Message to Shareholders

Message to Shareholders

Sales for 1995 were $19.5 billion with net earnings of $783 million, exclusive of a $390 million after-tax special retirement charge in the second quarter. Sales and earnings were somewhat less than anticipated due to the 10-week strike in the fourth quarter. Sales of approximately $22 billion are expected in 1996, which reflects both recovery from the strike and the beginning of a growth period as airlines add capacity to meet the growing air travel demand. In our commercial aircraft business, we saw an upturn in order activity in 1995 and achieved a number of important milestones.

Customers announced orders for 346 Boeing jetliners—representing about a two-thirds market share, in dollar value, of all jetliner orders announced in 1995.

We delivered the first 777 to United Airlines, on time and service ready, fulfilling a commitment we made when the program was launched in October 1990. The 777 has been getting high marks from all the airlines that currently fly it for reliability, efficiency and passenger comfort.

Boeing won the prestigious Collier Trophy for the 777 as the top aeronautical achievement of 1995.

We expanded our product line with the launch of two new models—a "stretch" 777, with about 20-percent more capacity, and the third and smallest member of the new 737 series, the 737-600. Other key achievements on the commercial side included the delivery of the first 767 freighter, improvements in customer support, and continued progress in our long-term efforts to simplify the way we design and build and support our airplanes—with the goal of delivering superior products in less time at lower cost. World airlines showed generally much stronger profitability in 1995, and the increase in order activity was a clear indication the air travel industry is starting to recover. If present trends continue, we look for continued improvement in the demand for commercial airplanes. Our defense and space business also turned in a solid performance in 1995.

As NASA’s prime contractor for the International Space Station, we continue to demonstrate our abilities as a large-scale systems integrator on this huge project—which is proceeding on schedule.

Sea Launch, a Boeing-led international joint venture to launch commercial satellites from a seagoing platform, obtained an order for at least 10 commercial satellite launches—starting in 1998.

Boeing continued to perform well on major defense programs, such as the V-22 Osprey tiltrotor, F-22 fighter, RAH-66 Comanche helicopter and 767 AWACS. We were disappointed that the military did not choose to purchase modified 747s in addition to C-17s for airlift, but we will continue to pursue opportunities involving military derivatives of Boeing jetliners. Over the past few years we’ve streamlined and consolidated our defense and space operations, positioning the company to compete in a very demanding market. While the growth prospects for defense and space are more limited than they are for commercial airplanes, we believe there is a realistic opportunity to increase our market share in the years ahead. The early retirement program offered this spring resulted in about 9,500 employees accepting the one-time retirement incentive. This enabled us to reduce employment to desired levels with fewer layoffs, while preserving the necessary mix of critical skills.

In December, 33,000 of our employees represented by the International Association of Machinists and Aerospace Workers (IAM) agreed to a new four-year contract, after a 10-week strike. In January 1996, a new four-year contract was ratified by the bargaining unit representing 21,000 engineers and technical workers. The longer contracts (four years instead of three) with both of these bargaining units should serve the interests of our employees and the company.

At Boeing, we recognize that the aerospace industry is changing in fundamental ways, and we are determined to lead that change process to keep ahead of the competition. We have always prided ourselves on the quality, performance and reliability of Boeing products, but in recent years we’ve put a top priority on improving the processes by which we design, build and support those products. Our goal, in every product sector, is to be the value leader in our industry.

We’ve made good progress to date in cutting waste and improving productivity, but there is much more to be done. People are the key to driving change in any organization, and we are improving the way we select, train and promote managers—as we seek better ways to tap the skills and creativity of our work force. With our commitment to continuous improvement and continuous learning, we need great leaders at every level—men and women who can coach and inspire and encourage the spirit of working together.

Our long-range mission is to be the number one aerospace company in the world, and among the premier industrial concerns in terms of quality, profitability and growth. The measure for profitability and growth is our ability to increase shareholder value over the long term.

As part of our planned succession process, in February 1996 the Boeing Board of Directors approved the selection of President Phil Condit to assume the added duties of Chief Executive Officer, effective April 29, 1996, with Frank Shrontz continuing to serve as Chairman of the Board for a transition period. This change in leadership will continue the mission and basic operating philosophy of your company.

Frank Shrontz
Chairman and Chief Executive Officer

Philip M. Condit
President

February 26, 1996

Frank Shrontz, Chairman
and Chief Executive Officer, and
Philip M. Condit, President.