2018 Address to Shareholders

Annual Meeting, Chicago, IL

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

April 30, 2018

In 2017, more than 140,000 dedicated Boeing teammates around the world, together with our U.S. and global partners, delivered record company financial and operational performance; strengthened our businesses for profitable, long-term growth; drove additional productivity and quality gains across the enterprise; and returned significant value to you, our shareholders.

Despite an increasingly challenging business environment, they did it by delivering consistently on our programs and customer commitments; capturing new business and winning key campaigns; growing our new integrated services business; pursuing breakthrough technologies and processes, and further investing in our people.

By all measures, 2017 was an excellent year for Boeing and our shareholders:

  • Record commercial airplane deliveries, growth in our services business, and solid defense, space and security performance drove revenue of $93.4 billion.
  • $110.2 billion in new net orders for our market-leading products and services raised our companywide backlog to $488 billion.
  • Strong core operating performance led to a record-breaking year for core operating earnings of $9 billion and core earnings per share of $12.04, and company-best operating cash flow of $13.3 billion.
  • We continued to deploy our cash responsibly, repurchasing 46.1 million shares of Boeing stock for $9.2 billion and paying $3.4 billion in dividends. Fully confident in our financial strength and long-term outlook, our board of directors in December increased the quarterly dividend 20 percent and authorized a new $18 billion share repurchase program. Over the past five years, we’ve raised our quarterly dividend by more than 250 percent.
  • In addition to these direct shareholder benefits, we maintained and grew our R&D and capital investments to stay on the leading edge of innovation for the long run.
  • This strong performance trend — underpinned by our sizeable backlog, a large and growing aerospace and defense market, and our positive future outlook — made Boeing the Dow’s top-performing company in 2017, as measured by stock price and total shareholder return.

Boeing Commercial Airplanes earned $56.7 billion of revenue in 2017 and led the industry in deliveries for the sixth consecutive year with a record 763 airplanes. We also logged orders for 912 net new airplanes, growing our backlog to a Boeing-record 5,864 jets. This strong order book, worth $421 billion, equals approximately seven years of production at current rates.

The global commercial airplane market, valued at $2.8 trillion over the next decade, is stronger than ever. We estimate customers will buy more than 41,000 airplanes over the next 20 years, including 9,100 widebodies, as more people start travelling by air, particularly in the rapidly growing Asia region. This positive outlook, along with healthy market conditions and a robust backlog, provide a solid foundation for increased production and long-term growth.

In the competitive single-aisle market, our 737 family of airplanes continued to exceed expectations, with 745 net new orders and a company-record 529 deliveries in 2017, with production rising to 47 aircraft per month during the year, and further increasing to 52 aircraft per month in 2018. The 737 backlog now stands at more than 4,600 airplanes. Our transition to the new 737 MAX is going well. We’ve delivered the first 113 737 MAX 8 airplanes and recently began delivering the MAX 9; debuted and conducted the first flight of the MAX 7; and formally launched the MAX 10, the largest plane in the MAX family. With more than 4,500 orders from 97 customers worldwide, the 737 MAX is the fastest-selling airplane in Boeing’s history, with plenty of room still to grow.

We also extended our lead in the high-value twin-aisle market with significant progress on the 787 and 777 programs. We delivered 136 787s for the year, driven by the industry’s highest widebody production rate – 12 airplanes per month. And just a few weeks ago, we delivered to Singapore Airlines the first 787-10, the third and largest Dreamliner model. The worldwide operating fleet of more than 675 787 Dreamliners has flown 3 billion miles, carried 240 million passengers and opened more than 180 new nonstop city pairs. We also continue to make significant progress on our newest twin-aisle airplane, the 777X. In 2017, we began producing parts for the first flight-test airplane in our Composite Wing Center in Everett, Washington. It remains on track to enter service in 2020.

Healthy revenue and margins, important new orders and significant program milestones led to continued success for Boeing Defense, Space & Security in 2017 as well. Revenues were $21.1 billion, driven by deliveries of four commercial and military satellites, 170 military aircraft and more than 35,000 weapons systems. New orders worth $28.8 billion reinforced our $50 billion backlog, which includes a balanced mix of U.S. and international customers.

We continue to see solid demand for our products and services in a market valued at $2.2 trillion over the next 10 years. To compete for a larger share of this market, we’re investing in growth areas such as commercial derivatives, rotorcraft, satellites, services, human space exploration and autonomous systems, while competing for exciting new programs including the T-X trainer, the MQ-25 unmanned aerial refueling aircraft and the Ground-Based Strategic Deterrent.

Other key 2017 accomplishments included:

  • FAA certification of the 767-2C aircraft, confirming that the fundamental design of the KC-46 tanker is safe and reliable;
  • Significant domestic and international orders for our market-leading products, including Apache helicopters, F-15 and F/A-18 fighter jets, and P-8 maritime reconnaissance planes;
  • Successful downselect to design the United States’ next intercontinental ballistic missile; and
  • A Ground-based Midcourse Defense system intercept test, among others.

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

  • Completion of CST-100 Starliner drop tests and design certification review;
  • Progress on the first Space Launch System rocket that one day will carry astronauts to Mars;
  • Launch of seven satellites and the X-37B reusable, autonomous spacecraft; and
  • Eight successful launches by our United Launch Alliance joint venture.

In July 2017, our third major business unit, Boeing Global Services, officially started operations in our quest to secure a larger share of the 10-year, $2.6 trillion – and growing – commercial and government services market. Solid execution and portfolio diversity, along with some early key wins, led to revenue of $14.6 billion and a backlog of $17.2 billion.

Because we produce roughly half of the world’s commercial and defense fleets, and aircraft service life is increasing, aerospace services represents one of our biggest growth opportunities for the future. Our services expertise, the global reach of our business and our strong customer partnerships have us well positioned to compete and win for the long-term in areas such as spare parts; maintenance, modifications and upgrades; training; and, increasingly, digital solutions, which generated approximately $1 billion in revenue in 2017 – making Boeing the market leader in this growing segment.

Even with our progress and performance, we are not standing still. Instead, we’re accelerating our pace of innovation to outrun global competition that’s becoming more aggressive and capable by the day. Over the past year, we made several strategic investments to better position ourselves for future markets and growth:

  • We stood up Boeing Global Services to expand our share of the aerospace services market.
  • We continued to develop new commercial, defense and space products and services such as the 787-10 and 777X, the KC-46 tanker and the T-X trainer aircraft, and the CST-100 Starliner and Space Launch System, just to name a few.
  • We took steps to strengthen our capabilities in important areas such as data analytics, avionics, actuation and additive manufacturing — high-value work that benefits from our internal expertise and our global scale.
  • We launched our HorizonX innovation cell and formed partnerships with several companies whose technology can change the competitive landscape.
  • And we acquired Aurora Flight Sciences to bolster our autonomous-flight portfolio.

As we shape our business for a second century of aerospace innovation, we also continue to make meaningful progress toward building a zero-injury workplace, achieving world-class quality and creating the kind of culture that breaks down organizational barriers, eliminates bureaucracy and unleashes the full capabilities of our people.

Looking ahead to 2018 and beyond, we remain focused on winning through innovation, driving growth and productivity, and extending our position as the world’s leading aerospace company — all while delivering the best value to our customers, employees and our shareholders.

The importance of our purpose and mission demands that we embrace the enduring values that define who we are today and the company we aspire to be tomorrow. Living these values also means being best-in-class in community and environmental stewardship.

In 2017, Boeing – along with our employees and retirees – invested $181 million plus time and talent – to help strengthen communities worldwide. We also revamped our approach to corporate citizenship, sharpening our commitment to science, technology, engineering and math education as well as military veterans – more than 20,000 of whom we’re proud to call Boeing teammates.

Additionally, we’re continuously improving the environmental efficiency and performance of our products and services, reducing emissions and conserving water and resources. To date, we’ve tested nearly 70 technologies on our ecoDemonstrator program with another 30 planned for this year. And even as aircraft production increases, our goal remains zero growth in greenhouse gas emissions, water use, hazardous waste (all normalized to revenue) and solid waste sent to landfills. We are making strong progress across the board.

When I think about Boeing, I think of a company that’s stronger, more innovative and more focused than ever in our mission to connect, protect, explore and inspire the world. And I think of a company that has the industry’s best team, the right products, services and strategies, and a compelling vision that will position us to be the best in aerospace and an enduring global industrial champion.

As encouraging as our performance was in 2017, I’m even more excited about what lies ahead — countless opportunities to build upon our storied legacy, exceed expectations and claim Boeing’s position among the world’s best companies, regardless of industry.

For more than 30 years, I’ve viewed this great company with a sense of wonder — in the products we design, build and support, in the important mission we serve and in the talented, passionate people around the world who I now have the honor of leading. For a company that dreams big and delivers on those dreams, a bold, bright future is ours to seize — and we’ll do so, together.

Thank you. That concludes my Chairman’s Report.