2023 Address to Shareholders

Annual Meeting, Virtual

David L. Calhoun
President and Chief Executive Officer
The Boeing Company

April 18, 2023

Thanks, Larry and I appreciate your leadership with respect to the board and all the insights you provide to our management team.

Welcome to all of you joining us today.

As you know, 2022 was another critical year for Boeing and we made meaningful progress in our recovery.

We know we have more work ahead and challenges remain, but we feel confident in our path forward.

About six months ago in Seattle, we laid out that path at our first investor conference since 2018. That was an important moment for us to get back on our front foot to share our strategy, our plans and the path for restoring our operational and financial strength.

We have the right team, the right products, the right services in our portfolio and the right strategy in place. We just have to execute, and stay squarely focused every step of the way on safety, quality and transparency.

To that end, let me start with an update on the 737. As we shared last week, our fuselage supplier notified us that a non-standard manufacturing process was used on two fittings in the aft fuselage section of certain 737 airplanes.

Once notified by our supplier, we immediately and transparently informed the FAA and focused first and foremost on making a safety determination. This is not a safety of flight concern and the in-service fleet can continue to operate safely.

For airplanes in production and in storage, the issue is understood and isolated to specific fittings and we know what we have to do.

We are assessing the near-term delivery impact and working closely with our customers. Unaffected airplanes will continue to deliver. And for those impacted, keep in mind that the inspection and rework hours are being bounded, and this is an airplane-by-airplane evaluation.

We are not changing the supplier master schedule, including any anticipated rate increases – and we are comfortable holding buffer stock so that our supply chain can keep its pace.

We appreciate the actions that our fuselage supplier took to notify us promptly and we are working constructively with them to accelerate their recovery plan.

We will share more detail as we move through the process, and we don’t expect this issue to change our long-term guidance for 2025 or 2026 – in that timeframe. This delivery delay removes approximately 9,000 seats from our customers’ summer schedules and we apologize to all of them for the impact on those fleets. We’re working transparently and diligently through this process while prioritizing safety, quality and transparency every step of the way.

Taking a wider, longer-term view, we’re actually quite proud of the progress our team has made on the 737 MAX over the last several years.

It wasn’t too long ago that the fleet was grounded, production was halted, and we had over 400 airplanes sitting in storage. But our team stayed focused and we started to rebuild trust through transparency, and the delivery of one reliable airplane at a time.

Today, it is a much different picture. There are currently over 1,000 737 MAX airplanes flying in the fleet. And since returning to service, the fleet has safely flown nearly 4 million flight hours with exceptional reliability. We’ve steadily ramped up production in Renton and announced plans for a fourth production line to be added in 2024 in Everett.  Last year, we delivered 387 737 airplanes, and demand continues to roar back stronger than ever predicted.

With respect to China, we’ve been working diligently to support our customers there as they return their 737 MAX fleets to service. In fact, as of this month, all MAX operators in China have returned to flying their airplanes in service, and 45 of the 95 737 MAX airplanes in China are now in service. With regards to future deliveries, we’ve recently seen encouraging progress with the Civil Aviation Administration of China releasing the 737 Aircraft Evaluation Report, which is an important step in that process. Ultimately, our customers will determine the timing of when they are ready to take delivery of their airplanes, we’ll be there to support them.

We’re also proud of our 787 team, who returned to delivering airplanes last year after a comprehensive and transparent process. This was another important moment, demonstrating how we are conforming to exacting specifications and prioritizing stability and transparency. The work was detailed, it was difficult and it took longer than we would have liked – but we did take our time, and we set the program up for long-term success. Today, the 787 team is back to delivering, we’re producing at lower rates, and demand is strong. In 2022, we delivered 93 widebodies across our 787, our 777, 767 and 747 families.

We also took important steps to de-risk our defense business. And while we’re still working to improve operating performance within BDS, I want to highlight our space team. The Artemis I launch in November, powered by our SLS Rocket, was inspiring. The performance of our rocket – on the heels of our successful Starliner test mission earlier in the year – was another important demonstration of what we are capable of achieving when we are at our best. In both cases, our team took their time to get things right. They put safety first – and ultimately, they are delivering for our customers.

On the Global Services front – I won’t point to a single moment, because what really stands out is how this team has stepped up to support their customers day in and day out. Their solid, steady performance has enabled our customers to keep their fleets flying through a very dynamic time. And thanks to that performance our services business has returned to pre-pandemic levels.  

Our commitment to safety transcends all this work. Over the past three years, we made profound and fundamental changes to strengthen our Safety governance and leadership, including establishing a Chief Aerospace Safety Officer position.

In 2022, our first Chief Aerospace Safety Officer report was released and offered an in-depth look at meaningful changes we continue to make at Boeing and across our industry. Our next report will launch later in May. And, earlier this year we convened Boeing’s first Aviation Safety Conference bringing together key stakeholders from across the industry.

We proactively advanced an enterprise-wide Safety Management System – or SMS - to embed safety into the way we design, build and support our products and our services. We’re doing the same within our Quality Management System and are committed to transparency in all that we do.

Everyone at Boeing has an opportunity to contribute to making us a safer enterprise. We’re fully committed to promoting a culture that encourages the reporting of safety, quality and compliance concerns. Our learning, our development and our knowledge-sharing programs include the latest insights on Boeing’s safety journey.

Through these milestones, and many others – we have demonstrated our commitment to safety, quality and transparency with a focus on production stability and meeting our customers’ expectations at delivery.  As we continue on this course, sustainable financial progress will follow.

In fact, from a financial perspective, we were encouraged with our ability to generate positive full-year cash flow for the first time since 2018. As you know, this was an important metric in our recovery and it sets us on a good path to achieving the $10 billion of free cash flow that we shared for the 2025/2026 timeframe.

Moving to demand…As air travel increases, our customers are investing heavily, and we are doing everything we can to meet the demand for new airplanes and services.

We booked over 800 net orders last year including more than 600 narrowbodies and 182 widebodies. Our 737 family is sold through 2026 and the 787 is mostly sold through 2025. And over the last few months, we’ve announced three of the largest orders in our history.

In December, we announced our largest ever Dreamliner order with United Airlines for 100 787s, with options for 100 more…which is in addition to 100 737 MAX jets that United also announced.

Then earlier this year, Air India announced plans to purchase 190 737 MAXs, and shared their intent to expand international routes with 20 787-9 Dreamliners. They also became the newest 777X customer with an agreement to purchase 10 777-9s.

And just last month, the newly established Riyadh Air announced the selection of up to 72 787-9 Dreamliners, and SAUDIA selected up to 49 787s.

Of note, air cargo remains a crucial piece of global trade and last year we again saw strong sales of production and converted freighters and launched the 777-8 Freighter with the largest freighter commitment by dollar value in history.

Demand for our 767 continues at a steady pace as well.

And although bittersweet, the final 747 rolled out of our factory late last year. This iconic airplane transformed international travel and played a key role in our history of aerospace leadership. Although production has ended, we continue to support the 747 operations and sustainment well into the future.

Importantly, this will leave the sizeable market for large aircraft, think 450 seats or 110 tons of cargo, forthe 777 alone. With two engines replacing what was previously served by four, we expect a long and successful run for our company.

So, at the end of the day, we closed out 2022 solidly and we’re off to a strong start again in 2023, and we feel great about how our portfolio is competing.

We are also seeing strong demand on the defense and services side. Governments around the world are prioritizing security – and we are working hard to support their needs.

Last month, we announced a multi-year contract to produce 184 Apaches for the U.S. Army and international customers. Last year, Poland selected the Apache, Germany selected the Chinook to meet their future needs.  Meanwhile, the U.S. Air Force recently announced plans to purchase another lot of KC-46 Tankers and new E-7 aircraft. We also see significant opportunities in our proprietary markets with our air dominance and unmanned capabilities.

Our portfolio is well positioned and the markets we serve are big, they’re resilient and they’re growing. In fact, we forecast $9.6 trillion in market opportunity over the next decade across our three segments.

With demand strong, we’re focused on supply chain and factory stability to ensure we can make our production capabilities more predictable and to meet our customer commitments. We live in a supply-constrained environment.

The majority of our production systems are performing well, but we continue to work through supply chain challenges on a case-by-case basis. Our focus is on both capacity and quality.

Like many in the industry, we do expect another challenging year for the supply chain, but we have seen some improvement and our line of sight gets better every day. 

Within our factories, we are not pushing the system too fast. We’re slowing down when necessary and working hard to ensure work gets completed in its proper sequence. 

To support the supply chain, we’ve increased onsite presence, we’ve ramped up internal fabrication for surge capacity and we’ve increased inventory of select parts for risk protection.

This environment is impacting our performance both in our commercial and our defense programs, but we feel like the worst is behind us, and that we will slowly improve as we move into the next year.

And as we work to deliver for our customers today, we’re also positioning for the future and increasing investments in our people, our technology and our products.

Our development pipeline is full and our engineering team is hard at work. We’re making steady progress across our development programs including the 737-7, the 737-10, the 777X, the 777-8F, the T-7A, the MQ-25, the MQ-28, the MH-139 and a host of proprietary programs that serve our U.S. government and NATO allies. Our hangars are indeed full.

As part of our capability building, we hired 23,000 new employees last year, primarily engineers and manufacturing employees. And this year, we plan to add another 10,000 with that very same focus.

Similarly, we’re starting to bring up spending on research and development and capital expenditures. In 2023, we plan to increase these investments by more than 10% to more than $4.5 billion. And that’s on top of the new research and technology centers we established over the last few years: Australia, Brazil, China, Europe, the Middle East, India, South Korea and most recently in Japan.

At the same time, we are simplifying our corporate structure and reducing complexity so that we can focus as many resources as possible toward the engineering, the innovation and manufacturing of our products. 

And when it comes to the next airplane and new set of products, we don’t want to simply fill a niche in the market, we want to provide a generational leap in performance for our customers that completely reshapes the landscape. That is our legacy. That mindset takes real technology and capability advancement.

Our work with NASA on their Sustainable Flight Demonstrator is a great example. We’re building, we’re testing, and flying a full-scale demonstrator to validate technologies aimed at lowering emissions and creating efficiencies by up to 30% – the kind of standards that, in our view are required to launch a new Commercial Airplane.

Ultimately, we believe that the future of aerospace is producible, it’s digital, it’s sustainable and it’s autonomous – and our investments and focus are geared toward advancing these key capabilities.

Our Wisk joint venture is another great example of capability advancement. This past year we unveiled the world’s first self-flying, four-seat, all-electric, vertical takeoff and landing air taxi, which we believe has a very bright future. Our work in autonomy is driven by safety and Wisk aligns to our broader sustainability agenda.

Our customers around the globe are committing to bold climate change ambitions and we will be with them every step of the way.

We support the aviation industry’s commitment to achieve net zero carbon emissions by 2050 and we continue to partner across the sector to decarbonize through fleet renewal, operational efficiency, renewable energy transition and advanced technologies.

Sustainable Aviation Fuels – or SAF – will be key. We are investing in helping establish an industry and infrastructure for SAF - and we are committed to delivering commercial airplanes that will be capable of flying 100% on Sustainable Aviation Fuels by 2030.

To be successful, it will take all of us working together. With that in mind, in May, Boeing is hosting its first Sustainable Aerospace Together Forum that will connect leaders from the aviation, policy, energy, finance sectors for collaborative conversation on what it will take for the aviation industry to decarbonize by 2050.

Now, I would like to turn to the war in Ukraine.

At its core, this industry is a global force for good. The work we do helps connect cultures, protect what matters most and explore our world and beyond. We take our role seriously and are committed to always doing what is right.

In that spirit, I want to recognize the resilience of our teammates in Ukraine.

Throughout almost 14 months of war in the region – they have stayed strong and continued their work – and we are all so very proud of all of them. We have been focused on supporting their safety and their well-being. Boeing and our employees provided over $3 million in humanitarian assistance to Ukraine in 2022. We have seen generous Boeing families in Poland and throughout the region willingly open their homes to our displaced teammates. 

In March 2022, we suspended major operations in Russia, including providing parts, maintenance and technical support for our customers. Since that time, we have moved all engineering work to the U.S. and other global sites as we wrap up details to formalize the suspension of work in Russia.

As a company, we will continue to support our teammates and their families in Ukraine, and our values will guide every action we take.

This support complements other actions we took around the globe from supporting military veterans to helping communities recover from natural disasters to strengthening STEM education and advancing equity and diversity.

Reflecting on these last few years, I’m incredibly proud of our team and of our company. And in closing my remarks, I would like to speak directly to my 156,000 colleagues at Boeing.

Thank you. Together, we’ve overcome significant challenges. Your resilience has helped us navigate one of the most difficult periods in Boeing’s history. We have made progress and we are not done yet. We have more work ahead to stabilize our operations, improve our performance and restore our health. As we lean forward, I am inspired each and every day by the dedication of everyone across Boeing and I’m confident in our shared future.

And that concludes my report.