Message to Shareholders

When the headquarters is located in proximity to a principal business — as ours had been in Seattle — the corporate center is inevitably drawn into day-to-day business operations. We don’t want to meddle. Our function is to concentrate on vision and strategy. We are focused on where we are going and how fast, how to allocate capital and resources across the corporation, how to make the best use of the Boeing brand and how best to develop our intellectual capital.

People, Programs and Synergy

Today’s Boeing is far better balanced than the Boeing of a few years ago. We are less vulnerable to cycles or downturns in any one business. When one business is in a downturn, others will be growing and able to pick up the slack. However, we do not see ourselves as merely a holding company juggling a portfolio of businesses. To speak in those terms ignores the growing reality of, and the extraordinary opportunities for, synergy within and across our company.

Take tankers and surveillance aircraft. Though less glamorous than fighters and bombers, they are the supporting cast that gets those aircraft to the scene of battle in faraway places. Most airlines retired their 707s years ago. Yet the U.S. and allied air forces are still using the older KC-135 with 707 airframes for most of their tankers. We know — and they know — that the Boeing 767 airframe will do the same tasks even better, and do new things besides. It will fly longer, carry a bigger payload, use much less fuel and require far less maintenance. So here is a case of large potential sales where Military Aircraft and Missile Systems, and its Aerospace Support unit, has the customer knowledge; where Commercial Airplanes has the ideal product; and where Boeing Capital could structure the financing of a full-service package of solutions.

Or take Connexion by Boeing^SM — a new business of great potential that provides two-way, high-bandwidth communications to and from mobile platforms. While the initial customers remain the commercial airlines and their passengers, the events of September 11 are expanding our business focus to include executive jet opportunities, including those operated by the government. Here, Military Aircraft and Missile Systems and Commercial Airplanes have customer knowledge, Space and Communications has the satellite technology, and we have formed a new unit to develop additional customer knowledge of end users.

Or consider Joint Strike Fighter. Were we disappointed that we lost the competition? Absolutely. Did we come away empty-handed? To the contrary, our participation in this competition was a fantastic learning experience — particularly with regard to advancements in affordability through lean design and manufacture. Phantom Works, our advanced research and development center, uses innovative techniques to push affordability and new customer solutions. Now it is speeding the knowledge gained from JSF to all parts of the enterprise, playing a critical role, for instance, in developing the technologies and design practices being used to develop the new Sonic Cruiser.

Air Traffic Management takes advantage of technology from Space and Communications, knowledge from Commercial Airplanes and Boeing systems integration expertise. ATM has put these capabilities together and proposed a revolutionary, space-based air traffic control system. Compared with the current ground-based air traffic management system, this space-based system promises dramatic benefits both in safety and security — and in efficiency and capacity.

Another opportunity for synergy is found in our Shared Services Group. We want business unit leaders to be focused on their customers and the products and services that they need. Shared Services focuses on non-production operations and the huge infrastructure required to run Boeing efficiently. It ensures that computers and networks operate with high reliability. It provides facility services. It delivers about one million pieces of mail and packages per day. It runs one of the largest travel agencies in the United States. Without Shared Services, business units would spend more time on infrastructure detail and have far less commonality.

We more than
doubled our
revenues in less than
10 years, while
improving our portfolio
mix to make Boeing
a more balanced
company for future
growth.

Boeing Commercial Airplanes

Military Aircraft and Missile Systems
Space and Communications
Boeing Capital Corporation
Connexion by Boeing
Air Traffic Management
Other

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