Commercial aviation remains a fundamental enabler for global economic development and a long-term growth market for Boeing. Solidly committed to our commercial airplane business, we are focused on running this business well and investing to meet the future needs of our customers and airline passengers.

Year in Review In 2003, we continued restructuring to operate more efficiently and profitably through the business cycles, while investing wisely in new products and services for our customers. Thanks to the tremendous efforts of our employees, we remained solidly profitable despite the lingering industry downturn.

We won hard-fought competitions for new orders in key markets and achieved our plan to deliver 281 airplanes. We continued strong performance in the low-cost market, winning key competitions in the United States, Europe and Australia. With the first 777-300ER flight in February, we remained on schedule for first delivery in April 2004. We also completed federally mandated design, certification and delivery of enhanced-security flight deck doors ahead of schedule.

Aligning and globalizing engineering, production, supplier management and customer support drove efficiency improvements. We also reduced the size of our facilities by 3 million square feet and consolidated our supplier base by 8 percent. In addition, we continued to divest nonstrategic businesses, including a fabrication facility in Spokane, Washington, and a wiring assembly plant in Corinth, Texas.

We are working strategically with our customers to shape the commercial airplane market and to invest in the right products at the right time. In December 2003, the Board of Directors authorized Boeing Commercial Airplanes to offer the 7E7, which will fill the gap between the smaller 737 and larger 777. The new, highly efficient, twin-aisle 7E7 targets a market segment that we believe will require up to 3,500 new airplanes over the next 20 years, valued at more than $400 billion. We selected Everett, Washington, as the final assembly site for the new airplane. We also announced a global team of suppliers and partners for the program.

In addition, we began offering a 747-400 passenger-to-freighter conversion. We also made progress with innovative concepts for e-enabling airplanes to improve airline operating efficiencies, security and passenger connectivity.

Future Outlook Looking ahead, we see a strong market for aircraft in an industry that we believe will continue to favor point-to-point travel. Over the next 20 years, we foresee passenger and freight traffic growing at 5 percent and 6 percent per year, respectively, resulting in a market for more than 24,000 airplanes worth $1.9 trillion. We are well positioned to serve that market.