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Boeing Frontiers
December 2003/January 2004
Volume 02, Issue 08
Boeing Frontiers
Focus on Finance

A Capital refocusing

The new head of Boeing's financing subsidiary explains what's next for the unit


A Capital refocusing The Nov. 12 refocusing of Boeing Capital Corporation means Walt Skowronski has a new role.

Previously the senior vice president of finance and treasurer of Boeing, Skowronski now becomes the president of Boeing Capital, Boeing's financing subsidiary. Boeing Capital has a $12 billion portfolio—nearly 80 percent of which is in its Aircraft Financial Services group, which arranges and provides financing to buy and lease Boeing commercial aircraft.

Amid the many tasks involved in getting integrated with his new team, Skowronski shared his thoughts on what he foresees for Boeing Capital going forward.

Q. What does the refocusing mean for Boeing Capital?

A. What's changed is our mission. A few years ago, Boeing Capital's mission was growth, so the portfolio grew substantially and quickly. Our new direction is one of primary support to the business units: to be a source of customer-finance solutions for Commercial Airplanes, Integrated Defense Systems and Boeing's other business units.

For BCA, this means enabling financing, arranging financing or—if it meets our criteria—providing the actual financing ourselves. For IDS, it generally encompasses structuring and arranging financing. Some examples of this are the structured lease of four C-17 transports to the United Kingdom, and the financing arrangements involved with the recent sale of Apache helicopters to Greece.

Q. Why was the refocusing done?

A. When Boeing Capital was designated as a business unit in 2000, it was given the "green light" to grow. However, the post-9/11 environment has brought a significantly different environment. The aircraft finance business continues to be greatly and adversely impacted and will likely recover at a pace in line with a rebound in overall air travel demand. In addition, the economic downturn of the past three years has negatively impacted corporate capital expenditures, which in turn has adversely impacted the volume of new business in our Commercial Financial Services group [which finances non-aerospace equipment across multiple industries].

This combination has led to lower-than-anticipated new business volumes in our two major business segments, and as a result, lower growth in 2002 and 2003. But in addition, risk became a new priority. We became very choosy in what deals we wanted to do. We were focusing on what exposure would come in a deal and what kind of risk Boeing overall would be assuming. Our new mission really is a two-pronged fork: to support the business units and to manage risk for the corporation on a go-forward basis. Both are equally important.

Q. Does this mean you'll reduce your asset portfolio?

A. Not necessarily. What we're doing right now, in the context of trying to manage our overall level of exposures, is to review the portfolio and determine how best to mitigate current exposures. We're also looking at whether there are ways to operate Aircraft Financial Services and Commercial Financial Services in a different fashion going forward so we can better manage overall risks.

Q. Is there a role for Boeing Capital in the 7E7 airplane?

A. There's a huge role, but it is evolving. The financial markets are likely to play a key role in not just the financing of the new airplane, but also in the development of the 7E7, as many of the financial institutions will be major fleet owners.

This is the first time we've reached out to banks and financiers as an integral participant in the process of design and development. The 7E7 development team just held a conference on the 7E7, and numerous bankers were in attendance, right alongside our airline customers ... and both appreciated the other's presence.

As you remember, the 777 was developed in conjunction with our major airline customers. We worked with them to determine what they wanted in the airplane, and we designed the airplane around their input. The 7E7 process is similar, except that the customer set includes not only airlines but also the financial community. If they're going to be ultimate owners of the airplane, we want to know what's desirable for them for the preservation of value, which is a key driver for them.

Q. What do you see as being a measure of success in this new role?

A. The biggest impact is probably with driving success for our business units. Our goal is to develop business discriminators [that will stand out as] key differentiators. We haven't worked out all the metrics yet, but certainly one of them is going to be to help in securing sales, winning campaigns, and selling products and services. It's our hope that we can bring additional value-added solutions to the sales and marketing process. That applies to BCA, IDS, and ultimately to Connexion by Boeing and Air Traffic Management as well.


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