The U.S. Navy recently awarded Boeing [NYSA: BA] a Foreign Military Sales (FMS) contract, valued at $109 million, to provide P-8A Poseidon training for the Royal New Zealand Air Force (RNZAF). A suite of training systems and courseware will prepare RNZAF aircrew and maintainers to safely and effectively operate and maintain the world’s premier maritime patrol and reconnaissance aircraft for decades to come.
Boeing’s holistic P-8 training system will enable the RNZAF to conduct up to 70 percent of all Poseidon-related training in a simulated environment. As part of the contract, Boeing will provide:
Operational Flight Trainer (OFT) – Full-motion simulator incorporates all P-8 unique displays and switches.
Weapons Tactics Trainer– Simulates mission systems and tactical operations, and when coupled with the OFT, forms a Weapons Systems Trainer that enables multi-crew, high-fidelity mission rehearsal training in the same simulated environment.
Virtual MaintenanceTrainer – Enables training of maintenance professionals to properly perform maintenance tasks and procedures on the P-8A aircraft.
Scenario Generation Station – Creates custom scenarios for mission training.
Brief/Debrief Station – Provides post-mission analysis and playback.
In addition, Boeing’s Electronic Classroom will give RNZAF instructors and students access to courseware and testing capabilities. Boeing also will provide initial Instructor Cadre Training to a group of RNZAF instructors, enabling them to continue training additional RNZAF P-8A instructors and aircrews following delivery of the training system in early 2024.
“This holistic training system will enable aircrew to safely train for all aspects of flying and maintaining the P-8A Poseidon,” said Tonya Noble, director of International Defense Training for Boeing. “We look forward to bringing these training capabilities in-country and working alongside the RNZAF to ensure readiness of aircrew and maintenance personnel.”
All training will be conducted in Ohakea, New Zealand. In March 2020, the RNZAF acquired four P-8A Poseidon aircraft through the U.S. Navy FMS process, with expected delivery beginning in 2023. New Zealand is one of seven nations operating the P-8.
Boeing is the world’s largest aerospace company and leading provider of commercial airplanes, defense, space and security systems, and global services. As a top U.S. exporter, the company supports commercial and government customers in more than 150 countries, leveraging the talents of a global supplier base. Building on a legacy of aerospace leadership, Boeing continues to lead in technology and innovation, deliver for its customers and invest in its people and future growth.
Boeing (NYSE: BA) announced a new 10-year agreement with North American carrier Frontier Airlines to implement a range of crew, flight-planning and operations tools to enhance efficiency for the airline.
These digital solutions from Boeing’s Jeppesen product range provide fleet-wide cost savings across regional and international routes, enhance airline crew-planning processes and increase operational reliability.
“We are fully confident that these robust Jeppesen flight-planning and operational tools will bring tremendous benefit to Frontier’s operations from day one following implementation,” said Brad Lambert, vice president of Flight Operations for Frontier Airlines. “From maintenance and operational planning to day-of and irregular operations, the Jeppesen automation and crew-management tools will complement our low-cost business model while contributing to our system reliability and efficiency.”
In addition to its digital navigation and charting services from Boeing, Frontier Airlines will use a new Jeppesen digital solutions suite that provides day-of-operations decision-support tools, including:
– Flight-planning and scheduling services to enhance flight operations and enable on-time departures and efficient routing
– Crew management, tail assignment and operations-control tools that optimize schedules and aircraft utilization in the short- and long-term planning horizon, including day-of-operation issue detection and schedule recovery to minimize issues due to unexpected events
“As commercial aviation emerges from the COVID-19 pandemic, Frontier Airlines is poised to continue its exceptional growth, utilizing Boeing’s analytics-powered tools to maximize performance and reduce costs during this critical moment for our industry,” said Ted Colbert, president and CEO of Boeing Global Services. “This is a great example of our partnership with customers like Frontier to turn Boeing’s unparalleled digital expertise into operational bottom-line advantages.”
Frontier Airlines is committed to “Low Fares Done Right.” Headquartered in Denver, the company operates more than 100 aircraft with a route network spanning the U.S., the Caribbean and Mexico. With 160 new planes on order, Frontier will continue to grow to deliver on the mission of providing affordable travel across America.
Boeing is the world’s largest aerospace company and leading provider of commercial airplanes, defense, space and security systems, and global services. As a top U.S. exporter, the company supports commercial and government customers in more than 150 countries, leveraging the talents of a global supplier base. Building on a legacy of aerospace leadership, Boeing continues to lead in technology and innovation, deliver for its customers and invest in its people and future growth.
Union Pacific today named Craig Richardson executive vice president, chief legal officer and corporate secretary. Richardson is responsible for overseeing all aspects of the company’s legal affairs, including commercial transactions and litigation, regulatory matters, labor and employment. Richardson also supervises the railroad’s compliance and ethics program, and risk management initiatives, including Union Pacific’s police department. He succeeds Rhonda Ferguson, who served as executive vice president, chief legal officer and corporate secretary.
Richardson most recently served as vice president of commercial and regulatory law. He’s also held the position of associate general counsel.
“Craig has provided critical leadership, guiding us through sensitive and complex legal matters with insight, sound judgment and clarity,” said Chairman, President and CEO Lance Fritz. “He is a superior partner and counselor and has the expertise we need during this time of unprecedented change within our nation and company.”
Richardson’s experience spans commercial and regulatory litigation, including oil and gas, environmental, and antitrust law, as well as all aspects of multi-jurisdictional permitting of global energy infrastructure. For nearly a decade, he served as the Chief Legal Officer of El Paso Corporation’s Pipeline Group, the largest network of interstate natural gas pipelines in North America, delivering over 30% of the natural gas consumed in the United States. He was responsible for all legal matters nationwide, waging successful litigation in executing El Paso’s $8 billion portfolio of crucial additions to national energy infrastructure from California to New York.
New agreement to focus on enhancing performance and unprecedented sustainability for world’s fastest commercial aircraft
Collins Aerospace Systems, a unit of Raytheon Technologies (RTX), has signed a collaboration agreement with Boom Supersonic, the aerospace company building the world’s fastest airliner, to advance nacelle technology on Boom’s forthcoming flagship supersonic airliner, Overture. Overture will be the world’s fastest airliner and is designed and committed to industry-leading standards of speed, safety, and sustainability.
Collins Aerospace engineers will work in concert with Boom to develop inlet, nacelle and exhaust system technologies that enable fuel-burn reduction and cutting-edge acoustics for cleaner and quieter supersonic flight. They will do this via lightweight aerostructures and variable nacelle geometry. Collins Aerospace has been providing innovative nacelle technology for more than 70 years, including development of the first commercial variable fan nozzle for high-bypass-ratio geared turbofan (GTF) engines.
“Through improved acoustics and lightweight materials systems, we can provide the next generation of supersonic propulsion systems with the nacelle technologies that not only enable higher performance and lower fuel burn, but also quieter operation,” said Marc Duvall, president, Aerostructures, Collins Aerospace. “Having completed 19 nacelle certification programs over the past decade, we’re uniquely positioned to collaborate with Boom Supersonic to create new propulsion-system solutions that will be key enablers of Overture’s success.”
The combined engineering team will be exploring the development of advanced acoustics and variable inlet and exhaust technologies required to minimize aircraft noise for passengers and airport communities while enhancing performance.
“Boom is taking an all-encompassing approach to sustainability — from our commitment to make Overture 100% carbon neutral to minimizing community noise and emissions, we’re dedicated to making mainstream supersonic travel environmentally and economically sustainable,” said Blake Scholl, Boom founder and CEO. “We are leveraging Collins’ experience in developing more fuel efficient and noise attenuating technologies for nacelles to help us develop Overture as an environmentally responsible supersonic jet.”
Boom’s mission is to make the world dramatically more accessible by making supersonic travel mainstream. Overture is in its design phase with plans to finalize the configuration and begin building the first airliner while XB-1 is flying supersonic. Boom will roll out the first completed Overture aircraft in 2025, with entry into service planned for 2029.
Embraer and EDP, a company that operates in all segments of the Brazilian energy sector, have signed a partnership for electric aircraft research. Through its EDP Smart division, the Portuguese-based multinational announced a financial contribution for the acquisition of energy storage and battery charging technologies for Embraer’s all-electric demonstrator aircraft project, utilizing the EMB-203 Ipanema as its test bed. The prototype, which is already in development, is scheduled to complete its inaugural flight in 2021.
The investment is part of the cooperation agreement signed by both companies to advance their shared knowledge of energy storage and battery charging technologies for aviation – one of the main challenges of the project. The partnership aims to investigate the applicability of high voltage batteries for the electric propulsion systems of small aircraft, in addition to evaluating the main operating characteristics, such as weight, efficiency and power quality, thermal control and management, cycling loading and unloading, and operational safety.
EDP Headquarters in Portugal
Technological Cooperation
This proposal for the technological development of aeronautical electrification was initially created as a cooperation between Embraer and WEG, in May 2019. The project was developed as an effective and efficient instrument for training and for the maturation of technologies prior to their application in future products.
The scope of the partnership with EDP is to develop shared research in the storage of high voltage energy, complementing Embraer’s ongoing research. These research and development initiatives seek to accelerate the combined knowledge of the technologies necessary for the use and integration of batteries and electric motors in order to increase the energy efficiency of the propulsion systems of aircraft.
For the evaluations, a small single-engine aircraft is being used as the test bed to perform a primary assessment of electrification technologies. Ground tests have taken place at Embraer’s facilities in Botucatu, in the interior of São Paulo, in preparation for the first flight, which will take place at Embraer’s Gavião Peixoto unit.
Electrification is just one project in a series of initiatives being developed by Embraer and the entire aeronautical industry aimed at ensuring a commitment to environmental sustainability, as already exemplified by biofuel developments to reduce carbon emissions.
EDP has a global commitment to electrify 100% of its fleet by 2030, as well as to develop new offers and commercial solutions that promote the energy transition. Last year, during Aneel’s Public Call on the topic of Efficient Electric Mobility, the Company approved an investment of about R$ 50 million in projects, via a Research and Development Fund consisting of both corporate and partner resources.
The U.S. Federal Aviation Administration (FAA) today rescinded the order that halted commercial operations of Boeing (NYSE: BA) 737-8’s and 737-9’s. The move will allow airlines that are under the FAA’s jurisdiction, including those in the U.S., to take the steps necessary to resume service and Boeing to begin making deliveries.
“We will never forget the lives lost in the two tragic accidents that led to the decision to suspend operations,” said David Calhoun, chief executive officer of The Boeing Company. “These events and the lessons we have learned as a result have reshaped our company and further focused our attention on our core values of safety, quality and integrity.”
Throughout the past 20 months, Boeing has worked closely with airlines, providing them with detailed recommendations regarding long-term storage and ensuring their input was part of the effort to safely return the airplanes to service.
An Airworthiness Directive issued by the FAA spells out the requirements that must be met before U.S. carriers can resume service, including installing software enhancements, completing wire separation modifications, conducting pilot training and accomplishing thorough de-preservation activities that will ensure the airplanes are ready for service.
“The FAA’s directive is an important milestone,” said Stan Deal, president and chief executive officer of Boeing Commercial Airplanes. “We will continue to work with regulators around the world and our customers to return the airplane back into service worldwide.”
In addition to changes made to the airplane and pilot training, Boeing has taken three important steps to strengthen its focus on safety and quality.
Organizational Alignment: More than 50,000 engineers have been brought together in a single organization that includes a new Product & Services Safety unit, unifying safety responsibilities across the company.
Cultural Focus: Engineers have been further empowered to improve safety and quality. The company is identifying, diagnosing and resolving issues with a higher level of transparency and immediacy.
Process Enhancements: By adopting next-generation design processes, the company is enabling greater levels of first-time quality.
Boeing [NYSE: BA] expects China’s airlines to acquire 8,600 new airplanes valued at $1.4 trillion and commercial aviation services valued at $1.7 trillion over the next 20 years, reflecting an expected robust recovery following the COVID-19 pandemic. Boeing shared its annual China market forecast today as part of the 2020 Commercial Market Outlook (CMO), which shows anticipated demand for commercial airplanes and services.
China’s rapidly growing middle class, increased economic growth and growing urbanization are all factors in the Boeing forecast, suggesting the country will lead passenger travel globally in the next few years. Since 2000, China’s commercial jet fleet has expanded sevenfold, and approximately 25% of all aviation growth worldwide in the last decade has come from China. Boeing forecasts this trend will continue over the next 20 years.
“While COVID-19 has severely impacted every passenger market worldwide, China’s fundamental growth drivers remain resilient and robust,” said Richard Wynne, managing director, China Marketing, Boeing Commercial Airplanes. “Not only has China’s recovery from COVID-19 outpaced the rest of the world, but also continued government investments toward improving and expanding its transportation infrastructure, large regional traffic flows, and a flourishing domestic market mean this region of the world will thrive.”
Despite the challenges imposed by the pandemic, China’s projected airplane and services market represents a nearly 7% increase over last year’s 20-year CMO forecast. These increases are driven by continued high demand for single-aisle airplanes and China’s expanding share of passenger widebodies to support international routes, along with a large replacement cycle as China’s fleet matures. Boeing also anticipates growth in Chinese demand for new and converted freighters and digital solutions to help carriers further innovate and succeed.
The 2020 China CMO includes:
– Boeing forecasts China’s annual passenger traffic growth to be 5.5% over the next 20 years
– Boeing estimates operators will need more than 6,450 new single-aisle airplanes in China over the next 20 years. Single-aisle airplanes, such as the 737 family, continue to be the main driver of capacity growth
– In the widebody market, Boeing forecasts demand for 1,590 deliveries by 2039 in China. Widebody airplanes will account for 18% of China’s deliveries during the 20-year period, down 4% from last year’s forecast due to an anticipated slower recovery in global long-haul traffic
– China has the world’s highest e-commerce growth rate but significant room for development of air express shipping, presenting an opportunity for robust freighter demand
– Long-term aviation industry growth in China is expected to drive the need for 395,000 commercial pilots, cabin crew members and aviation technicians to fly and to maintain the country’s airplane fleet
F-15QA1 and F-15QA2 Air to Air. Includes Arch Fly-by, St. Louis, MO. MSF20-0028 Series.
– Qatar Emiri Air Force to receive aircrew and maintenance training support for F-15QA aircraft
– Comprehensive support includes pre-delivery training and maintenance, and in-country services support
Boeing [NYSA: BA] today acknowledged three foreign military sales contracts with the U.S. Air Force for training services and support in the Middle East valued at more than $800 million.
The first previously unannounced contract was awarded in 2019 and will support the Qatar Emiri Air Force (QEAF) with F-15QA program management, maintenance and aircrew training valued at $240 million over a five-year contract period.
Boeing also received a separate not-to-exceed $68 million contract to provide maintenance and logistics support for the QEAF during their pre-delivery training for the F-15QA aircraft, which will commence early next year. The QEAF will send pilots and weapon system operators to the U.S., where the aircrews will learn how to independently operate the F-15QA ahead of receiving their new aircraft. Training will include in-person instruction, simulation events and flying operations and will be held near Boeing’s F-15 production facility in the U.S. through mid-2021.
Following this, Boeing will establish and operate an aircrew and maintenance training center for the QEAF at Al Udeid Air Base, Qatar, through 2024.
A third contract awarded in November and valued at more than $500 million will provide the QEAF with in-country spares and logistics support once the aircraft are delivered to Qatar.
“The tailored training and sustainment delivered by our team, coupled with Boeing’s platform expertise, allows us to deliver a holistic solution to our Qatari customer so they can optimize the full capability of their fleet with high availability rates,” said Tim Buerk, director of Middle East defense services for Boeing. “We look forward to our continued partnership with Qatar and further supporting their mission readiness needs.”
The F-15QA is an advanced variant of the undefeated F-15 aircraft. The Advanced F-15 features next-generation technologies that offer more speed, range and payload than any other fighter in its class. Boeing will deliver 36 F-15QA aircraft to Qatar starting in 2021.
Boeing is the world’s largest aerospace company and leading provider of commercial airplanes, defense, space and security systems, and global services. As a top U.S. exporter, the company supports commercial and government customers in more than 150 countries. Building on a legacy of aerospace leadership, Boeing continues to lead in technology and innovation, deliver for its customers and invest in its people and future growth.
F-15QA1 and F-15QA2 Air to Air. Includes Arch Fly-by, St. Louis, MO. MSF20-0028 Series.
– Financial results continue to be significantly impacted by COVID-19 and the 737 MAX grounding
– Proactively managing liquidity and transforming for the future
– Revenue of $14.1 billion, GAAP loss per share of ($0.79) and core (non-GAAP)* loss per share of ($1.39)
– Operating cash flow of ($4.8) billion; cash and marketable securities of $27.1 billion
– Total backlog of $393 billion, including more than 4,300 commercial airplanes
Table 1. Summary Financial Results
Third Quarter
Nine Months
(Dollars in Millions, except per share data)
2020
2019
Change
2020
2019
Change
Revenues
$14,139
$19,980
(29)%
$42,854
$58,648
(27)%
GAAP
(Loss)/Earnings From Operations
($401)
$1,259
NM
($4,718)
$229
NM
Operating Margin
(2.8)%
6.3%
NM
(11.0)%
0.4%
NM
Net (Loss)/Earnings
($466)
$1,167
NM
($3,502)
$374
NM
(Loss)/Earnings Per Share
($0.79)
$2.05
NM
($6.10)
$0.66
NM
Operating Cash Flow
($4,819)
($2,424)
NM
($14,401)
($226)
NM
Non-GAAP*
Core Operating (Loss)/Earnings
($754)
$895
NM
($5,773)
($864)
NM
Core Operating Margin
(5.3)%
4.5%
NM
(13.5)%
(1.5)%
NM
Core (Loss)/Earnings Per Share
($1.39)
$1.45
NM
($7.88)
($1.13)
NM
*Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 5, “Non-GAAP Measures Disclosures.”
The Boeing Company [NYSE: BA] reported third-quarter revenue of $14.1 billion, GAAP loss per share of ($0.79) and core loss per share (non-GAAP)* of ($1.39), reflecting lower commercial deliveries and services volume primarily due to COVID-19 (Table 1). Boeing recorded operating cash flow of ($4.8) billion.
“The global pandemic continued to add pressure to our business this quarter, and we’re aligning to this new reality by closely managing our liquidity and transforming our enterprise to be sharper, more resilient and more sustainable for the long term,” said Boeing President and Chief Executive Officer Dave Calhoun. “Our diverse portfolio, including our government services, defense and space programs, continues to provide some stability for us as we adapt and rebuild for the other side of the pandemic. We remain focused on the health and safety of our employees and their communities. I’m proud of the dedication and commitment our teams have demonstrated as they continued to deliver for our customers in this challenging environment. Despite the near-term headwinds, we remain confident in our long term future and are focused on sustaining critical investments in our business and the meaningful actions we are taking to strengthen our safety culture, improve transparency and rebuild trust.”
Following the lead of global regulators, Boeing made steady progress toward the safe return to service of the 737 MAX, including rigorous certification and validation flights conducted by the U.S. Federal Aviation Administration, Transport Canada and the European Union Aviation Safety Agency. The Joint Operational Evaluation Board, featuring civil aviation authorities from the United States, Canada, Brazil, and the European Union, also conducted its evaluations of updated crew training. The 737 MAX has now completed around 1,400 test and check flights and more than 3,000 flight hours as it progresses through the robust and comprehensive certification process.
To adapt to the market impacts of COVID-19 and position the company for the future, Boeing continued its business transformation across five key areas including its infrastructure footprint, overhead and organizational structure, portfolio and investment mix, supply chain health and operational excellence. As the company resizes its operations to align with market realities, Boeing expects to continue lowering overall staffing levels through natural attrition as well as voluntary and involuntary workforce reductions, and recorded additional severance costs in the third quarter.
Table 2. Cash Flow
Third Quarter
Nine Months
(Millions)
2020
2019
2020
2019
Operating Cash Flow
($4,819)
($2,424)
($14,401)
($226)
Less Additions to Property, Plant & Equipment
($262)
($465)
($1,038)
($1,387)
Free Cash Flow*
($5,081)
($2,889)
($15,439)
($1,613)
*Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 5, “Non-GAAP Measures Disclosures.”
Operating cash flow was ($4.8) billion in the quarter, reflecting lower commercial deliveries and services volume primarily due to COVID-19, as well as timing of receipts and expenditures (Table 2).
Table 3. Cash, Marketable Securities and Debt Balances
Quarter-End
(Billions)
Q3 20
Q2 20
Cash
$10.6
$20.0
Marketable Securities1
$16.5
$12.4
Total
$27.1
$32.4
Debt Balances:
The Boeing Company, net of intercompany loans to BCC
$59.1
$59.5
Boeing Capital, including intercompany loans
$1.9
$1.9
Total Consolidated Debt
$61.0
$61.4
1Marketable securities consists primarily of time deposits due within one year classified as “short-term investments.”
Cash and investments in marketable securities decreased to $27.1 billion, compared to $32.4 billion at the beginning of the quarter, primarily driven by operating cash outflows (Table 3). Debt was $61.0 billion, down from $61.4 billion at the beginning of the quarter due to the repayment of maturing debt.
Total company backlog at quarter-end was $393 billion.
Segment Results
Commercial Airplanes
Table 4. Commercial Airplanes
Third Quarter
Nine Months
(Dollars in Millions)
2020
2019
Change
2020
2019
Change
Commercial Airplanes Deliveries
28
62
(55)%
98
301
(67)%
Revenues
$3,596
$8,249
(56)%
$11,434
$24,793
(54)%
Loss from Operations
($1,369)
($40)
NM
($6,199)
($3,813)
NM
Operating Margin
(38.1)%
(0.5)%
NM
(54.2)%
(15.4)%
NM
Commercial Airplanes third-quarter revenue decreased to $3.6 billion, reflecting lower delivery volume primarily due to COVID-19 impacts as well as 787 quality issues and associated rework. Third-quarter operating margin decreased to (38.1) percent, primarily driven by lower delivery volume, as well as $590 million of abnormal production costs related to the 737 program.
Commercial Airplanes added the final 777X flight test airplane to the test program and the GE9X engine received FAA certification. In October, the company decided it will consolidate 787 production in South Carolina in mid-2021, which did not have a significant financial impact on the program in the third quarter. Commercial Airplanes delivered 28 airplanes during the quarter, and backlog included over 4,300 airplanes valued at $313 billion.
Defense, Space & Security
Table 5. Defense, Space & Security
Third Quarter
Nine Months
(Dollars in Millions)
2020
2019
Change
2020
2019
Change
Revenues
$6,848
$7,002
(2)%
$19,478
$20,168
(3)%
Earnings from Operations
$628
$754
(17)%
$1,037
$2,581
(60)%
Operating Margin
9.2%
10.8%
(1.6) Pts
5.3%
12.8%
(7.5) Pts
Defense, Space & Security third-quarter revenue decreased to $6.8 billion, primarily due to derivative aircraft award timing, partially offset by higher fighter volume (Table 5). Third-quarter operating margin decreased to 9.2 percent reflecting less favorable performance, including a $67 million KC-46A Tanker charge.
During the quarter, Defense, Space & Security received an award for eight F-15EX advanced fighter aircraft for the U.S. Air Force and a contract extension for the International Space Station for NASA, as well as contracts for nine additional MH-47G Block II Chinook helicopters for the U.S. Army Special Operations and four additional 702X satellites. Also in the quarter, the U.S. Air Force and Boeing team was awarded the Collier Trophy for aerospace excellence for the X-37B autonomous spaceplane. Significant milestones included inducting the 20th U.S. Navy F/A-18 into the Service Life Modification program as well as delivering the firstBell Boeing V-22 Osprey to Japan and the first MH-47G Block II Chinook to the U.S. Army Special Operations.
Backlog at Defense, Space & Security was $62 billion, of which 30 percent represents orders from customers outside the U.S.
Global Services
Table 6. Global Services
Third Quarter
Nine Months
(Dollars in Millions)
2020
2019
Change
2020
2019
Change
Revenues
$3,694
$4,658
(21)%
$11,810
$13,820
(15)%
Earnings from Operations
$271
$673
(60)%
$307
$2,013
(85%)
Operating Margin
7.3%
14.4%
(7.1) Pts
2.6%
14.6%
(12.0) Pts
Global Services third-quarter revenue decreased to $3.7 billion, driven by lower commercial services volume due to COVID-19, partially offset by higher government services volume (Table 6). Third-quarter operating margin decreased to 7.3 percent primarily due to lower commercial services volume and additional severance costs.
During the quarter, Global Services signed an agreement with GECAS for 11 737-800 Boeing Converted Freighters, secured a six-year P-8A support contract for the Royal Australian Air Force, and was awarded F-15EX training and services support contracts by the U.S. Air Force. Global Services also delivered the first P-8A Operational Flight Trainer for the United Kingdom Royal Air Force.
Additional Financial Information
Table 7. Additional Financial Information
Third Quarter
Nine Months
(Dollars in Millions)
2020
2019
2020
2019
Revenues
Boeing Capital
$71
$66
$205
$207
Unallocated items, eliminations and other
($70)
$5
($73)
($340)
Earnings from Operations
Boeing Capital
$30
$29
$47
$86
FAS/CAS service cost adjustment
$353
$364
$1,055
$1,093
Other unallocated items and eliminations
($314)
($521)
($965)
($1,731)
Other income, net
$119
$121
$325
$334
Interest and debt expense
($643)
($203)
($1,458)
($480)
Effective tax rate
49.6%
0.8%
40.1%
(350.6)%
At quarter-end, Boeing Capital’s net portfolio balance was $2.0 billion. The change in revenue and earnings from other unallocated items and eliminations was primarily due to the timing of cost allocations. Earnings from other unallocated items and eliminations was also impacted by lower enterprise research and development expense. Interest and debt expense increased due to higher debt balances. The third quarter effective tax rate reflects tax benefits related to the five year net operating loss carryback provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act as well as the impact of pre-tax losses.
Non-GAAP Measures Disclosures
We supplement the reporting of our financial information determined under Generally Accepted Accounting Principles in the United States of America (GAAP) with certain non-GAAP financial information. The non-GAAP financial information presented excludes certain significant items that may not be indicative of, or are unrelated to, results from our ongoing business operations. We believe that these non-GAAP measures provide investors with additional insight into the company’s ongoing business performance. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. The following definitions are provided:
Core Operating Earnings, Core Operating Margin and Core Earnings Per Share
Core operating earnings is defined as GAAP earnings from operations excluding the FAS/CAS service cost adjustment. The FAS/CAS service cost adjustment represents the difference between the FAS pension and postretirement service costs calculated under GAAP and costs allocated to the business segments. Core operating margin is defined as core operating earnings expressed as a percentage of revenue. Core earnings per share is defined as GAAP diluted earnings per share excluding the net earnings per share impact of the FAS/CAS service cost adjustment and Non-operating pension and postretirement expenses. Non-operating pension and postretirement expenses represent the components of net periodic benefit costs other than service cost. Pension costs, comprising service and prior service costs computed in accordance with GAAP are allocated to Commercial Airplanes and BGS businesses supporting commercial customers. Pension costs allocated to BDS and BGS businesses supporting government customers are computed in accordance with U.S. Government Cost Accounting Standards (CAS), which employ different actuarial assumptions and accounting conventions than GAAP. CAS costs are allocable to government contracts. Other postretirement benefit costs are allocated to all business segments based on CAS, which is generally based on benefits paid. Management uses core operating earnings, core operating margin and core earnings per share for purposes of evaluating and forecasting underlying business performance. Management believes these core earnings measures provide investors additional insights into operational performance as they exclude non-service pension and post-retirement costs, which primarily represent costs driven by market factors and costs not allocable to government contracts. A reconciliation between the GAAP and non-GAAP measures is provided on pages 12-13.
Free Cash Flow
Free cash flow is GAAP operating cash flow reduced by capital expenditures for property, plant and equipment. Management believes free cash flow provides investors with an important perspective on the cash available for shareholders, debt repayment, and acquisitions after making the capital investments required to support ongoing business operations and long term value creation. Free cash flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt. Management uses free cash flow as a measure to assess both business performance and overall liquidity. Table 2 provides a reconciliation of free cash flow to GAAP operating cash flow.
Caution Concerning Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “should,” “expects,” “intends,” “projects,” “plans,” “believes,” “estimates,” “targets,” “anticipates,” and similar expressions generally identify these forward-looking statements. Examples of forward-looking statements include statements relating to our future financial condition and operating results, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on expectations and assumptions that we believe to be reasonable when made, but that may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties, and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are risks related to: (1) the COVID-19 pandemic and related government actions, including with respect to our operations, our liquidity, the health of our customers and suppliers, and future demand for our products and services; (2) the 737 MAX, including the timing and conditions of 737 MAX regulatory approvals, lower than planned production rates and/or delivery rates, and increased considerations to customers and suppliers, (3) general conditions in the economy and our industry, including those due to regulatory changes; (4) our reliance on our commercial airline customers; (5) the overall health of our aircraft production system, planned commercial aircraft production rate changes, our commercial development and derivative aircraft programs, and our aircraft being subject to stringent performance and reliability standards; (6) changing budget and appropriation levels and acquisition priorities of the U.S. government; (7) our dependence on U.S. government contracts; (8) our reliance on fixed-price contracts; (9) our reliance on cost-type contracts; (10) uncertainties concerning contracts that include in-orbit incentive payments; (11) our dependence on our subcontractors and suppliers, as well as the availability of raw materials; (12) changes in accounting estimates; (13) changes in the competitive landscape in our markets; (14) our non-U.S. operations, including sales to non-U.S. customers; (15) threats to the security of our or our customers’ information; (16) potential adverse developments in new or pending litigation and/or government investigations; (17) customer and aircraft concentration in our customer financing portfolio; (18) changes in our ability to obtain debt financing on commercially reasonable terms and at competitive rates; (19) realizing the anticipated benefits of mergers, acquisitions, joint ventures/strategic alliances or divestitures; (20) the adequacy of our insurance coverage to cover significant risk exposures; (21) potential business disruptions, including those related to physical security threats, information technology or cyber-attacks, epidemics, sanctions or natural disasters; (22) work stoppages or other labor disruptions; (23) substantial pension and other postretirement benefit obligations; and (24) potential environmental liabilities.
Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made, and we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.
– The demonstrator will help the Navy determine technical requirements for future carrier-based weapons systems
Boeing [NYSE: BA] and the U.S. Navy will demonstrate advanced missile technologies that will make carrier air wing strike fighters more lethal against threats into the next decade.
Boeing has been awarded a $30 million contract from the Navy to co-develop the Supersonic Propulsion Enabled Advanced Ramjet (SPEAR) flight demonstrator with the Navy’s Air Warfare Center Weapons Division. The contract award comes after the Department of Defense requested information from the defense industry to help the Navy determine technical requirements of future carrier-based land and sea strike weapons systems.
“The SPEAR flight demonstrator will provide the F/A-18 Super Hornet and carrier strike group with significant improvements in range and survivability against advanced threat defensive systems,” said Steve Mercer, Boeing’s SPEAR program manager. “We have a talented team of engineers to meet the challenging technical demands and schedule timeline that the SPEAR program requires. We look forward to working with Navy experts to advance technologies for the Navy’s future capabilities.”
Boeing and the Navy Air Warfare Center Weapons Division plan to fly the SPEAR demonstrator in late 2022. Prior successes by Boeing in developing supersonic and hypersonic technologies include the X-51 Waverider test vehicle in 2010 and the Variable Flow Ducted Rocket propulsion system under the Triple Target Terminator program in 2014.
Boeing is the world’s largest aerospace company and leading provider of commercial airplanes, defense, space and security systems, and global services. As a top U.S. exporter, the company supports commercial and government customers in more than 150 countries. Building on a legacy of aerospace leadership, Boeing continues to lead in technology and innovation, deliver for its customers and invest in its people and future growth.
