2017 Address to Shareholders

Annual Meeting, Chicago, IL

Dennis A. Muilenburg
Chairman, President and Chief Executive Officer
The Boeing Company

May 1, 2017

In 2016, we celebrated our centennial – a unique opportunity to reflect on our achievements in innovation and the indispensable role that Boeing and its people have played in shaping global society. We’ve used this incredible history, our ongoing performance trends and the evolving marketplace to set an inspirational vision and bold new goals. And as we look ahead to a bright future, our opportunities are even greater than those of our first century. Like aviation pioneers 100 years before, it’s now our turn to imagine what comes next and bring it to life.

Thanks to the collective efforts of our 147,000 employees and U.S. and global partners, we expanded Boeing’s industry leadership, posting another year of strong performance and innovation across our business units and functions. In an increasingly dynamic business environment, we delivered on customer commitments; enhanced workplace safety, quality and affordability; invested in our people, products and services; and returned significant value to you, our shareholders.

Our continued focus on profitable long-term growth; disciplined execution of our production and development programs; expansion of our services business; and accelerated quality and productivity gains generated strong revenue, solid core operating performance and record cash flows.

A quick recap of the 2016 numbers…

  • Strong commercial airplane deliveries, solid performance in our defense, space and security business, and services growth drove revenue of $94.6 billion.
  • Our market-leading products and services attracted $76 billion in net new orders, maintaining our sizable companywide backlog of $473 billion.
  • Solid core operating performance led to core operating earnings of nearly $5.5 billion, core earnings per share of $7.24 and a company-record $10.5 billion in cash.
  • We continued to deploy that cash responsibly, repurchasing 55 million shares of Boeing stock for $7 billion and paying $2.8 billion in dividends. Encouraged by our performance and positive long-term outlook, our board of directors in December increased the quarterly dividend 30 percent and authorized a new $14 billion share repurchase program.
  • Together, this sustained strong performance has driven Boeing’s stock price to an all-time high, hitting $184.83 last Friday, 38 percent higher than this time last year.

Boeing Commercial Airplanes recorded $65 billion of revenue and 4.8 percent operating margins in 2016, and our 748 deliveries led the industry for the fifth consecutive year. We also booked orders for 668 net new airplanes worth $49 billion, fortifying a backlog of more than 5,700 airplanes valued at $416 billion. That’s more than seven years of production at current rates.

Our outlook for the global commercial airplane market – and our confidence in it – is as strong as ever. We estimate that customers will buy more than 39,600 airplanes over the next two decades, including 9,000 in the twin-aisle segment, where a large number of older airplanes are expected to be replaced by new, more efficient ones. This positive long-term view, along with our strong performance and planned production rate increases, puts us in a unique position for significant and sustained growth in the years ahead.

In 2016, our lead in the twin-aisle aircraft segment was extended with advancements on the 787 and the 777 programs. We delivered a record 137 787s, including the 500th Dreamliner overall – the fastest twin-aisle jet in history to hit that mark. Flight testing of the 787-10, our third and largest Dreamliner model, began in the first quarter of this year and we’ll start delivering that airplane next year. We’ve also begun building our next twin-aisle airplane, the 777X, in new production facilities in Everett, Washington and St. Louis, Missouri. The airplane remains in high demand and is on track to enter service in 2020 as we transition from the current 777.

In the highly competitive single-aisle market, net new orders and deliveries for our 737 family reached 550 and 490 airplanes, respectively, with our total 737 backlog now at more than 4,400 airplanes. Our new 737 MAX has exceeded our high expectations in both development and flight test, allowing us to accelerate delivery of the first airplane to later this month. With 3,600 orders from 83 customers around the world, the MAX is the fastest-selling commercial airplane in Boeing history, with plenty of room to grow.

Healthy revenue and margins, important contract wins and significant program milestones drove another solid year of performance for Boeing Defense, Space & Security in 2016 as well. Revenues were $29.5 billion on strong deliveries and services growth, with operating margins of 10.2 percent. We delivered seven satellites, 178 military aircraft and more than 23,000 weapons systems – a 46 percent increase over 2015. New orders worth $26.2 billion added to a healthy backlog of $57 billion, 37 percent of which comes from international customers.

Our defense and space products and services are in demand, our affordability efforts are working and we are well positioned to compete for a growing share of the 10-year, $2.2 trillion global market. But we aren’t standing still. Investments in areas such as commercial derivatives, rotorcraft, satellites, services, human space exploration and autonomous systems are helping us compete for future programs such as the new T-X trainer, JSTARS recapitalization, and numerous advanced weapons and unmanned systems programs.

Other key 2016 accomplishments include:

  • Completion of KC-46 tanker refueling tests that retired technical risk and earned U.S. Air Force contracts for 19 airplanes;
  • Approval for significant international orders for F-15 and F/A-18 fighter jets, and contracts for P-8 maritime patrol aircraft and AH-64 and CH-47 helicopters;
  • First flight of the first of two T-X trainer aircraft now flying; and
  • Rollout of the new Echo Voyager unmanned, undersea vehicle.

We also extended our leadership in space over the past year through:

  • Solid progress on the first Space Launch System rocket that will one day carry the first astronauts to Mars;
  • Initial assembly and test of the first CST-100 Starliner flight-test spacecraft;
  • Launch of seven satellites; and
  • Twelve successful launches by our United Launch Alliance joint venture.

Finally, in November 2016, we announced creation of a new business unit called Boeing Global Services, bringing together capabilities from our Commercial Aviation Services and Global Services & Support groups, as well as Boeing subsidiaries Aviall and Jeppesen. Slated to begin integrated operations in the third quarter of this year, Boeing Global Services will accelerate our growth ambitions and prospects in the $2.5 trillion services market over the coming decade. That means strengthening our competitive position in areas such as spare parts, modifications, upgrades, and data analytics as well as other information-based services. It’s an exciting part of our future that will complement our already strong commercial airplanes and defense and space businesses.

With a deep appreciation of our storied past and an eye towards the future, in 2016 we also refreshed our company vision to express it in a simpler and more compelling way for our people. We added clear enterprise strategies and a more inspirational purpose and mission… “To connect, protect, explore and inspire the world through aerospace innovation.” This is what inspires us to do our very best for the passengers flying aboard our commercial airplanes, the men and women in uniform who rely on our products and services to complete their missions safely and the astronauts operating on the edge of space… and to attract and retain the best team and talent the world has to offer.

Yet, in our second century, we aspire not only to be the best in aerospace (as hard as that may be), but also aspire to be an enduring global industrial champion – a top performer in every aspect of our business, delivering superior value to our customers, employees, shareholders, communities and partners. This bold goal requires that we set – and achieve – higher expectations for our work and compete every day with companies in other sectors for capital, influence, talent and positioning in a business environment that is getting tougher, more complex and more global every day. These realities – and the aggressive existing and emerging competition we face in the aerospace industry – demand that we relentlessly pursue productivity and affordability to win in our markets and to fuel our investment in the products and services that will drive our future growth.

As we look to the mid-point of the next decade, we aim to be number one in commercial airplanes with differentiated products and demand-driven rates; we aim to lead in the key defense, space and security growth markets we’re targeting; and to be top in services, growing our business significantly with a focus on lifecycle opportunities. And, we must consistently deliver top-quartile business performance.

Our three enterprise strategies to achieve these goals are to continue leveraging the unique competitive advantage we have in operating as One Boeing, build strength on strength to deliver on our existing plans and commitments, and to stretch beyond those plans by sharpening and accelerating our pace of progress on key enterprise growth and productivity efforts to win. These efforts include engaging our supply chain to reduce costs and improve quality, breaking the cost curve on our development programs, implementing advanced manufacturing and design technologies, and creating global scale and depth by growing our presence and partnerships in key markets around the world.

Going forward, how we do our work is just as important as the work itself. To further strengthen our culture and accelerate company performance, we must improve the way we work together in support of our customers and one another. We must adhere to enduring Boeing values that begin with integrity, embrace diversity and inclusion, and fuel mutual trust and respect. It’s early, but we’re already making measurable progress in areas such as simplifying our strategies; clarifying roles and responsibilities of teams and individuals; and improving our processes for developing, assessing and rewarding our people – levers that will unlock accelerated growth and productivity. The importance of our work – and the fact that lives literally depend on what we do – demands this enduring sense of excellence.

At Boeing, community and environmental stewardship are among our core values. In 2016, Boeing – along with our employees and retirees – invested $163 million to help improve lives and build better communities worldwide. For example, we’re focused on inspiring the next generation of innovators, dreamers and doers through STEM-related giving, volunteering and mentoring. We’re also strengthening our commitment to military veterans and their families with new programs and expanded outreach, including sponsorship of the 2017 Warrior Games right here in Chicago.

Environmentally, in 2016, 30,000 Boeing employees chose alternate commuting methods, reducing vehicle emissions, noise and road congestion. Despite increasing aircraft production and expanding operations, we continue to target zero growth in greenhouse gas emissions, water use, hazardous waste and solid waste sent to landfills. And, we continue to work with universities and others to advance sustainable aviation products and technologies such as biofuel- and electric-powered flight.

Boeing and its people have shaped the aerospace industry and changed the world for the better for more than 100 years. But I truly believe Boeing’s best days – and its greatest achievements – are ahead of us and that we have the right people, products and services, and strategies to realize our bold vision and bright future – together. Few companies have achieved as much or are positioned as well for continued success as Boeing.

With our proud legacy as inspiration, we turn to our priorities for 2017 and beyond, including ramping up commercial airplane production profitably; continuing to strengthen our defense, space and security business; launching our integrated services business; consistently delivering on our development programs; driving world-class levels of productivity and performance; and developing the best team and talent in the industry.

It’s my great privilege, humbling responsibility and energizing opportunity to lead this company and the people who strive every day around the world to forever and always build something better. Our goals and aspirations are bold, but achievable for a company that has dared to dream big and deliver on those dreams for more than a century.

Thank you and that concludes my Chairman’s Report.