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Item 1A. Risk Factors

2023-01-27 compared with 2022-01-31 · 113 added, 172 removed, 220 unchanged (56% of the section changed)

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We urge investors to consider carefully the risk factors described below in evaluating the information contained in this report.

Risks Related to COVID-19

We face significant risks related to the spread of the COVID-19 virus and developments surrounding the global pandemic have had, and will continue to have, significant effects on our business, financial condition, results of operations and cash flows.

We also face significant risks related to the global economic downturn and severe reduction in commercial air traffic caused by the pandemic.

These risks include materially reduced demand for our products and services, increased instability in our operations and in our supply chain and challenges to the ongoing viability of some of our customers.

In addition, future vaccination mandates or other government requirements may further disrupt our operations and those of our customers and suppliers.

We may face similar risks in connection with any future public health crises, including resurgences in the spread of COVID-19.

The COVID-19 pandemic has subjected our business, operations, financial performance, cash flows and financial condition to a number of risks, including, but not limited to those discussed below.

Operations-related risks:

As a result of the COVID-19 pandemic, we are facing increased operational challenges from the need to protect employee health and safety.

These challenges have included, and may in the future include, production site shutdowns, workplace disruptions and restrictions on the movement of people, social distancing guidelines, increased employee absenteeism due to illness and/or quarantine/contact tracing requirements, as well as reduced availability of raw materials and goods, both at our own facilities and those of our customers and suppliers.

During the second quarter of 2020, we temporarily suspended operations in Puget Sound, South Carolina, and Philadelphia, as well as at several other key production sites.

We had not previously experienced a complete suspension of our operations at these production sites.

While we have resumed operations at all of our production sites, we cannot predict whether or where further production disruptions could be required or what the ongoing impact of COVID-19-related operating restrictions will be.

For example, we continue to experience near-term production disruptions and inefficiencies as well as additional operating costs due to social distancing requirements, increased levels of employee absenteeism and other factors related to COVID-19 restrictions.

We cannot predict the impact that future production disruptions may have on our business, operations, financial performance and financial condition.

We continue to monitor federal, state and municipal health authorities for new or modified guidance and requirements concerning the COVID-19 pandemic, and we may be required to impose additional operational restrictions and/or suspend operations at key production sites based on these requirements and recommendations and/or workplace disruptions caused by COVID-19.

If future vaccination mandates or other similar governmental requirements take effect, or if COVID-19 case rates worsen at one or more of our production facilities, we may face further increases in employee absenteeism and/or attrition, any of which could cause operational disruptions and otherwise have an adverse effect on our business and results of operations.

Many of our suppliers also were required to suspend operations during the second quarter of 2020.

In 2021, we experienced part shortages which disrupted our operations and delayed deliveries.

We may experience additional disruptions and/or part shortages in 2022.

Any such disruptions could have severe adverse impacts on our production costs, delivery schedule and/or ability to meet customer commitments.

Further production disruptions and inefficiencies, suspension of operations or delayed recovery in our operations, and/or any comparable impacts involving one or more of our key suppliers, or the failure of any of our key suppliers, would result in further challenges to our business, which could have a further material adverse effect on our business, financial position, results of operations and/or cash flows.

Liquidity risks:

The COVID-19 pandemic has also had a significant impact on our liquidity and overall debt levels.

During the year ended December 31, 2021, net cash used by operating activities was $3.4 billion.

At December 31, 2021, cash and short-term investments totaled $16.2 billion.

Our debt balance totaled $58.1 billion at December 31, 2021, down from $63.6 billion at December 31, 2020.

We expect negative operating cash flows in future quarters until deliveries begin to return to historical levels, and if the pace and scope of the recovery are worse than we currently contemplate, we may need to obtain additional financing in order to fund our operations and obligations.

If we were to need to obtain additional financing, uncertainty related to COVID-19 and its impact on us and the aerospace industry, as well as continued uncertainty with respect to our credit rating could limit our access to credit markets and we may have difficulty obtaining financing on terms acceptable to us or at all.

In addition, certain of our customers may also be unable to make timely payments to us.

Factors that could limit our access to additional liquidity include further disruptions in the global capital markets and/or additional declines in our financial performance, outlook or credit ratings.

The occurrence of any or all of these events could adversely affect our ability to fund our operations and/or meet outstanding debt obligations and contractual commitments.

In addition, further downgrades in our credit ratings could adversely affect our cost of funds and related margins, liquidity, competitive position and access to capital markets, and a significant downgrade could have an adverse impact on our businesses.

Customer-related risks:

Commercial air traffic has fallen dramatically due to the COVID-19 pandemic.

This trend has impacted passenger traffic most severely.

Most airlines have significantly reduced their capacity, and many could implement further reductions.

Many airlines are also implementing significant reductions in staffing.

These capacity changes are causing, and are expected to continue to cause, negative impacts to our customers’ revenue, earnings, and cash flow, and in some cases may threaten the future viability of some of our customers, potentially causing defaults within our customer financing portfolio, which was $1.8 billion as of December 31, 2021 and/or requiring us to remarket aircraft that have already been produced and/or are currently in backlog.

If we are unable to successfully remarket these aircraft and/or the narrow-body and wide-body markets do not recover as soon as we are currently assuming, or if we are required to further reduce production rates and/or contract the accounting quantity on any of our commercial programs, we could experience material reductions in earnings and/or be required to recognize a reach-forward loss on one or more of our programs.

For example, in the fourth quarter of 2020, we recognized a reach-forward loss on the 777X program in part due to impacts related to the COVID-19 pandemic.

Additionally, we may 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.

Our customers may also lack sufficient liquidity to purchase new aircraft due to impacts from the pandemic.

In addition to the near-term impact, there is risk that the industry implements longer-term strategies involving reduced capacity, shifting route patterns and mitigation strategies related to impacts from COVID-19 and the risk of future public health crises.

In addition, airlines may experience reduced demand due to reluctance by the flying public to travel as a result of travel restrictions and/or social distancing requirements.

As a result, there is significant uncertainty with respect to whether and at what point commercial air traffic capacity will return to and/or exceed pre-COVID-19 levels.

This uncertainty may have a significant impact on the demand for both single-aisle and wide-body commercial aircraft, as well as for the services we provide to commercial airlines.

In addition, a lengthy period of reduced industry-wide demand for commercial aircraft would put additional pressure on our suppliers, resulting in increased procurement costs and/or additional supply chain disruption.

To the extent that the COVID-19 pandemic

or its aftermath further impacts demand for our products and services or impairs the viability of some of our customers and/or suppliers, our financial position, results of operations and/or cash flows could be adversely affected, and those impacts could be material.

The magnitude and duration of the global COVID-19 pandemic is uncertain and continues to adversely affect our business and operating and financial results.

For example, during the fourth quarter of 2020, due in part to the prolonged adverse impact of the pandemic on our earnings, we recorded an increase of $2.5 billion to the valuation allowance associated with deferred income tax assets.

The pandemic also is expected to heighten many of the other risks described below.

For example, the COVID-19 pandemic could cause and continue to cause an increasingly competitive labor market due to a sustained labor shortage or increased turnover rates within our employee base.

Further, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not expect to present significant risks to our operations or financial results.

Risks Related to Our Business and Operations

We remain subject to a number of risks and uncertainties related to the 737 MAX.

These risks include uncertainties regarding the timing and conditions of remaining 737 MAX regulatory approvals, lower than planned production rates and/or delivery rates, additional considerations to customers, increased supplier costs and supply chain health, changes to the assumptions and estimates made in our financial statements regarding the 737 program and potential outcomes of 737 MAX-related legal proceedings and government investigations that remain outstanding.

On March 13, 2019, the FAA issued an order to suspend operations of all 737 MAX aircraft in the U.S.

aircraft operators following two fatal 737 MAX accidents.

civil aviation authorities issued directives to the same effect.

Deliveries of the 737 MAX were suspended until December 2020.

The grounding reduced revenues, operating margins and cash flows, and will continue to do so until production rates return to pre-grounding levels.

While we have received regulatory approval to return the 737 MAX to service in most jurisdictions, we continue to work with certain non-U.S.

civil aviation authorities to complete remaining steps toward certification and readiness for return to service worldwide.

Any delays in the completion of the certification activities and/or the ramp-up of deliveries or other liabilities associated with the accidents or grounding could have a material adverse effect on our financial position, results of operations and/or cash flows.

In addition, multiple legal actions have been filed against us related to the 737 MAX.

We also are fully cooperating with U.S.

government investigations related to the accidents and the 737 MAX, including an ongoing investigation by the Securities and Exchange Commission.

We also remain subject to compliance with a Deferred Prosecution Agreement with the U.S.

Department of Justice relating to the Department of Justice’s investigation into us regarding the evaluation of the 737 MAX airplane by the FAA.

We expensed $744 million in the fourth quarter of 2020 related to this agreement.

Any further adverse impacts related to any such litigation or investigations could have a further material impact on our financial position, results of operations and/or cash flows.

During 2019, we announced plans to reduce, and ultimately to suspend 737 production.

Impacts related to our suspension of 737 MAX production from 2019 to 2020 significantly increased costs to produce aircraft included in the current accounting quantity and have resulted in reduced 737 program and overall BCA segment operating margins.

We have also made significant assumptions regarding estimated costs expected to be incurred in 2022 that should be included in program inventory and those estimated costs that will be expensed when incurred as abnormal production costs.

If the completion of remaining certification activities and/or our ability to deliver 737 aircraft to customers is impaired, we will incur significant additional costs and/or be required to delay the planned ramp-up of 737 production.

These delays would also result in significant additional disruption to the 737 production system and

further delay efforts to restore and/or implement previously planned increases in the 737 production rate.

Cash flows continue to be negatively impacted by delayed payments from customers, higher costs and inventory levels, and payments made to customers in connection with disruption to their operations.

In addition, we have experienced claims and assertions from customers in connection with the grounding and associated delivery delays, and recorded an estimate of potential concessions and other considerations to customers for these disruptions.

As of December 31, 2021, the remaining liability associated with these concessions and other considerations totaled $2.9 billion, of which $0.7 billion remains subject to negotiation.

Any further delays in regulatory approval of the 737 MAX in one or more jurisdictions, further disruptions to suppliers and/or the long-term health of the production system, supplier claims or assertions, or changes to estimated concessions or other considerations we expect to provide to customers could have a material adverse effect on our financial position, results of operations and/or cash flows.

In the event of unanticipated additional training requirements in one or more jurisdictions, delays in regulatory approval and/or delays in our ability to resume deliveries to one or more customers, we may be required to take actions with longer-term impact, such as further changes to our production plans, employment reductions and/or the expenditure of significant resources to support our supply chain and/or customers.

We have made significant estimates with respect to the 737 program regarding the number of units to be produced, the period during which those units are likely to be produced, and the units’ expected sales prices, production costs, program tooling and other non-recurring costs, and routine warranty costs.

We have made assumptions regarding outcomes of accident investigations and other government inquiries, timing of future 737 production rate increases, timing and sequence of future deliveries, supply chain health as we implement our production plans, as well as outcomes of negotiations with customers.

Any changes in these estimates and/or assumptions with respect to the 737 program could have a material impact on our financial position, results of operations and/or cash flows.

In addition to the impact of COVID-19 described above, our Commercial Airplanes and Global Services businesses depend heavily on commercial airlines, and are subject to unique risks.

We depend heavily on commercial airlines, subjecting us to unique risks.

Market conditions have a significant impact on demand for our commercial aircraft and related services.

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The principal factors underlying long-term traffic growth are sustained economic growth and political stability both in developed and emerging markets.

Demand for our commercial aircraft is further influenced by airline profitability, availability of aircraft financing, world trade policies, government-to-government relations, technological advances, price and other competitive factors, fuel prices, terrorism, epidemics and environmental regulations.

Traditionally, the airline industry has been cyclical and very competitive and has experienced significant profit swings and constant challenges to be more cost competitive.

Historically, the airline industry has been cyclical and very competitive and has experienced significant profit swings and constant challenges to be more cost competitive.

Significant deterioration in the global economic environment, the airline industry generally or the financial stability of one or more of our major customers could result in fewer new orders for aircraft or services, or could cause customers to seek to postpone or cancel contractual orders and/or payments to us, which could result in lower revenues, profitability and cash flows and a reduction in our contractual backlog.

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Commercial aircraft sales contracts are often entered into years before the aircraft are delivered.

In order to help account for economic fluctuations between the contract date and delivery date, aircraft pricing generally consists of a fixed amount as modified by price escalation formulas

derived from labor, commodity and other price indices.

In order to help account for economic fluctuations between the contract date and delivery date, aircraft pricing generally consists of a fixed amount as modified by price escalation formulas derived from labor, commodity and other price indices.

Our revenue estimates are based on current expectations with respect to these escalation formulas, but the actual escalation amounts are outside of our control.

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In addition, fleet decisions, airline consolidations or financial challenges involving any of our major commercial airline customers could significantly reduce our revenues and limit our opportunity to generate profits from those customers.

Our Commercial Airplanes business depends on our ability to maintain a healthy production system, ensure every airplane in our production system conforms to our exacting specification, achieve planned production rate targets, successfully develop new aircraft or new derivative aircraft, and meet or exceed stringent performance and reliability standards.

Airlines also are experiencing increased fuel and other costs, and the global economy is experiencing high inflation.

Our Commercial Airplanes business depends on our ability to maintain a healthy production system, ensure every airplane in our production system conforms to our exacting specifications, achieve planned production rate targets, successfully develop and certify new aircraft or new derivative aircraft, and meet or exceed stringent performance and reliability standards.

The commercial aircraft business is extremely complex, involving extensive coordination and integration with U.S and non-U.S.

suppliers, highly-skilled labor from thousands of employees and other partners, and stringent regulatory requirements, including the risk of evolving standards for commercial aircraft certification, and performance and reliability standards.

The FAA has been working to implement safety reforms such as the implementation of the 2018 FAA Reauthorization Act and the 2020 Aircraft Certification, Safety and Accountability Act, among them changing the process for certification of commercial aircraft.

Comparable agencies that regulate similar matters in other countries may adopt similar changes.

To the extent the FAA or other similar regulatory agencies outside the U.S.

implement more stringent regulations, we may incur additional costs to achieve compliance.

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

The 737 program experienced significant disruption due to the grounding of the 737 MAX and associated suspension of commercial operations of the 737 MAX aircraft by civil aviation authorities around the globe.

737 MAX deliveries resumed in late 2020 and early 2021 upon approval of the FAA and other non-U.S.

civil aviation authorities.

During 2020 and 2021, we experienced production quality issues, including in our supply chain, which have contributed to lower 787 deliveries, including a pause in 787 deliveries since May 2021.

During 2021, this resulted in reprioritizing production resources to support inspections and rework.

We continue to conduct inspections and rework on undelivered 787 aircraft and engage in detailed discussions with the FAA regarding required actions for resuming delivery.

A number of our customers may have contractual remedies, including compensation for late deliveries as well as rights to reject individual airplane deliveries if the actual delivery date is significantly later than the contractual delivery date.

The regulators will ultimately determine the timing and conditions for resuming 787 deliveries.

Delays on the 737 MAX, 777X and 787 programs have resulted in, and may continue to result in, customers having the right to terminate orders and/or substitute orders for other Boeing aircraft.

suppliers, highly-skilled labor performed by thousands of employees of ours and other partners, and stringent and evolving regulatory requirements and performance and reliability standards.

The FAA has been working to implement safety reforms such as the 2018 FAA Reauthorization Act and the 2020 Aircraft Certification, Safety and Accountability Act (ACSAA).

One of these, section 116 of the ACSAA prohibited the FAA from issuing a type certificate to aircraft after December 27, 2022 unless the aircraft’s flight crew alerting system met certain specifications.

The Consolidated Appropriations Act, 2023 amended Section 116 of the ACSAA, such that applications for original or amended type certifications that were submitted to the FAA prior to December 27, 2020, including those of the 737-7 and 737-10, are no longer subject to the crew alerting specifications of Section 116.

Additionally, beginning one year after the FAA issues the type certificate for the 737-10, any new 737 MAX aircraft must include certain safety enhancements to be issued an original airworthiness certification by the FAA.

These enhancements are included in Boeing’s application for the certification for the 737-10, and the sufficiency of these enhancements will be determined by the FAA.

Beginning three years after the issuance of a type certificate for the 737-10, all previously delivered 737 MAX aircraft must be retrofitted with these safety enhancements.

As the holder of the type certificate, Boeing is required to bear any costs of these safety enhancement retrofits.

We have provisioned for the estimated costs associated with the safety enhancements and do not expect those costs to be material.

If we experience delays in achieving certification and/or incorporating safety enhancements, future revenues, cash flows and results of operations could be adversely impacted.

Comparable agencies in other countries may adopt similar changes.

To the extent the FAA or similar regulatory agencies outside the U.S.

implement more stringent regulations, we may incur additional compliance costs.

In addition, the introduction of new aircraft programs and/or derivatives, such as the 777X, 737-7 and 737-10, involves increased risks associated with meeting development, testing, certification and production schedules.

In addition, we have experienced production quality issues, including in our supply chain, which have contributed to lower 787 deliveries, including a suspension of 787 deliveries from May 2021 to August 2022.

We continue to conduct inspections and rework on built and stored 787 aircraft.

A number of our customers have contractual remedies, including compensation for late deliveries or rights to reject individual airplane deliveries based on delivery delays.

Delays on the 737, 777X and 787 programs have resulted in, and may continue to result in, customers having the right to terminate orders, be compensated for late deliveries and/or substitute orders for other Boeing aircraft.

We must minimize disruption caused by production changes, achieve operational stability and implement productivity improvements in order to meet customer demand and maintain our profitability.

We have previously announced plans to adjust production rates on several of our commercial aircraft programs.

During 2021, we reprioritized production resources to support inspections and rework on undelivered 787 aircraft.

The 787 program is currently producing at very low rates and expects that to continue until deliveries resume.

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 and rework.

The 787 program is currently producing at low rates and we expect to gradually increase to 5 per month in 2023.

Production of the 777X is currently paused and is expected to resume in 2023.

The 737 program has experienced operational and supply chain challenges stabilizing production at 31 per month.

We plan to gradually increase 737 production rates based on market demand and supply chain capacity.

In addition, we continue to seek opportunities to reduce the costs of building our aircraft, including working with our suppliers to reduce supplier costs, identifying and implementing productivity improvements and optimizing how we manage inventory.

If production rate changes at any

of our commercial aircraft assembly facilities are delayed or create significant disruption to our production system, or if our suppliers cannot timely deliver components to us at the cost and rates necessary to achieve our targets, we may be unable to meet delivery schedules and/or the financial performance of one or more of our programs may suffer.

Operational challenges impacting the production system for one or more of our commercial aircraft programs could result in production delays and/or failure to meet customer demand for new aircraft, either of which would negatively impact our revenues and operating margins.

If production rate changes at any of our

commercial aircraft assembly facilities are delayed or create significant disruption to our production system, or if our suppliers cannot timely deliver components to us at the cost and rates necessary to achieve our targets, we may be unable to meet delivery schedules and/or the financial performance of one or more of our programs may suffer.

Operational challenges impacting the production system for one or more of our commercial aircraft programs could result in additional production delays and/or failure to meet customer demand for new aircraft, either of which would negatively impact our revenues and operating margins.

Our commercial aircraft production system is extremely complex.

Operational issues, including delays or defects in supplier components, failure to meet internal performance plans, or delays or failures to achieve required regulatory approval, could result in significant out-of-sequence work and increased production costs, as well as delayed deliveries to customers, impacts to aircraft performance and/or increased warranty or fleet support costs.

For example, in 2021, we performed additional inspections and associated rework on 787 aircraft in inventory and continued discussions with the FAA regarding required actions to resume deliveries, resulting in additional costs and further delays in aircraft deliveries to customers.

If our commercial airplanes fail to satisfy performance and reliability requirements, we could face additional costs and/or lower revenues.

Developing and manufacturing commercial aircraft that meet or exceed our performance and reliability standards, as well as those of customers and regulatory agencies, can be costly and technologically challenging.

Operational issues, including delays or defects in supplier components, failure to meet internal performance plans, or delays or failures to achieve required regulatory approval, could result in additional out-of-sequence work and increased production costs, as well as delayed deliveries to customers, impacts to aircraft performance and/or increased warranty or fleet support costs.

We and our suppliers are experiencing supply chain disruptions as a result of the lingering impacts of COVID-19, global supply chain constraints, and labor instability.

We and our suppliers are also experiencing inflationary pressures.

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

These factors have reduced overall productivity and adversely impacted our financial position, results of operations and cash flows.

If our commercial aircraft fail to satisfy performance and reliability requirements and/or potentially required sustainability standards, we could face additional costs and/or lower revenues.

Developing and manufacturing commercial aircraft that meet or exceed our performance and reliability standards and/or potentially required sustainability standards, as well as those of customers and regulatory agencies, can be costly and technologically challenging.

These challenges are particularly significant with newer aircraft programs.

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Changes in levels of U.S.

government defense spending or overall acquisition priorities could negatively impact our financial position and results of operations.

government defense spending or acquisition priorities could negatively impact our financial position and results of operations.

We derive a substantial portion of our revenue from the U.S.

government, primarily from defense related programs with the U.S.

government, primarily from defense related programs with the United States Department of Defense (U.S.

Levels of U.S.

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however, this would restrict the execution of certain program activities and delay new programs or competitions.

In addition, long-term uncertainty remains with respect to overall levels of defense spending in FY22 and beyond, and it is likely that U.S.

government discretionary spending, including defense spending, will continue to be subject to pressure.

In addition, long-term uncertainty remains with respect to overall levels of defense spending in FY24 and beyond.

government discretionary spending, including defense spending, is likely to continue to be subject to pressure.

There continues to be uncertainty with respect to future acquisition priorities and program-level appropriations for the U.S.

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defense spending and the evolving nature of the national security threat environment, we also expect the U.S.

DoD to continue to emphasize affordability, innovation, cybersecurity and delivery of technical data and

software in its procurement processes.

If we can no longer adjust successfully to these changing acquisition policies, our revenues and market share could be impacted.

Also, additional federal appropriations to cover the increased costs of federal contractors’ compliance with evolving U.S.

Government contractual requirements associated with COVID-19 mitigation are unlikely, reducing the U.S.

Government’s buying power.

Our ability to deliver products and services that satisfy customer requirements is heavily dependent on the performance and financial stability of our subcontractors and suppliers, as well as on the availability of raw materials and other components.

DoD to continue to emphasize affordability, innovation, cybersecurity and delivery of technical data and software in its procurement processes, including the implementation of cybersecurity compliance requirements on the Defense Industrial Base, for which the supply chain may not be fully prepared.

We and our suppliers will need to continue to adjust successfully to these changing acquisition priorities and policies or our revenues and market share could be impacted.

We rely on other companies, including U.S.

subcontractors and suppliers, to provide and produce raw materials, integrated components and sub-assemblies, and production commodities and to perform some of the services that we provide to our customers.

If one or more of our suppliers or subcontractors experiences financial difficulties, delivery delays or other performance problems, we may be unable to meet commitments to our customers or incur additional costs.

Many of our suppliers are experiencing inflationary pressures, as well as disruptions due to the lingering impacts of COVID-19, global supply chain constraints, and labor instability.

If one or more of our suppliers or subcontractors continue to experience financial difficulties, delivery delays or other performance problems, we may be unable to meet commitments to our customers and our financial position, results of operations and cash flows may continue to be adversely impacted.

In addition, if one or more of the raw materials on which we depend (such as aluminum, titanium or composites) becomes unavailable to us or our suppliers, or is available only at very high prices, we may be unable to deliver one or more of our products in a timely fashion or at budgeted costs.

For example, we suspended purchasing titanium from Russia during 2022 as a result of the Russia Ukraine war.

We believe we have sufficient material and parts to avoid production disruptions in the near-term, but future impacts to our production from disruptions in our supply chain are possible.

In some instances, we depend upon a single source of supply.

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The markets in which we operate are highly competitive and one or more of our competitors may have more extensive or more specialized engineering, manufacturing and marketing capabilities than we do in some areas.

In our Commercial Airplanes business, we anticipate increasing competition among non-U.S.

aircraft manufacturers of commercial jet aircraft.

In our BCA business, we face aggressive international competition intent on increasing market share.

In our BDS business, we anticipate that the effects of defense industry consolidation, shifting acquisition and budget priorities, and continued cost pressure at our U.S.

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competitors facing BCA and BDS.

Furthermore, we are facing increased international competition and cross-border consolidation of competition.

Furthermore, we are facing increased international competition and cross-border consolidation of competition, and U.S.

procurement and compliance requirements that could limit our ability to be cost-competitive in the international market.

There can be no assurance that we will be able to compete successfully against our current or future competitors or that the competitive pressures we face will not result in reduced revenues and market share.

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and/or impose costs on our customers in the form of tariffs, duties or penalties attributable to the importation of Boeing products and services;

government policies, including requirements to expend a portion of program funds locally and governmental industrial cooperation or participation requirements;

• changes to U.S.

government policies, including sourcing restrictions, requirements to expend a portion of program funds locally and governmental industrial cooperation or participation requirements;

• fluctuations in international currency exchange rates;

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• uncertainties and restrictions concerning the availability of funding credit or guarantees;

• imposition of domestic and international taxes, export controls, tariffs, embargoes, sanctions and other trade restrictions;

• imposition of domestic and international taxes, export controls, tariffs, embargoes, sanctions (such as those imposed on Russia) and other trade restrictions;

• the difficulty of management and operation of an enterprise spread over many countries;

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and China have imposed tariffs on each other’s imports.

China is a very significant market for commercial airplanes and represents a significant component of our commercial airplanes backlog.

Impacts from these or future potential tariffs, or deterioration in trade relations between the U.S.

Certain aircraft parts and components that Boeing procures are subject to these tariffs.

We are mitigating import costs through Duty Drawback Customs procedures.

Overall, the U.S.-China trade relationship remains stalled as economic and national security concerns continue to be a challenge.

China is a significant market for commercial aircraft.

Boeing has long-standing relationships with our Chinese customers, who represent a key component of our commercial aircraft backlog.

For the 737 MAX, there is uncertainty regarding timing of resumption of deliveries in China which is still subject to final regulatory approvals.

If we are unable to obtain additional orders from China in the future, our market share could be adversely affected.

Furthermore, following Russia’s invasion of Ukraine, we suspended our operations in Russia due to sanctions and export controls, and the war has negatively impacted, and could continue to adversely impact, our business and financial results.

Impacts from future potential deterioration in trade relations between the U.S.

and one or more other countries, could have a material adverse impact on our financial position, results of operations and/or cash flows.

We use estimates in accounting for many contracts and programs.

Changes in our estimates could adversely affect our future financial results.

We use estimates and make assumptions in accounting for contracts and programs.

Changes in our estimates and/or assumptions could adversely affect our future financial results.

Contract and program accounting require judgment relative to assessing risks, estimating revenues and costs and making assumptions for schedule and technical issues.

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Incentives or penalties related to performance on contracts are considered in estimating sales and profit rates and are recorded when there is sufficient information for us to assess anticipated performance.

Supplier claims and assertions are also assessed and considered in estimating costs and profit rates.

Estimates of future award fees are also included in sales and profit rates.

Customer and supplier claims and assertions are also assessed and considered in estimating revenues, costs and profit rates.

Estimates of future award fees are also included in revenues and profit rates.

With respect to each of our commercial aircraft programs, inventoriable production costs (including overhead), program tooling and other non-recurring costs and routine warranty costs are accumulated and charged as cost of sales by program instead of by individual units or contracts.

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Several factors determine accounting quantity, including firm orders, letters of intent from prospective customers and market studies.

Changes to customer or model mix,

production costs and rates, learning curve, changes to price escalation indices, costs of derivative aircraft, supplier performance, customer and supplier negotiations/settlements, supplier claims and/or certification issues can impact these estimates.

In addition, on development programs such as the 777X, we are subject to risks with respect to the timing and conditions of aircraft certification, including potential gaps between when aircraft are certified in various jurisdictions, changes in certification processes and our estimates with respect to timing of future certifications, which could have an impact on overall program status.

Changes to customer or model mix, production costs and rates, learning curve, changes to price escalation indices, costs of derivative aircraft, supplier performance, customer and supplier negotiations/settlements, supplier claims and/or certification issues can impact these estimates.

In addition, on development programs such as the 777X, 737-7 and 737-10 we are subject to risks with respect to the timing and conditions of aircraft certification, including potential gaps between when aircraft are certified in various jurisdictions, changes in certification processes and our estimates with respect to timing of future certifications, which could have an impact on overall program status.

Any such change in estimates relating to program accounting may adversely affect future financial performance.

Because of the significance of the judgments and estimation processes described above, materially different sales and profit amounts could be recorded if we used different assumptions or if the underlying circumstances were to change.

Because of the significance of the judgments and estimation processes described above, materially different revenues and profit amounts could be recorded if we used different assumptions, revised our estimates, or if the underlying circumstances were to change.

Changes in underlying assumptions, circumstances or estimates may adversely affect future period financial performance.

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Whether we realize the anticipated benefits from these acquisitions and related activities depends, in part, upon our ability to integrate the operations of the acquired business, the performance of the underlying product and service portfolio, and the performance of the management team and other personnel of the acquired operations.

Accordingly, our financial results could be adversely affected by unanticipated performance issues, legacy liabilities, transaction-related charges, amortization of expenses related to intangibles, charges for impairment of long-term assets, credit guarantees, partner performance and indemnifications.

guarantees, partner performance and indemnifications.

Consolidations of joint ventures could also impact our reported results of operations or financial position.

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government are subject to extensive procurement regulations, and changes to those regulations could increase our costs.

New procurement regulations, or changes to existing requirements, could increase our compliance costs or otherwise have a material impact on the operating margins of our BDS and BGS businesses.

New procurement regulations or climate or cyber-related contractual disclosures, or changes to existing requirements, could increase our compliance costs or otherwise have a material impact on the operating margins of our BDS and BGS businesses.

These requirements may also result in withheld payments and/or reduced future business if we fail to comply.

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Furthermore, if any audit, inquiry or investigation uncovers improper or illegal activities, we could be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or debarment from doing business with the U.S.

We also could suffer reputational harm if allegations of impropriety were made against us, even if such allegations are later determined to be false.

could suffer reputational harm if allegations of impropriety were made against us, even if such allegations are later determined to be false.

We enter into fixed-price contracts which could subject us to losses if we have cost overruns.

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While fixed-price contracts enable us to benefit from performance improvements, cost reductions and efficiencies, they also subject us to the risk of reduced margins or incurring losses if we are unable to achieve estimated costs and revenues.

In addition, increased compliance costs and costs due to loss of productivity due to COVID-19 may not be reimbursed.

If our estimated costs exceed our estimated price, we recognize reach-forward losses which can significantly affect our reported results.

For example in the fourth quarter of 2021, BDS recorded additional losses of $402 million on the KC-46A Tanker contract reflecting continued disruption in the factory and in the supply chain, including impacts of COVID-19, and an increase in costs to complete the new Remote Vision System as the customer’s requirements definition has evolved.

For example, during the year ended December 31, 2022, BDS recorded additional losses on several fixed price development programs.

We continue to experience near-term production disruptions and inefficiencies due to supplier disruption, labor instability and factory performance.

These factors have contributed to significant earnings charges on a number of fixed-price development programs which are expected to adversely affect cash flows in future periods, and may result in future earnings charges and adverse cash flow effects.

New programs could also have risk for reach-forward loss upon contract award and during the period of contract performance.

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In addition, some of our contracts have specific provisions relating to cost, schedule and performance.

Fixed-price development contracts are generally subject to more uncertainty than fixed-price production contracts.

Estimating costs to complete fixed-price development contracts is generally subject to more uncertainty than fixed-price production contracts.

Many of these development programs have highly complex designs.

In addition, technical or quality issues that arise during development could lead to schedule delays and higher costs to complete, which could result in a material charge or otherwise adversely affect our financial condition.

Examples of significant BDS fixed-price development contracts include Commercial Crew, KC-46A Tanker, T-7A Red Hawk, VC-25B Presidential Aircraft, MQ-25, and commercial and military satellites.

Examples of significant BDS fixed-price development contracts include Commercial Crew, KC-46A Tanker, MQ-25, T-7A Red Hawk, VC-25B Presidential Aircraft, and commercial and military satellites.

We enter into cost-type contracts, which also carry risks.

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In these cases the associated financial risks are primarily in reduced fees, lower profit rates or program cancellation if cost, schedule or technical performance issues arise.

Programs whose contracts are primarily cost-type include Ground-based Midcourse Defense (GMD), Proprietary and SLS programs.

Programs whose contracts are primarily cost-type include Ground-based Midcourse Defense, Proprietary and Space Launch System programs.

We enter into contracts that include in-orbit incentive payments that subject us to risks.

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Unauthorized access to our, our customers’ and/or our suppliers’ information and systems could negatively impact our business.

We face certain security threats, including threats to the confidentiality, availability and integrity of our data and systems.

We maintain an extensive network of technical security controls, policy enforcement mechanisms, monitoring systems and management oversight in order to address these threats.

While these measures are designed to prevent, detect and respond to unauthorized activity in our systems, certain types of attacks, including cyber-attacks, could result in significant financial or information losses and/or reputational harm.

We rely extensively on information technology systems and networks to operate our company and meet our business objectives.

As cyber threats increase in volume and sophistication, the risk to the security of these systems and networks – and to the confidentiality, integrity, and availability of the data they house – continues to evolve, requiring constant vigilance and concerted, company-wide risk management efforts.

A cyberattack or security breach, whether experienced directly or through our supply chain, could, among other serious consequences, result in loss of intellectual property;

unauthorized access to various categories of sensitive, proprietary or customer data;

disruption or degradation of business operations, or compromise of products or services.

To address these risks, we maintain an extensive network of technical security controls, policy enforcement mechanisms, monitoring systems and management oversight.

We also have established a Cybersecurity Governance Council to strengthen governance and coordination of cybersecurity activities.

While these measures are designed to prevent, detect and respond to unauthorized activity, there is no guarantee that they will be sufficient to prevent or mitigate the risk of a cyberattack or the potentially serious reputational, operational, or financial impacts that may result.

In November 2022, we discovered a cybersecurity incident that impacted certain systems of Jeppesen, a wholly owned Boeing subsidiary that provides flight planning and navigation services.

We determined that the incident posed no risk to flight safety.

We promptly notified law enforcement, regulatory authorities and customers, launched an investigation, and took additional steps to protect the integrity of our systems.

While this incident has not had a material impact on us, future incidents like this one could have material impact on our business, operations, and reputation.

In addition, we manage information and information technology systems for certain customers and/or suppliers.

Many of these customers and/or suppliers face similar security threats.

If we cannot prevent the unauthorized access, release and/or corruption of our customers’ and/or suppliers’ confidential, classified or personally identifiable information, our reputation could be damaged, and/or we could face financial losses.

If we were unable to protect against the unauthorized access, release and/or corruption of our customers’ and/or suppliers’ confidential, classified or personally identifiable information, our reputation could be damaged, and/or we could face financial or other losses.

Business disruptions could seriously affect our future sales and financial condition or increase our costs and expenses.

Our business may be impacted by disruptions including threats to physical security, information technology, or cyber-attacks or failures, damaging or extreme weather (including effects of climate change), or other acts of nature and pandemics or other public health crises.

Our business may be impacted by disruptions including threats to physical security or our information technology systems, extreme weather (including effects of climate change) or other acts of nature, and pandemics or other public health crises.

Any of these disruptions could affect our internal operations or our suppliers’ operations and delay delivery of products and services to our customers.

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An adverse resolution of any of these lawsuits, or future lawsuits, could have a material impact on our financial position and results of operations.

In addition, we are subject to extensive regulation under the laws of the United States and its various states, as well as other jurisdictions in which we operate.

As a result, we are sometimes subject to government inquiries and investigations of our business due, among other things, to our business relationships with the U.S.

In addition, we

are subject to extensive regulation under the laws of the United States and its various states, as well as other jurisdictions in which we operate.

As a result, we are sometimes subject to government inquiries and investigations due, among other things, to our business relationships with the U.S.

government, the heavily regulated nature of our industry, and in the case of environmental proceedings, our current or past ownership of certain property.

Any such inquiry or investigation could potentially result in an adverse ruling against us, which could have a material impact on our financial position, results of operations and/or cash flows.

Any such inquiry or investigation could result in an adverse ruling against us, which could have a material impact on our financial position, results of operations and/or cash flows.

Our operations expose us to the risk of material environmental liabilities.

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We may be adversely affected by global climate change or by legal, regulatory or market responses to such change.

Increasing stakeholder environmental, social and governance (ESG) expectations, physical and transition risks associated with climate change, and emerging ESG regulation and policy requirements may pose risk to our market outlook, brand and reputation, financial outlook, cost of capital, global supply chain and production continuity, which may impact our ability to achieve long-term business objectives.

Increasing stakeholder environmental, social and governance (ESG) expectations, physical and transition risks associated with climate change, emerging ESG regulation, contractual requirements, and policy requirements may pose risk to our market outlook, brand and reputation, financial outlook, cost of capital, global supply chain and production continuity, which may impact our ability to achieve long-term business objectives.

Changes in environmental and climate change laws or regulations could lead to additional operational restrictions and compliance requirements upon us or our products, require new or additional investment in product designs, result in carbon offset investments or otherwise could negatively impact our business and/or competitive position.

Increasing aircraft performance standards and requirements on manufacturing and product air pollutant emissions, especially greenhouse gas (GHG) emissions, may result in increased costs or reputational risks and could limit our ability to manufacture and/or market certain of our products at acceptable costs, or at all.

Increasing aircraft performance standards, increasing sustainability disclosure requirements in the U.S.

and globally, and requirements on manufacturing and product air pollutant emissions, especially greenhouse gas (GHG) emissions, may result in increased costs or reputational risks and could limit our ability to manufacture and/or market certain of our products at acceptable costs, or at all.

Physical impacts of climate change, increasing global chemical restrictions and bans, and water and waste requirements may drive increased costs to us and our suppliers and impact our production continuity and data facilities.

Finally, from time to time, in alignment with our sustainability priorities, we establish and publicly announce goals and commitments to improve our environmental performance, such as our recent operational goals in areas of GHG emissions, energy, water and waste.

If we fail to achieve or

improperly report on our progress toward achieving our environmental goals and commitments, the resulting negative publicity could adversely affect our reputation and/or our access to capital.

If we fail to achieve or improperly report on our progress toward achieving our sustainability goals and commitments, the resulting negative publicity could adversely affect our reputation and/or our access to capital.

Risks Related to Financing and Liquidity

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In addition, our debt balances have increased significantly since 2019, driven primarily by impacts related to the 737 MAX grounding and the COVID-19 pandemic, and we expect to continue to actively manage our liquidity.

Our increased debt balance has also resulted in downgrades to our credit ratings.

As of December 31, 2021, our debt totaled $58.1 billion of which approximately $11.4 billion of principal payments on outstanding debt become due over the next three years.

As of December 31, 2022, our debt totaled $57.0 billion of which approximately $14.5 billion of principal payments on outstanding debt will become due over the next three years.

In addition, as of December 31, 2022, our airplane financing commitments totaled $16.1 billion.

If we require additional funding in order to pay off existing debt, address further impacts to our business related to the 737 MAX, COVID-19, 787 production issues or broader market developments, fund outstanding financing commitments or meet other business requirements, our market liquidity may not be sufficient.

Our increased debt balance resulted in downgrades to our credit ratings in 2020, and our ratings remained unchanged in 2022 and 2021.

If we require additional funding in order to pay off existing debt, address further impacts to our business related to market developments, fund outstanding financing commitments or meet other business requirements, our market liquidity may not be sufficient.

These risks will be particularly acute if we are subject to further credit rating downgrades.

A number of factors could cause us to incur increased borrowing costs and to have greater difficulty accessing public and private markets for debt.

These factors include disruptions or declines in the global capital markets and/or a decline in our financial performance, outlook or credit ratings, including impacts described above related to the COVID-19 pandemic and/or associated changes in demand for our products and services.

These factors include disruptions or declines in the global capital markets and/or a decline in our financial performance, outlook or credit ratings and/or changes in demand for our products and services.

The occurrence of any or all of these events may adversely affect our ability to fund our operations and contractual or financing commitments.

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Our estimates of future costs associated with these benefits are also subject to assumptions, including estimates of the level of medical cost increases.

For a discussion regarding how our financial statements can be affected by pension and other postretirement plan accounting policies, see “Management's Discussion and Analysis - Critical Accounting Policies & Estimates - Pension Plans” on pages 54 - 55 of this Form 10-K.

For a discussion regarding how our financial statements can be affected by pension and other postretirement plan accounting policies, see “Management's Discussion and Analysis – Critical Accounting Policies & Estimates – Pension Plans” on page 50 of this Form 10-K.

Although under Generally Accepted Accounting Principles in the United States of America (GAAP) the timing of periodic pension and other postretirement benefit expense and plan contributions are not directly related, the key economic factors that affect GAAP expense would also likely affect the amount of cash or stock we would contribute to our plans.

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The amount of our insurance coverage may not cover all claims or liabilities, and we may be forced to bear substantial costs.

For example, liabilities arising from the use of certain of our products, such as aircraft technologies, space systems, spacecraft, satellites, missile systems, weapons, cybersecurity, border security systems, anti-terrorism technologies and/or air traffic management systems may not be insurable on commercially reasonable terms.

For example, liabilities arising from the use of certain of our products, such as aircraft technologies, space systems, spacecraft, satellites, missile systems,

weapons, cybersecurity, border security systems, anti-terrorism technologies and/or air traffic management systems may not be insurable on commercially reasonable terms.

While some of these products are shielded from liability within the U.S.

under the SAFETY Act provisions of the 2002 Homeland Security Act, no such protection is available outside the U.S., potentially resulting in significant liabilities.

See Note 21 of the Consolidated Financial Statements for discussion of legal proceedings resulting from the October 29, 2018 accident of Lion Air Flight 610 and the March 10, 2019 accident of Ethiopian Airlines Flight 302.

The amount of insurance coverage we maintain may be inadequate to cover these or other claims or liabilities.

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We may experience additional work stoppages in the future, which could adversely affect our business.

We cannot predict how stable our relationships, currently with 11 U.S.

We cannot predict how stable our union relationships, currently with 11 U.S.

labor organizations and 12 non-U.S.

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Union actions at suppliers can also affect us.

Work stoppages and instability in our union relationships could delay the production and/or development of our products, which could strain relationships with customers and cause a loss of revenues which would adversely affect our operations.

Work stoppages and instability in our union relationships could delay the production and/or development of our products, which could strain relationships with customers and result in lower revenues.

Unresolved Staff Comments

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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-K

Item 1A. Risk Factors