred in the second quarter of 2020 due to the COVID-19 pandemic, as well as higher commercial services volume.

Charges in the second quarter of 2020 included $370 million for higher expected credit losses primarily driven by customer liquidity issues, $237 million of inventory write-downs and $153 million of related impairments of distribution rights primarily driven by airlines' decisions to retire certain aircraft and $99 million of contract termination and facility impairments charges.

Additionally, severance costs for the nine months ended September 30, 2020 were $130 million.

The net favorable impact of cumulative contract catch-up adjustments for the nine months ended September 30, 2021 were $4 million lower than the comparable period in the prior year.

BGS earnings from operations for the three months ended September 30, 2021 increased by $373 million compared with the same period in 2020, primarily due to higher commercial services volume, as well as $66 million of severance charges incurred in 2020.

The net favorable impact of cumulative contract catch-up adjustments for the three months ended September 30, 2021 were $67 million lower than the comparable period in the prior year.

BGS backlog decreased from $20,632 million as of December 31, 2020 to $18,781 million at September 30, 2021, primarily due to revenue recognized on contracts awarded in prior years.

Boeing Capital

Results of Operations

(Dollars in millions) Six months ended June 30 Three months ended June 30

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2021 2020 2021 2020

Revenues $209 $205 $71 $71

Earnings/(loss) from operations $57 $17 $36 ($7)

Earnings from operations $99 $47 $42 $30

Operating margins 47.4 % 22.9 % 59.2 % 42.3 %

BCC segment revenues consist principally of lease income from equipment under operating lease, interest income from financing receivables and notes, and other income.

BCC’s revenues increased by $4 million and $9 million for the six and three months ended June 30, 2021 compared with the same periods in 2020 primarily due to net gains on re-lease of assets, partially offset lower operating lease income and lower interest income on notes receivable.

BCC’s revenues for the nine months ended September 30, 2021 increased by $4 million compared with the same period in 2020 primarily due to higher gains on re-lease of assets.

BCC’s revenues for the three months ended September 30, 2021 were consistent with the same period in 2020.

Earnings From Operations

BCC’s earnings from operations are presented net of interest expense, provision for (recovery of) losses, asset impairment expense, depreciation on leased equipment and other operating expenses.

Earnings from operations for the six and three months ended June 30, 2021 increased by $40 million and $43 million compared with same periods in 2020 primarily due to lower asset impairment expense.

Earnings from operations for the nine months ended September 30, 2021 increased by $52 million compared with the same period in 2020 primarily due to lower asset impairment expense.

Earnings from operations for the three months ended September 30, 2021 increased by $12 million compared with the same period in 2020 primarily due to lower provision for losses and lower depreciation expense.

Financial Position

The following table presents selected financial data for BCC:

(Dollars in millions) June 30

(Dollars in millions) September 30

2021 December 31

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Debt-to-equity ratio 4.9-to-1 5-to-1

BCC’s customer financing and investment portfolio at June 30, 2021 decreased $98 million from December 31, 2020 primarily due to note payoffs and portfolio run-off.

BCC’s customer financing and investment portfolio at September 30, 2021 decreased $179 million from December 31, 2020 primarily due to note payoffs and portfolio run-off.

BCC enters into certain intercompany transactions with Boeing, reflected in Unallocated items, eliminations and other, in the form of intercompany guarantees and other subsidies that mitigate the effects of certain credit quality or asset impairment issues on the BCC segment.

Aircraft subject to leases with a carrying value of approximately $11 million are scheduled to be returned off lease in the next 12 months.

We are seeking to remarket these aircraft or have the leases extended.

There are no uncommitted aircraft subject to leases scheduled to be returned off lease in the next 12 months.

Liquidity and Capital Resources

Cash Flow Summary

(Dollars in millions) Six months ended June 30

Net earnings/(loss) $6 ($3,036)

(Dollars in millions) Nine months ended September 30

Net loss ($126) ($3,502)

Non-cash items 2,942 2,874

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Cash & cash equivalents, including restricted, at end of period $9,820 $10,647

Operating Activities Net cash used by operating activities was $3.9 billion during the six months ended June 30, 2021, compared with $9.6 billion during the same period in 2020 driven by earnings in 2021 primarily due to 737 deliveries and recovery from impacts of COVID-19 across the business, as well as improved working capital and use of common stock in lieu of cash to fund Company contributions to our 401(k) plans in 2021 as compared to the prior year.

Operating Activities Net cash used by operating activities was $4.1 billion during the nine months ended September 30, 2021, compared with $14.4 billion during the same period in 2020.

The $10.3 billion year over year improvement is primarily driven by nearly break-even earnings in 2021 and improved working capital.

The changes in working capital reflect the significant increase in commercial airplane inventory in 2020 driven by lower deliveries due to the COVID-19 pandemic and the 737 MAX grounding.

While 787 inventory increased in 2021 due to the continued buildup of more aircraft caused by production issues, the increase was largely offset by a decrease in 737 MAX inventory reflecting the resumption of deliveries.

Cash provided by Advances and progress billings was $0.3 billion in 2021, as compared with $1.8 billion in 2020.

Compensation payments to 737 MAX customers totaled $1.5 billion and $1.2 billion during the six months ended June 30, 2021 and 2020.

Additionally, in the first quarter of 2021, we paid $0.7 billion consistent with the terms of the Deferred Prosecution Agreement between Boeing and the U.S.

In 2021, inventories stabilized as the decrease in 737 MAX inventory following the resumption of 737 MAX deliveries was offset by the continued buildup of 787 aircraft caused by production issues and 777X inventory growth Compensation payments to 737 MAX customers totaled $2.0 billion and $1.7 billion during the nine months ended September 30, 2021 and 2020.

In the first quarter of 2021, we paid $0.7 billion consistent with the terms of the Deferred Prosecution Agreement between Boeing and the U.S.

Department of Justice.

Additionally, in the third quarter of 2021, we received income tax refunds of $1.3 billion.

Cash provided by Advances and progress billings was $0.8 billion in 2021, as compared with $0.4 billion in 2020.

The reduction in 787 deliveries and the residual impacts of the 737 MAX grounding are expected to continue to have a significant negative impact on our operating cash flows during 2021.

Payables to suppliers who elected to participate in supply chain financing programs decreased by $0.4 billion during the six months ended June 30, 2021 compared with $1.3 billion for the same period in 2020.

The decrease for both periods is primarily due to reductions in commercial purchases from suppliers.

Payables to suppliers who elected to participate in supply chain financing programs decreased by $1.0 billion during the nine months ended September 30, 2021 and 2020.

The decrease for both periods is primarily due to reductions in commercial purchases from suppliers and timing of payments.

Supply chain financing is not material to our overall liquidity.

Investing Activities Cash provided by investing activities was $4.4 billion during the six months ended June 30, 2021, compared with cash used of $12.7 billion during the same period in 2020, due to net proceeds from investments of $4.9 billion in 2021 compared to net contributions to investments of $12.0 billion in 2020.

In the six months ended June 30, 2021 and 2020, capital expenditures totaled $0.5 billion and $0.8 billion.

We expect capital expenditures in 2021 to be relatively consistent with 2020.

Financing Activities Cash used by financing activities was $67 million during the six months ended June 30, 2021 compared with cash provided of $32.7 billion during the same period in 2020.

During the six months ended June 30, 2021, net repayments were $56 million compared with net borrowings of $34.0 billion in the same period in 2020.

Investing Activities Cash provided by investing activities was $7.4 billion during the nine months ended September 30, 2021, compared with cash used of $16.8 billion during the same period in 2020, due to net proceeds from investments of $7.8 billion in 2021 compared to net contributions to investments of $16.1 billion in 2020.

In the nine months ended September 30, 2021 and 2020, capital expenditures totaled $0.8 billion and $1.0 billion.

We expect capital expenditures in 2021 to be lower than in 2020.

Financing Activities Cash used by financing activities was $1.2 billion during the nine months ended September 30, 2021 compared with cash provided of $32.3 billion during the same period in 2020.

During the nine months ended September 30, 2021, net repayments were $1.2 billion compared with net borrowings of $33.6 billion in the same period in 2020.

The absence of dividends in 2021 reflects the Company’s decision in March 2020 to suspend the declaration or payment of dividends until further notice.

For further discussion see Liquidity Matters in Note 1 to our Condensed Consolidated Financial Statements.

As of June 30, 2021 and December 31, 2020, the total debt balance was $63.6 billion.

At June 30, 2021, $6.5 billion of debt was classified as short-term.

Debt, including intercompany loans, attributable to BCC totaled $1.5 billion, $0.5 billion of which was classified as short-term.

As of September 30, 2021 the total debt balance was $62.4 billion, down from $63.6 billion at December 31, 2020.

At September 30, 2021, $5.4 billion of debt was classified as short-term.

including intercompany loans, attributable to BCC totaled $1.5 billion, $0.3 billion of which was classified as short-term.

Capital Resources The impacts of the COVID-19 pandemic, 737 MAX grounding, and reduction in 787 deliveries are having a significant negative impact on our liquidity and ongoing operations and creating significant uncertainty.

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For further discussion see Liquidity Matters in Note 1 to our Condensed Consolidated Financial Statements.

At June 30, 2021, we had $8.3 billion of cash and $13.1 billion of short term investments.

At June 30, 2021, we had $14.8 billion of unused borrowing capacity on revolving credit line agreements, of which $3.1 billion expires in October 2021, $3.2 billion expires in October 2022, $5.3 billion expires in March 2023, and $3.2 billion expires in October 2024.

The facility scheduled to expire in October 2021 has a one-year term out option that allows us to extend the maturity of any borrowings one additional year.

At September 30, 2021, we had $9.8 billion of cash and $10.2 billion of short term investments.

At September 30, 2021, we had $14.8 billion of unused borrowing capacity on revolving credit line agreements, of which $3.1 billion was set to expire in October 2021, $3.2 billion expires in October 2022, $5.3 billion expires in March 2023, and $3.2 billion expires in October 2024.

In October 2021, we renewed the 364-day facility for $3.1 billion, which now expires in October 2022.

This 364-day facility has a one-year term out option that allows us to extend the maturity of any borrowings one additional year.

We anticipate that these credit lines will remain undrawn and primarily serve as back-up liquidity to support our general corporate borrowing needs.

Any future borrowings may affect our credit ratings and are subject to various debt covenants.

At June 30, 2021, we were in compliance with the covenants for our debt and credit facilities.

At September 30, 2021, we were in compliance with the covenants for our debt and credit facilities.

The most restrictive covenants include a limitation on mortgage debt and sale and leaseback transactions as a percentage of consolidated net tangible assets (as defined in the credit agreements), and a limitation on consolidated debt as a percentage of total capital (as defined).

When considering debt covenants, we continue to have substantial borrowing capacity.

Customer Financing commitments totaled $13.5 billion and $11.5 billion at June 30, 2021 and December 31, 2020.

Customer Financing commitments totaled $13.3 billion and $11.5 billion at September 30, 2021 and December 31, 2020.

The increase relates to new financing commitments.

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Legal contingencies are discussed in Note 17 to our Condensed Consolidated Financial Statements.

Environmental Remediation We are involved with various environmental remediation activities and have recorded a liability of $582 million at June 30, 2021.

Environmental Remediation We are involved with various environmental remediation activities and have recorded a liability of $629 million at September 30, 2021.

For additional information, see Note 9 to our Condensed Consolidated Financial Statements.

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Our unaudited condensed consolidated interim financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP) which we supplement with certain non-GAAP financial information.

These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently.

These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such

measures differently.

We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Core operating earnings, core operating margin and core earnings per share exclude the FAS/CAS service cost adjustment.

The FAS/CAS service cost adjustment represents the difference between the Financial Accounting Standards (FAS) pension

and postretirement service costs calculated under GAAP and costs allocated to the business segments.

The FAS/CAS service cost adjustment represents the difference between the Financial Accounting Standards (FAS) pension and postretirement service costs calculated under GAAP and costs allocated to the business segments.

Core earnings per share excludes both the FAS/CAS service cost adjustment and non-operating pension and postretirement expenses.

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Other postretirement benefit costs are allocated to all business segments based on CAS, which is generally based on benefits paid.

The Pension FAS/CAS service cost adjustments recognized in Earnings/(loss) from operations were benefits of $384 million and $191 million for the six and three months ended June 30, 2021, compared with benefits of $513 million and $258 million for the six and three months ended June 30, 2020.

The non-operating pension expenses included in Other income, net were benefits of $352 million and $175 million for the six and three months ended June 30, 2021, compared with benefits of $171 million and $84 million for the six and three months ended June 30, 2020.

The benefits in 2021 reflect expected returns in excess of interest cost and amortization of actuarial losses.

The Pension FAS/CAS service cost adjustments recognized in Earnings/(loss) from operations were benefits of $576 million and $192 million for the nine and three months ended September 30, 2021, compared with benefits of $773 million and $260 million for the nine and three months ended September 30, 2020.

The lower benefits in 2021 were primarily due to reductions in allocated pension cost year over year.

The non-operating pension expenses included in Other income, net were benefits of $381 million and $29 million for the nine and three months ended September 30, 2021, compared with benefits of $255 million and $84 million for the nine and three months ended September 30, 2020.

The higher benefits for the nine months ended September 30, 2021 were primarily due to lower interest cost and higher expected return on plan assets, partially offset by higher settlement charges and higher amortization of actuarial losses.

The lower benefits for the three months ended September 30, 2021 were primarily due to higher settlement charges and higher amortization of actuarial losses, partially offset by lower interest cost and higher expected return on plan assets.

For further discussion of pension and other postretirement costs see the Management’s Discussion and Analysis on page 44 of this Form 10-Q and on page 57 of our 2020 Annual Report on Form 10-K.

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The table below reconciles the non-GAAP financial measures of core operating earnings/(loss), core operating margin and core earnings/(loss) per share with the most directly comparable GAAP financial measures of earnings/(loss) from operations, operating margins and diluted earnings/(loss) per share.

(Dollars in millions, except per share data) Six months ended June 30 Three months ended June 30

(Dollars in millions, except per share data) Nine months ended September 30 Three months ended September 30

2021 2020 2021 2020

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Core operating margins (non-GAAP) 1.0 % (13.5) % 0.4 % (5.3) %

Diluted earnings/(loss) per share, as reported $0.09 ($5.31) $1.00 ($4.20)

Diluted loss per share, as reported ($0.10) ($6.10) ($0.19) ($0.79)

Pension FAS/CAS service cost adjustment (1)

8 unchanged sentences

0.43 0.47 0.11 0.16

Core (loss)/earnings per share (non-GAAP) ($1.12) ($6.49) $0.40 ($4.79)

Core loss per share (non-GAAP) ($1.72) ($7.88) ($0.60) ($1.39)

Weighted average diluted shares (in millions) 587.3 566.3 589.0 566.6

2 unchanged sentences

(2) Non-operating pension and postretirement expenses represent the components of net periodic benefit costs other than service cost.

These expenses are included in Other income, net and are excluded from Core earnings/(loss) per share (non-GAAP).

These expenses are included in Other income, net and are excluded from Core loss per share (non-GAAP).

(3) The income tax impact is calculated using the U.S.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis