CEO Perspective –Performance and Leadership
Jim McNerneyChairman, President and CEOThe Boeing Company
May 23, 2007
2
Annual Investor Conference | CEO Perspective
Boeing’s Management Model
FinancialObjectives
Growth
Productivity
Financial Performance
StockPrice
Performance to PlanMove Toward
World-Class: Margins, Earnings, Cash
CHARTS THE COURSE
INSPIR
ES OTH
ERS
LIVES BOEING VALUES
DEL
IVER
S R
ESU
LTS
Attaining World-Class Growth and Productivity:• Committed, performance-driven management
• Maximize learning across the enterprise and from outside• Adapt and apply learnings in clearly defined businesses
Initiative Toolkit
Customer Satisfaction
Competitiveness
Economic Profit
Stakeholders
EmployeesCustomersShareholdersCommunitiesEmployee
Accountability
SETS HIGH EXPECTATIONS
FINDS A WAY
CEO Perspective –Performance and Leadership
Jim McNerneyChairman, President and CEOThe Boeing Company
May 23, 2007
2
Annual Investor Conference | Finance
Strong Momentum
Record year for revenue, cash flow, airplane orders, and backlog in 2006
Strong commercial airplane demand… solid defense markets
Excellent cash generation… balanced cash deployment
Significant new product investment… focused on maintaining product leadership and delivering value
Product strength driving record backlog of $262 billion
Growth outlook on trackGrowth outlook on track
3
Annual Investor Conference | Finance
Transformation Strategy Driving Results
World’s largest, best integrated aerospace companyWorld’s largest, best integrated aerospace company
2006 Revenue $61.5B
Integrated Defense Systems
53%
1996 Revenue $23B
CommercialAirplanes
75%
IntegratedDefenseSystems
25%
CommercialAirplanes
47%
4
Annual Investor Conference | Finance
$0
$1
$2
$3
$4
2003 2004 2005 2006
Strong Financial Performance
Delivering significant growth and profitabilityDelivering significant growth and profitability
Billions
Revenue8%
CAGR
49.351.4 53.6
$0
$20
$40
$60
2003 2004 2005 2006
Billions
Earnings from Operations44% *CAGR
2.8
1.3*
61.5
*Adjusted Earnings from Operations is a non-GAAP measure. The CAGR for GAAP earnings from operations is 96%. Definitions, reconciliations and further disclosures regarding these non-GAAP measures are provided in the attached disclosure.
0.4
2.6*
2.0
3.0
3.9*
5
Annual Investor Conference | Finance
Strong Financial Performance (cont’d)
Strong double-digit growth in EPS and cash flowStrong double-digit growth in EPS and cash flow
$0
$1
$2
$3
$4
Earnings Per Share24%*
CAGR
1.90*2.30
3.20
$0
$2
$4
$6
$8Billions
Operating Cash Flow39%
CAGR
3.5
7.0
2003 2004 2005 20062003 2004 2005 2006
3.62*7.5
2.85
*Adjusted EPS is a non-GAAP measure. The CAGR for GAAP EPS is 47%. Definitions, reconciliations and further disclosures regarding these non-GAAP measures are provided in the attached disclosure.
0.89
2.82.06*
2.39*
6
Annual Investor Conference | Finance
Good Start to 2007 – Q1 Results
Strong momentum… growth outlook on trackStrong momentum… growth outlook on track
(Millions, except per share data) Q1 Q12007 2006 Change
Revenues $15,365 $14,264 8%
Earnings from Operations $1,309 $959 36%
Operating Margin 8.5% 6.7% 1.8 Pts
Reported Net Income $877 $692 27%
Reported Earnings per Share $1.13 $0.88 28%
7
Annual Investor Conference | Finance
Product Strategy Driving Backlog to Record Level
81 76 74
124174 188
87
65
$0
$50
$100
$150
$200
$250
2004 2005 2006 2007Q1
Future growth driven by industry-leading backlog of $262 billionFuture growth driven by industry-leading backlog of $262 billion
Billions BCA Backlog
IDS Backlog 250
Boeing backlog
>4x annual
revenues
205
152
262
8
Annual Investor Conference | Finance
3.9 3.9
5.64.8
$0
$2
$4
$6
$8
$10
2006Q4 2007Q1
Boeing debt
BCC debt
$3.3$3.2
$6.1 $4.8
$0
$2
$4
$6
$8
$10
2006Q4 2007Q1
Over $8 billion cash; industry-leading credit quality
Outstanding Balance Sheet Strength
Over $8 billion cash; industry-leading credit quality
Billions BillionsCash
Marketable Securities
$8.1$9.3
S&P: A+ Moody’s: A2Fitch: A+
S&P: A+ Moody’s: A2Fitch: A+
9
Annual Investor Conference | Finance
Forecasting Strong Growth and Profitability
Financial guidanceFinancial guidance
64.5 - 65
$0
$20
$40
$60
$80
2007E 2008E
71 - 72
Billions
Revenues Operating Cash Flow
$0
2007E 2008E
> 7
Billions
EPS
$0
$2
$6
2007E 2008E
Per Share 5.55 -5.75
4.55 -4.75
>4
$4
$2
$4
$8
$6
10
Annual Investor Conference | Finance
71-72
64.5-6561.5
53.6$50
$55
$60
$65
$70
$75
2005 2006 2007E 2008E
~6.0% ~5.6%
3.6%
4.8%
0%
3%
6%
9%
2005 2006 2007E 2008E
Strong Revenue Growth Net Margins (goal >7%)
• Implementing growth plans and investing in new technologies
• Large backlog fuels growth
Targeting core business operating margins >10% to achieve net margin goal
Consistently achieved at top industrial companies
Improving Key Financial Metrics
Value-driven innovation foundation for long-term growthValue-driven innovation foundation for long-term growth
Billions
3.6%*
4.6%*
*Adjusted Net Margins is a non-GAAP measure. Definitions, reconciliations and further disclosures regarding these non-GAAP measures are provided in the attached disclosure.
11
Annual Investor Conference | Finance
~30%~26%
17%(1)
13%
0%
10%
20%
30%
2005 2006 2007E 2008E
13% 12%
>6%
>10%
0%
5%
10%
15%
2005 2006 2007E 2008E
Improving Key Financial Metrics
RONA (goal > 20%) Cash Flow (goal >10% as % of rev)
• Utilize assets efficiently
• Recognize inherent differences between BCA/IDS and BCC
• Consistent with top performing companies
• Focus on cash conversion
• Record orders drove strong cash in ’05 and ‘06
Growing strength in asset utilization and cash flow generationGrowing strength in asset utilization and cash flow generation(1) The financial impact of the decision to exit the Connexion by Boeing business and the settlement with the U.S. Department of Justice reduced 2006 RONA by 6 percentage points.
12
Annual Investor Conference | Finance
Economic Profit –Linking Pay to Performance
Economic Profit *
• Economic Profit strongly correlated with shareholder value
• New compensation plan links pay to EP goals
– One year commitment
– Three year commitment
• Stock plans extend deep into organization
– Stock options
– Share Value Trust
Management and shareholders alignedManagement and shareholders aligned
$0
$1
$2
$3
2004 2005 2006
Billions
0.7*
1.8*
2.6*
*Economic Profit is a non-GAAP measure. Definitions, reconciliations and further disclosures regarding these non-GAAP measures are in the attached disclosure.
13
Annual Investor Conference | Finance
Investing in Our Future
Capital Expenditures Research and Development
• Investing in the 787, 747-8 and IDS growth programs
• Investments focused on advanced materials, processes and equipment (composites)
• Focused on 787, 747-8 and IDS growth programs
• 787 spending should peak in 2007, decline in 2008
1.6 1.6 1.7 1.5
$0
$1
$2
$3
$4
2005 2006 2007E 2008E
2.8-3.0 2.2
3.3 3.2-3.4
$0
$1
$2
$3
$4
2005 2006 2007E 2008E
Billions Billions
Maintaining Boeing’s product leadership…while expanding margins
Maintaining Boeing’s product leadership…while expanding margins
14
Annual Investor Conference | Finance
Targeted M&A Supports Organic Growth Strategy
Strategy Recent ActivityAcquisitions/Joint Ventures
Strengthening core businesses by adding key capabilities and tapping new markets
Primarily small to modest sized
Focus on growth driving increased activity
Aviall
C-Map and Carmen Systems
Conquest and Frontier Systems
United Launch Alliance (JV)
Shanghai MRO (JV)
DivestituresReducing costs and risk combined with more focus on strategic alignmentLong-term supply agreements utilized to secure lower costsMajor initiatives complete
Wichita/Tulsa (now Spirit)
Rocketdyne
BCC Commercial Finance
Commercial Electronics
Electron Dynamic Devices
Enhancing growth and maintaining focus on Boeing’s core businesses
Enhancing growth and maintaining focus on Boeing’s core businesses
15
Annual Investor Conference | Finance
Strong Performance Benefiting Shareholders
Share Repurchase Dividends (1)
• 90 million shares repurchased since 2004
• Expect share repurchase to cover dilution and reduce total shares outstanding
• Focused on steadily increasing dividends
• Targeted payout ratio between 30% and 40%.
$0.8
$0
$1
$2
$3
2004 2005 2006 2007E 2008E
$1.40 Higher
$0.68
$1.00$1.20
$0.00
$0.50
$1.00
$1.50
2004 2005 2006 2007 2008E
Billions $/share
$2.9
Balanced strategyBalanced strategy
$2.0
(1) Annualized dividend payment made in the second quarter of each year.
16
Annual Investor Conference | Finance
Delivering Value to Shareholders
0%
10%
20%
30%
40%
2003 2004 2005 2006
Boeing… a top quartile performerBoeing… a top quartile performer
38%
25%30%
28%
Total Return to Shareholders(stock appreciation plus dividends)
Tota
l Ret
urn
(%)
Average of S&P 500
Source: Bloomberg
17
Annual Investor Conference | Finance
Productivity in Finance
“The status quo isn’t acceptable. Our challenge is to continually find ways to improve quality while reducing costs.”
- James Bell
“The status quo isn’t acceptable. Our challenge is to continually find ways to improve quality while reducing costs.”
- James Bell
Deploying a lean toolset in Finance
Improving efficiency, eliminating non-value added activity
An example: Finance Transformation… results to-date are promising
15% reduction in number of finance systems
75% reduction in time to close
50% reduction in post-closing adjustments
18
Annual Investor Conference | Finance
Looking Ahead
Boeing expects strong growth in 2007 and 2008
Our businesses are well positioned in growing markets
We are relentlessly committed to:
Highest standards of integrity
Business execution
Driving performance to new levels
Delivering value to customers and shareholdersDelivering value to customers and shareholders
20
Annual Investor Conference | Finance
The Boeing Company and SubsidiariesReconciliation of Non-GAAP MeasuresAdjusted Operating Earnings (Unaudited - $ millions)
2006 2005 2004 2003
Operating earnings as reported 3,014 2,812 2,007 398
Global settlement 599
Business Shutdown/Asset Dispositions/Divestitures 335 (41)
Air Force 767 Tanker and 717 Program completion 555
Goodwill impairment charge 913
Total adjusted operating earnings 3,948 2,771 2,562 1,311
In addition to disclosing results that are determined in accordance with U.S. generally accepted accounting principles (GAAP), the company also discloses non-GAAP results that exclude certain significant charges or credits that are important to an understanding of the company's ongoing operations. The company provides reconciliations of its non-GAAP financial reporting to the most comparable GAAP reporting. The company believes that discussion of results excluding certain significant charges or credits provides additional insights into underlying business performance. Adjusted operating earnings, a term which may be used interchangeably with “adjusted earnings from operations,” is not a measure recognized under GAAP. The determination of significant charges or credits may not be comparable to similarly titled measures used by other companies and may vary from quarter to quarter.
The Boeing Company and SubsidiariesReconciliation of Non-GAAP Measures
Adjusted Operating Earnings (Unaudited - $ millions)
21
Annual Investor Conference | Finance
The Boeing Company and SubsidiariesReconciliation of Non-GAAP MeasuresAdjusted Earnings Per Share (Unaudited)
2006 2005 2004 2003
Diluted earnings per share 2.85 $3.20 $2.30 0.89
Global settlement with U.S. Department of Justice 0.75
Business Shutdown/Asset Dispositions/Divestitures 0.24 (0.04) -
Air Force 767 Tanker and 717 Program completion - 0.44
Goodwill impairment charge 1.01
Interest associated with income tax benefits (0.01) (0.05) (0.17)
Net (gain)/loss on Discontinued Operations, Net of Taxes (0.01) 0.01 (0.06)
Income tax benefits (0.20) (0.71) (0.45)
Cumulative effect of accounting change (0.02)
Adjusted earnings per share $3.62 $2.39 $2.06 $1.90
Weighted average diluted shares (millions) 787.6 802.9 813.0 808.9
Twelve months endedDecember 31
In addition to disclosing results that are determined in accordance with U.S. generally accepted accounting principles (GAAP), the company also discloses non-GAAP results that exclude certain significant charges or credits that are important to an understanding of the company's ongoing operations. The company provides reconciliations of its non-GAAP financial reporting to the most comparable GAAP reporting. The company believes that discussion of results excluding certain significant charges or credits provides additional insights into underlying business performance. Adjusted earnings per share is not a measure recognized under GAAP. The determination of significant charges or credits may not be comparable to similarly titled measures used by other companies and may vary from quarter to quarter.
The Boeing Company and SubsidiariesReconciliation of Non-GAAP Measures
Adjusted Earnings Per Share (Unaudited)
22
Annual Investor Conference | Finance
The Boeing Company and SubsidiariesReconciliation of Non-GAAP MeasuresNet Margins
$ millions except per share amounts 2006 2005
Net Earnings as Reported (A) 2,215 2,572
Total Revenues as Reported (B) 61,530 53,621
Net Margins (A divided by B) 3.6% 4.8%
Adjusted earnings per share (C) $3.62 $2.39
Weighted average diluted shares (millions) (D) 787.6 802.9
Adjusted Net Earnings (C multiplied by D) = F 2,851 1,919
Adjusted Net Margins (F divided by B) 4.6% 3.6%
Twelve months endedDecember 31
credits may not be comparable to similarly titled measures used by other companies and may vary from quarter to quarter.
In addition to disclosing results that are determined in accordance with U.S. generally accepted accounting principles (GAAP), the company also discloses non-GAAP results that exclude certain significant charges or credits that are important to an understanding of the company's ongoing operations. The company provides reconciliations of its non-GAAP financial reporting to the most comparable GAAP reporting. The company believes that discussion of results excluding certain significant charges or credits provides additional insights into underlying business performance. Adjusted net margins is not a measure recognized under GAAP. The determination of significant charges or
The Boeing Company and SubsidiariesReconciliation of Non-GAAP Measures
Adjusted Net Margins (Unaudited)
23
Annual Investor Conference | Finance
Economic Profit Reconciliation
($ millions) 2004 2005 2006
Operating earnings 2,007 2,812 3,014 Add back: Share based plans expense 655 1,036 743 BCC interest expense 350 359 353 Settlement with U.S. DOJ 571 Connexion by Boeing charge 320 Adjusted operating earnings 3,012 4,207 5,001 Adjusted effective tax rate 30.0% 29.3% 30.4%Adjusted net operating profit after tax 2,108 2,974 3,481
BCC average net assets* 9,307 7,677 6,827 Non-BCC average net assets* 8,179 7,198 4,782 BCC targeted cost of capital 5.4% 5.4% 5.4%Non-BCC targeted cost of capital 10.5% 10.5% 10.5%BCC capital charge (BCC average net assets * BCC targeted cost of capital) 503 415 369 Non-BCC capital charge (Non-BCC average net assets * Non-BCC targeted cost of capital) 859 756 502 Total capital charge 1,361 1,170 871
EP (Adjusted net operating profit after tax less Total capital charge) 747 1,804 2,610
* Average net assets represent an average of monthly net assets. Net assets = (total assets less cash & marketable securities) less (total liabilities excluding debt)
Attachment: Disclosure of Non-GAAP Measures
The company uses Economic Profit to measure financial performance and determine certain elements of compensation. Economic Profit is a non-GAAP measure that excludes certain significant charges or credits that are important to an understanding of the company's ongoing operations. Economic profit is defined as net operating profit after tax (operating earnings, adjusted to exclude share-based plans expense and Boeing Capital Corporation interest expense, and reduced for taxes using an effective tax rate), less a capital charge (average net assets multiplied by a targeted cost of capital, where average net assets exclude cash, marketable securities, debt and certain pension and other post-retirement benefit obligations). The calculation of economic profit may also exclude certain significant charges or credits to provide additional insights into underlying business operations. The determination of significant charges or credits may not be comparable to similarly titled measures used by other companies and may vary from quarter to quarter. The company does not intend for economic profit to be considered in isolation or as a substitute for any GAAP measure.
The Boeing Company and SubsidiariesReconciliation of Non-GAAP Measures
Economic Profit (Unaudited - $ millions)
24
Annual Investor Conference | Finance
Forward-Looking Information Is Subject to Risk and Uncertainty
Certain statements in this report may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” and similar expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements in this press release include, among others, statements regarding future results as a result of our growth and productivity initiatives, our 2007 and 2008 financial outlook and the benefits of the new IDS structure. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. As a result, these statements speak only as of the date they were made and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Our actual results and future trends may differ materially depending on a variety of factors, including the continued operation, viability and growth of major airline customers and non-airline customers (such as the U.S. Government); adverse developments in the value of collateral securing customer and other financings; the occurrence of any significant collective bargaining labor dispute; our successful execution of internal performance plans including our company-wide growth and productivity initiatives, production rate increases and decreases (including any reduction in or termination of an aircraft product), availability of raw materials, acquisition and divestiture plans, and other cost-reduction and productivity efforts; charges from any future SFAS No. 142 review; ability to meet development, production and certification schedules for the 787 program; technical or quality issues in development programs (affecting schedule and cost estimates) or in the satellite industry; an adverse development in rating agency credit ratings or assessments; the actual outcomes of certain pending sales campaigns and the timely launch of the 787 program and U.S. and foreign government procurement activities, including the uncertainty associated with the procurement of tankers by the U.S. Department of Defense (DoD) and funding of the C-17 program; the cyclical nature of some of our businesses; unanticipated financial market changes which may impact pension plan assumptions; domestic and international competition in the defense, space and commercial areas; continued integration of acquired businesses; performance issues with key suppliers, subcontractors and customers; significant disruption to air travel worldwide (including future terrorist attacks); global trade policies; worldwide political stability; domestic and international economic conditions; price escalation; the outcome of political and legal processes, changing priorities or reductions in the U.S. Government or foreign government defense and space budgets; termination of government or commercial contracts due to unilateral government or customer action or failure to perform; legal, financial and governmental risks related to international transactions; legal and investigatory proceedings; tax settlements with the IRS and various states; U.S. Air Force review of previously awarded contracts; costs associated with the exit of the Connexion by Boeingbusiness; and other economic, political and technological risks and uncertainties. Additional information regarding these factors is contained in our SEC filings, including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2006 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.
BOEING is a trademark of Boeing Management Company.Copyright © 2006 Boeing. All rights reserved. 1
Boeing Commercial Airplanes
Scott CarsonExecutive Vice President, The Boeing Company President and Chief Executive Officer, Commercial Airplanes
May 23, 2007
Copyright © 2006 Boeing. All rights reserved. 2
Annual Investor Conference | Boeing Commercial Airplanes
Boeing Commercial Airplanes
Performance
Business Environment
Near and Long-term
Product Development
Airplanes, Services and Solutions
Productivity
Lean Global Enterprise
Copyright © 2006 Boeing. All rights reserved. 3
Annual Investor Conference | Boeing Commercial Airplanes
Billions
28.5
32.5 - 33.0
S30
$20
$10
$0
22.7
9.6%
6.3%
> 10%
4%
6%
12%
0%
2%100
05 06 07E 08E
290
398440 - 445
500
400
300
200
0
Revenues
05 06 07E 08E 05 06 07E 08E
Delivering growth and profitability
Performance and Outlook
MarginsAirplane Deliveries
Delivering growth and profitability
~ 11%39.0 - 40.0
515 - 520
600 S40
8%
10%
Copyright © 2006 Boeing. All rights reserved. 4
Annual Investor Conference | Boeing Commercial Airplanes
People Working Together as a Global Enterprise for Aerospace Leadership
as measured by:
GoalCreating value through profitable growth for all
Customer,
Employee,
Investor,
& Communitysatisfaction
Prefer Boeing
Top quartile
Good neighbor
Top quartile
Copyright © 2006 Boeing. All rights reserved. 5
Annual Investor Conference | Boeing Commercial Airplanes
Global Business Environment
Changing and dynamic marketplace with growth opportunitiesChanging and dynamic marketplace with growth opportunities
Instability with shifting world orderStrong long-term global marketGDP, trade, liberalization, new business models, technology, trafficFuel prices, environmental pressure, security issues cause uncertaintyDemand for air travel growing and increasingly segmentedAirline competitive strategies focused on efficiency and product innovation – profitability returningServices competitors consolidating to provide a broader and integrated range of servicesAggressive competition, emerging competitorsMore global talent base, strong demand for critical technical skills
Copyright © 2006 Boeing. All rights reserved. 6
Annual Investor Conference | Boeing Commercial Airplanes
Long-term market outlook is strongLong-term market outlook is strong
Business EnvironmentLong Term Global Growth Market
0
2,000
4,000
6,000
8,000
10,000
12,000
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
AsiaFinancial
Crisis
• Economy• War• Oil Prices
Trav
el -
Bill
ions
RPK
s
Gulf WarCrisis
• Cyclical• Liberalization• Technology• Point-to-point• New airplane opportunity
Long-Term Growth RatesGDP = 3%
Passengers = 5%Cargo = 6%
Long-Term Growth RatesGDP = 3%
Passengers = 5%Cargo = 6%
Copyright © 2006 Boeing. All rights reserved. 7
Annual Investor Conference | Boeing Commercial Airplanes
Long-Term Traffic Growth Trends Continue
Airlines will continue to address passenger desires for non-stops and frequencies
Airlines will continue to address passenger desires for non-stops and frequencies
0
200
400
600
800
1000
1200
1980 1990 2000 2010 2020
Index (1980=100) Nonstop markets>3,000 statute miles
ASKsFrequency GrowthAirport PairsAirplane Size in Seats
Copyright © 2006 Boeing. All rights reserved. 8
Annual Investor Conference | Boeing Commercial Airplanes
Continuous quality and productivity improvementEfficiently produce through cyclesLarge-scale systems integrationLean global enterprise
Market-driving products and servicesPoint-to-point…nonstop…frequencySimplified product familyServices and business solutions
Detailed customer knowledge and focusUnderstand and shape the market Valued relationshipsCustomer preferred solutionsSuperior customer experience
Skilled and motivated teamWorking TogetherHighest ethical standards
Strategy
Delivering valueDelivering value
Copyright © 2006 Boeing. All rights reserved. 9
Annual Investor Conference | Boeing Commercial Airplanes
Detailed Customer Knowledge and Focus
SunExpress
UPS
GAP
AmericasAmericasEurope/Africa/
Mid East
Europe/Africa/
Mid East
Asia PacificAsia Pacific
Copyright © 2006 Boeing. All rights reserved. 10
Annual Investor Conference | Boeing Commercial Airplanes
Market-Driving Products and Services
20-year forecast: $2.6 trillion market . . . 27,200 airplanes20-year forecast: $2.6 trillion market . . . 27,200 airplanes
380
737
320
340
330
787
777
747
Single-Aisle41%
Single-Aisle41%
Large10%
Intermediate Twin-Aisle
45%
Intermediate Twin-Aisle
45%
Regional Jets
767
4% E190
350
Copyright © 2006 Boeing. All rights reserved. 11
Annual Investor Conference | Boeing Commercial Airplanes
0
10,000
20,000
30,000
40,000Units
17,630New Airplanes for
Growth
17,630New Airplanes for
Growth
9,580New Airplanes for
Replacement
9,580New Airplanes for
Replacement
8,760Retained Fleet
8,760Retained Fleet
17,33017,330
35,970
27,210
2005 2025
Over One-Third of All New Airplane Deliveries Are For Replacement
Copyright © 2006 Boeing. All rights reserved. 12
Annual Investor Conference | Boeing Commercial Airplanes
Plan and Commitment
Pioneer new technologies
Deliver progressive new productsand services
Relentlessly pursue manufacturing and lifecycle improvements
Improve performance of current fleets
Industry LeadershipWorking together with airlines, industry and government to establish best practices and public policy at the global level – for a better future
Commitment to a Better FutureStrategy on Aviation and the Environment
Copyright © 2006 Boeing. All rights reserved. 13
Annual Investor Conference | Boeing Commercial Airplanes
Product Development Plan
CASFreighter Conversions GoldCare/e-EnabledMarine – C-MapAviall/Carmen
Lifecycle Solutions
737-900ER P-8A Poseidon (BCA)Replacement StudiesCompleting the Family
777 Freighter Even more Value
787-3/-8/-9787-10Breakthrough Capability,
Comfort & Economics
737
777
787
747-8/-8 Freighter 747LCF
More Efficiency and Capability
747
767Support key customers
Tanker Provisioned 767-200LRXF
Copyright © 2006 Boeing. All rights reserved. 14
Annual Investor Conference | Boeing Commercial Airplanes
Customer Preferred Products
Boeing61%
Airbus39%
Boeing73%
Airbus27%
2006 Orders ($)
*Boeing 767, 787, 777, 747; Airbus A330, A340, A350, A380
All Airplanes -- $195B Twin-Aisle Airplanes* -- $94B
Boeing twin-aisle airplanes (787, 777, 747) achieving outstanding success
Boeing twin-aisle airplanes (787, 777, 747) achieving outstanding success
Copyright © 2006 Boeing. All rights reserved. 15
Annual Investor Conference | Boeing Commercial Airplanes
Backlog
Model
Single-Aisle30%
Single-Aisle30%
Intermediate Twin-Aisle
59%
Intermediate Twin-Aisle
59%
Large11%
Large11%
747
777
737
767
787
$64$70
$124
$174$188
0
50
100
150
200
2003 2004 2005 2006 1Q07$-
Bill
ions
Backlog
Asia Pacific
Americas
Region
AmericasAmericas
Europe & Central Asia
Europe & Central Asia
Leasing & Gov'tLeasing & Gov't
Southeast Asia
Southeast Asia
Middle East & Africa
Middle East & Africa
Asia PacificAsia Pacific
Healthy backlog from established customers… continuing to growHealthy backlog from established customers… continuing to grow
Copyright © 2006 Boeing. All rights reserved. 16
Annual Investor Conference | Boeing Commercial Airplanes
787 Worldwide Market Interest Strong567 firm orders, 44 customers
Most successful program launch in commercial aviationMost successful program launch in commercial aviation
Firm Orders Firm Customers/Operators
0
100
200
300
400
500
600
0 3 6 9 12 15 18 21 24 27 30 33 36
Months after launch
787
737NG
767777
A320A340A330A380
0
10
20
30
40
50
0 3 6 9 12 15 18 21 24 27 30 33 36
Months after launch
787
737NG
767777A340 A320A330
A380
Copyright © 2006 Boeing. All rights reserved. 17
Annual Investor Conference | Boeing Commercial Airplanes
28 27 42 57111
198
329
572686
23 27 29 3833
28
27
42
57
111
71 72 7579
89
94
99
104
117
122
470
0
100
200
300
400
500
600
700
800
900
1000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
35+ years30 - 34 years25 - 29 years
U.S. Network Carrier Fleets Are Aging,Near-Term Fleet Action Is Imperative
…to avoid unmanageable
fleet replacement
activity during this period
Airplane deliveries need to begin
during this period…2007- 2008
likely to see orders from US network
carriers
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Annual Investor Conference | Boeing Commercial Airplanes
Quality and Productivity Improvements737 and 777 Assembly
737 Lean Progress50% factory cycle time reduction132% inventory turns increase55% cost of quality reduction36% customer introduction hours reduction41% covered floor space reduction
Lean global enterprise Lean global enterprise
777 Lean Progress14% Factory flow time reduction32% Inventory turns increase27% Engineering quality improvement7% Cost of quality reduction43% Factory footprint reduction
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Annual Investor Conference | Boeing Commercial Airplanes
Summary
Good long-term market
Product and services development supporting and shaping future
Competition will remain intense
Focused on customer, product development and production system execution
Proactive approach and engagement to environmental concerns
Continuing lean operations
Profitable growth . . . expanding marginsProfitable growth . . . expanding margins
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787 Program
Mike BairVice President/General Manager Boeing 787 Program
May 23, 2007
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Annual Investor Conference | Boeing Commercial Airplanes
787 Production Progress Video
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Annual Investor Conference | Boeing Commercial Airplanes
The 787 Is a Complete, Flexible, Efficient Family
787-8210-250 passengers (three-class)7,650 – 8,200 nmi | 14,200 – 15,200 km
787-9250-290 passengers (three-class)8,000 – 8,500 nmi | 14,800 - 15,750 km
787-3290-330 passengers (two-class)2,500 – 3,050 nmi | 4,650 – 5,650 km
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Annual Investor Conference | Boeing Commercial Airplanes
Configured for Success787-8 Design Features
Composite primary
structure
Advanced engines and
nacelles
Breakthrough passenger cabin Enhanced
flight deckAdvanced wing design
Innovative systems
technologies
Large cargo capacity
Overhead crew rests
COPYRIGHT © 2005 THE BOEING COMPANY
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Annual Investor Conference | Boeing Commercial Airplanes
787 Surpasses 500 Customer Orders With JAL Order
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Annual Investor Conference | Boeing Commercial Airplanes
Partners Across The Globe Are Bringing The 787 Together
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Annual Investor Conference | Boeing Commercial Airplanes
DreamlifterRoute Structure
Joined Section 43-46
Charleston, SCto Everett, WA
JoinedSection47-48
Charleston, SC to Everett, WA
Section 41Wichita, KS to Everett, WA
Section 46Grottaglie, Italy
to Charleston, SC
Section 44Grottaglie, Italy to
Charleston, SC
Horizontal StabilizerFoggia, Italy
to Charleston, SC
WingNagoya, Japanto Everett, WA
Section 43Nagoya, Japan
to Charleston, SC
Section 11/45Nagoya, Japan
to Charleston, SC
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Annual Investor Conference | Boeing Commercial Airplanes
Spirit AerosystemsForward Fuselage – Follow-on Airplanes
Line #3 in CS 449 Structures Installation
Line #4 Deburr & Edge Seal
Line #2 in CS449Structures Installation
Line 9998
Line #5 Mandrel Extraction Line #6 C Axis Leak Check
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VoughtAft Fuselage Sections in Join for AP #1
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Forward Body and AFT Body Delivered to Everett
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Final Major Structure for 787 DreamlinerCenter Fuselage Delivered to Everett
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Mitsubishi Heavy Industries (MHI) NagoyaAP #1 Wings – On Their Way
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Mitsubishi Heavy Industries (MHI) NagoyaAP #1 Wings being loaded on the Dreamlifter
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SpiritA/P #1 Pylons being Unloaded in Everett
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GoodrichThrust Reverser A/P #1 – Rolls-Royce
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Hamilton SundstrandCabin Air Conditioning and Temperature Control System
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Final Assembly Vertical Fin
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Final AssemblyHorizontal Stabilizer
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Final Assembly Wing Laydown
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Final Assembly Forward, Mid, and Aft Body in Position 1
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787 Factory Grand Opening
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Annual Investor Conference | Boeing Commercial Airplanes
787 Development on Track
20052002
787-8FirstFlight
787-8 Enters Service
AirplaneAnnouncement
Firm Configuration
Program Launch
Authorityto Offer
2003 2004 2006 2007 2008 2009 2010
787-3Enters
Service
787-9EntersService
Start of Major
Assembly
BOEING is a trademark of Boeing Management Company.Copyright © 2006 Boeing. All rights reserved.
Integrated Defense Systems
Jim AlbaughExecutive Vice President, The Boeing CompanyPresident and CEO, Integrated Defense Systems
May 23, 2007
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Annual Investor Conference | Integrated Defense Systems
$32.4B2006 Revenue
Right organization
Validated strategy
Solid revenue base
Focused on cost and execution
Manageable risk
Integrated Defense Systems
37%
44%
19%
Network& Space Systems
Network& Space Systems
PrecisionEngagement& MobilitySystems
PrecisionEngagement& MobilitySystems
SupportSystemsSupportSystems
Balanced portfolio; focused on executionBalanced portfolio; focused on execution
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Annual Investor Conference | Integrated Defense Systems
IDS 2006 Performance
2006
Revenue $32.4B
Operating Earnings $3.0B
Operating Margins 9.3%
Record revenue – $32.4B
Margins – 9.3%
Solid backlog – $75B
Outstanding performance on support and production programs
Continuing focus on execution and customer needsContinuing focus on execution and customer needs
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Annual Investor Conference | Integrated Defense Systems
IDS 1Q 2007 Performance
1Q07
Revenue $7.7B
Operating Earnings $0.8B
Operating Margins 10.2%
7% Revenue growth over 2006
Double digit margins
Significant milestones –FCS, ABL, FAB-T, TSAT
Captured international business
Focus on execution of large backlogFocus on execution of large backlog
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Annual Investor Conference | Integrated Defense Systems
2006 and 1Q07 IDS Video
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Annual Investor Conference | Integrated Defense Systems
Business Environment
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Annual Investor Conference | Integrated Defense Systems
U.S. Defense Budget
97 99 01 03 05 07 09 11 130
100
200
300
400
500
600
$700
Defense Budget $B
FY07
$594B$594B$565B$565B
$535B$535B$30B$30B
$481B$481B
SupplementalsSupplementals
O&M, Milpers,
Other
O&M, Milpers,
OtherCAGR 02-08 08-13TotalBaselineInvestment 8.3% 1.8%
11.5% -3.1%6.5% 2.0%
InvestmentInvestment
BaselineBaseline
$663B$663BFY08
DoD funding expected to decline 3% annually DoD funding expected to decline 3% annually
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DoD Investment Accounts Will be Squeezed
DoDInvestmentAccounts
Recap/
Reset
War consumption
Costly reset and repair
Aging infrastructure
Higher Costs
End-strength increases
Costs per unit increasing
Energy
Medical, housing, quality of life
Less
Funding
Full SpectrumThreat
Mature platforms
Accelerated obsolescence
Global War on Terror
Asymmetric threats
Regional conflicts
Emerging peer
US Political changes
Country at war?
Peace dividend?
Higher scrutiny
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Annual Investor Conference | Integrated Defense Systems
DoD Capability Focus Areas
• Global Force Projection• Kinetic and Non-kinetic Effects• Electronic Warfare • Redundancy against vulnerabilities
• Space Superiority• Defensive Counter Space
• Live, virtual, and constructive training
• Integrated scenario simulation
• Supply Chain Management• Performance Based Logistics• Factory to foxhole
PrecisionEffects
PrecisionEffects
Customers facing difficult investment choicesCustomers facing difficult investment choices
• Interoperability• Increased Bandwidth• Tactical Situational Awareness• Ad-hoc Self Forming Networks• Information Assurance
• Persistent ISR• Global Situational Awareness• Intelligence• Multi-use Platforms, Systems
• Tactical Mobility• Strategic Lift • Tankers
GlobalMobilityGlobal
Mobility
IntegratedISR
IntegratedISR
IntegratedC3
IntegratedC3
SpaceExploitation
SpaceExploitation
IntegratedTraining
IntegratedTraining
IntegratedLogistics
IntegratedLogistics
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Annual Investor Conference | Integrated Defense Systems
IDS Organized Around Markets & Capabilities
Network &Space
SystemsRoger Krone
Network &Space
SystemsRoger Krone
ABLABL
GMDGMD
PrecisionEffects
PrecisionEffects
GlobalMobilityGlobal
Mobility
IntegratedISR
IntegratedISR
IntegratedC3
IntegratedC3
SpaceExploitation
SpaceExploitation
IntegratedLogistics
IntegratedLogistics
IntegratedTraining
IntegratedTraining
SupportSystems
Pat Finneran
SupportSystems
Pat Finneran
PrecisionEngagement
& MobilityJohn Lockard
PrecisionEngagement
& MobilityJohn Lockard
IntegratedLogistics
F-15F-15
P-8AP-8A
Maintenance, Modifications & Upgrades C-17 GSPC-17 GSP
FIRSTFIRST
Training Systemsand Services
TankersTankers
N-UCASN-UCAS
ApacheApacheCH-47CH-47
C-17C-17
WeaponsWeapons
AWACSAWACS
F-18F-18
ISSISS
ShuttleShuttle
SatellitesSatellites
Sea LaunchSea Launch
JTRSJTRS
FAB-TFAB-TClassified
FCSFCSPAC-3PAC-3
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Annual Investor Conference | Integrated Defense Systems
Environmental Summary
Increasing, multi-dimensional threats
Moderating and reprioritized DoD budget
Balancing readiness, reset, end strength and modernization increasing focus on affordability
Limited new startsFinancially strong, aggressive competitors
Geopoliticaland
Threat
Political and
Budget
Customers
Marketsand
Competitors
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Annual Investor Conference | Integrated Defense Systems
IDS Strategic Focus
Keep programs sold and extend core business - focus on execution
Shape and capture major unawarded program opportunities
Increase international focus
Expand presence in attractive adjacencies and select capabilities
Drive affordability to reduce cost and improve competitivenessDrive affordability to reduce cost and improve competitiveness
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Annual Investor Conference | Integrated Defense Systems
Productivity & Execution – Go Hand in Hand
Productivity ExecutionEfficiency Effectiveness
&
Sustained Cost Reduction
Improved Competitiveness
New Business
Kept Promises
Increased Earnings/Margins
Repeat Customers
Initiatives Lessons Learned
Both required for long-term growthBoth required for long-term growth
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Annual Investor Conference | Integrated Defense Systems
Boeing LeadershipMeeting
All Program Manager Meeting
IDS Leadership Meeting(All IDS E-Series Leaders)
SystemsEngineering
Cost Structure
ProgramManagement
Best Practices
SupplierManagement
& Quality
EmployeeInvolvementLeadershipLeadership
AttributesAttributes
Non-advocateReviews
FunctionalExcellence
All Engineering Leadership Meeting
Leadership Excellence
Instantiating a Culture of Execution and Productivity
Copyright © 2006 Boeing. All rights reserved. | 15
Annual Investor Conference | Integrated Defense Systems
Productivity is Paying Off
F/A-18F/A-18 assembly line converted to pulsed moving line55% reduction in cycle time 90% reduction in defects
C-17157K square ft reduction in manufacturing area 20% reduction in aircraft cycle time 17% savings on work in process 50% increase in inventory turns
Satellite Development Center40% increase in on-time engineering 65% reduction in rework 85% reduction in quality defects
Facility Consolidation1.7M square feet reductionVacating leased facilities
Overhead Reduction$100M reduction in overhead in 2006
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Annual Investor Conference | Integrated Defense Systems
Capture Large Unawarded Opportunities
Several Key Opportunities in 2007:
TSAT
GPS-III
JTRS-AMF
BAMS
Over $100B in opportunities Over $100B in opportunities
CSAR-X
USAF Tanker
N-UCAS
ARES
Proprietary
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Annual Investor Conference | Integrated Defense Systems
International Focus
Saudi ArabiaF-15/JDAM
ApacheAWACS
Support Services
Growing International demand with most attractive opportunities in the Middle East and Asia
Growing International demand with most attractive opportunities in the Middle East and Asia
Other Middle EastAEW&C
SatellitesC-17
F/A-18Rotorcraft
India F/A-18
P-8Chinook
AustraliaF/A-18
ChinookC-17P-8
South KoreaF-15K
Apache, Chinook767 Tanker
JapanFX (F/A-18 ; F-15)Apache, Chinook
Satellites767 Tanker
SingaporeF-15
Apache, ChinookAEW&C
Copyright © 2006 Boeing. All rights reserved. | 18
Annual Investor Conference | Integrated Defense Systems
2007 revenue ~$31.0B
2008 revenue ~ $32-$33B
2007 margins ~11%
2008 margins ~11%
Integrated Defense Systems
Focused on execution and financial performanceFocused on execution and financial performance
37%
44%
19%
Network& Space Systems
Network& Space Systems
PrecisionEngagement& MobilitySystems
PrecisionEngagement& MobilitySystems
SupportSystemsSupportSystems
$31.0B2007E Revenue
Copyright © 2006 Boeing. All rights reserved. | 19
Annual Investor Conference | Integrated Defense Systems
Based on 2006 revenues
2006 2007ERevenue $14.4B $13.5BMargins * 13.9% 12.5%
44%
Global MobilityGlobal Mobility
Global StrikeGlobal Strike
Rotorcraft
Rotorcraft
ASW & ISR
ASW & ISR
SupportSupportSystemsSystems
Network & Network & Space SystemsSpace Systems
− CSAR-X− USAF Tankers− N-UCAS− C-17 Follow on− International Fighters− Joint Cargo Aircraft (JCA)− Future Long Range Strike
Precision Engagement and Mobility Systems
* Excludes 2006 AEW&C charges
Market stability with continued strong marginsMarket stability with continued strong margins
− F/A-18E/F and EA-18G− C-17− F-15 and F-22− P-8A (Poseidon)− AWACS & AEW&C− Apache, Chinook− V-22− JDAM, Small Diameter Bomb
Capture
Execute
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Annual Investor Conference | Integrated Defense Systems
37%Based on 2006 revenues (including ULA
Joint Venture)
2006 2007ERevenue $12.0B $11.0BMargins 8.0% 8.0%
Space & Intelligence
Systems
Space & Intelligence
SystemsMiss
ile Defe
nse
Missile
Defense
Space Exploration
Space Exploration Combat Systems
Combat SystemsC3C3
Precision Precision Engagement & Engagement &
Mobility SystemsMobility SystemsSupportSupportSystemsSystems
− Future Combat System− Ground-based Midcourse Defense− Proprietary− Joint Tactical Radio – Ground Mobile Radio− Military and Commercial Satellites− SBInet− Space Shuttle, International Space Station
Significant opportunities with improving margins
Network and Space Systems
Significant opportunities with improving margins
− Transformational Satellite Communication System
− Joint Tactical Radio – Airborne Maritime and Fixed Station
− Proprietary− GPS III− ARES− Commercial Satellites
Execute
Capture
Copyright © 2006 Boeing. All rights reserved. | 21
Annual Investor Conference | Integrated Defense Systems
Based on 2006 revenues
2006 2007ERevenue $6.1B $6.5BMargins 13.7% 13.0%
19%
Support SystemsSupport Systems
Network & Network & Space SystemsSpace Systems
Precision Precision Engagement & Engagement &
Mobility SystemsMobility Systems
− F/A-18 Performance Based Logistics− C-17 Performance Based Logistics− Rotorcraft Support− UK Through Life Customer Support (Chinook)− KC-135 Program Depot Maintenance− C-130 Avionics Modernization Program− VIP Modifications and Support− Training Systems
Growth opportunities with continued strong margins
Support Systems
Growth opportunities with continued strong margins
Capture
Execute
− C-17 GSP follow-on− V-22 support− Expand Performance Based Logistics and
Depot Partnerships with USG− KC-135 re-compete− KC-10 re-compete− Expand International support
Copyright © 2006 Boeing. All rights reserved. | 22
Annual Investor Conference | Integrated Defense Systems
Right strategy
Right leadership team
Right organization
Summary
37%
44%
19%
Network& Space Systems
Network& Space Systems
PrecisionEngagement& MobilitySystems
PrecisionEngagement& MobilitySystems
SupportSystemsSupportSystems
$31.0B2007E Revenue
Strong performance…focused on execution and growth opportunities
Strong performance…focused on execution and growth opportunities
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