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BOEING is a trademark of Boeing Management Company.Copyright © 2006 Boeing. All rights reserved. 1
Boeing Commercial Airplanes
Boeing Commercial Airplanes
Alan MulallyExecutive Vice President, The Boeing Company President and Chief Executive Officer, Commercial Airplanes
May 17, 2006
Copyright © 2006 Boeing. All rights reserved. 2
Annual Investor Conference | Boeing Commercial Airplanes
Boeing Commercial Airplanes
Performance
Business Environment
Near and Long-term
Product Development
Airplanes, Services and Solutions
Productivity
Lean Global Enterprise
BOEING is a trademark of Boeing Management Company.Copyright © 2006 Boeing. All rights reserved. 3
Boeing Commercial Airplanes
BCA 2005 Accomplishments as of 5/17/2006 | 3
2005
Our Journey Continues
Slideshow is not viewed on webcast
Copyright © 2006 Boeing. All rights reserved. 4
Boeing Commercial Airplanes
Billions~27.5
29.5 – 30.5
21.0
S30
$20
$10
$0
22.7
> 9%
6.3%
> 10%10%
4%
6%
8%
0%
2%
3.6%
100
04 05 06E 07E
290
~395
440 - 445
500
400
300
200
0
285
04 05 06E 07E 04 05 06E 07E
Delivering growth and profitability
Performance and Outlook
MarginsRevenuesAirplane Deliveries
Delivering growth and profitability
Copyright © 2006 Boeing. All rights reserved. 5
Boeing Commercial Airplanes
People Working Together as a Global Enterprise for Aerospace Leadership
as measured by:
GoalCreating value through profitable growth for all
Customer,
Employee,
Investor,
& Communitysatisfaction
Prefer Boeing
Top quartile
Good neighbor
Top quartile
Copyright © 2006 Boeing. All rights reserved. 6
Boeing Commercial Airplanes
Creating Value Roadmap
BusinessEnvironment & Opportunities
Plan andPerformance
Strategy
Continuously Exploiting
Growth Opportunities
• Geopolitical• Markets• Customers• Competition• Partners• Technology
• Detailed customer knowledge
• Large-scale system integration
• Lean global enterprise
• Revenue/Share• Earnings/Margins• Assets/Turns• EP/Cash/Value• Opportunities and Risks
Core Competencies
• Products• Process• People
Creating the future … todayCreating the future … today
Copyright © 2006 Boeing. All rights reserved.
Boeing Commercial Airplanes
Global Business Environment
Good long-term global marketTraffic outpacing capacity growthYields and productivity risingAirlines profitable despite high fuel costsU.S. airlines restructuringIndustry continues to restructure
LiberalizationTechnologyNew business models
Fuel prices, terrorism, securityContinued aggressive competitionGrowth opportunities
Industry growth is broad-basedIndustry growth is broad-based
Copyright © 2006 Boeing. All rights reserved. 8
Boeing Commercial Airplanes
Long-Term Global Growth Market
0
2,000
4,000
6,000
8,000
10,000
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Trav
el -
Bill
ions
RPK
s
Long-Term Growth Rates:GDP = 3%
Passengers = 5%Cargo = 6%
Long-Term Growth Rates:GDP = 3%
Passengers = 5%Cargo = 6%
Gulf WarCrisis
Sept 11 SARSIraq
• Liberalization• Technology• Fragmentation
Copyright © 2006 Boeing. All rights reserved. 9
Boeing Commercial Airplanes
Long-Term Traffic Growth Trends Continue
Airlines will continue to address passenger desires for non-stops and frequencies
Airlines will continue to address passenger desires for non-stops and frequencies
0
200
400
600
800
1000
1200
1980 1990 2000 2010 2020
Index (1980=100) Nonstop markets>3,000 statute miles
ASKsFrequency GrowthAirport PairsAirplane Size in Seats
Copyright © 2006 Boeing. All rights reserved. 10
Boeing Commercial Airplanes
Detailed Customer Knowledge and Focus
AmericasAmericasEurope/Africa/Mid East
Europe/Africa/Mid East
Asia Pacific
Copyright © 2006 Boeing. All rights reserved. 11
Boeing Commercial Airplanes
Continuous quality and productivity improvementEfficiently produce through cyclesLarge-scale systems integrationLean global enterprise
Market-driving products and servicesPoint-to-point…nonstop…frequencySimplified product familyServices and business solutions
Detailed customer knowledge and focusUnderstand and shape the market Valued relationshipsCustomer preferred solutionsSuperior customer experience
Skilled and motivated teamWorking TogetherHighest ethical standards
Strategy
Delivering valueDelivering value
Annual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 12
Boeing Commercial Airplanes
$2.1 Trillion25,700 Airplanes
over the next 20 years380
737
320
340
330
787
777
747
Single-Aisle39%
Single-Aisle39%
Large11%
Intermediate Twin-Aisle
45%
Intermediate Twin-Aisle
45%
Regional Jets
767
7175%
E190
350
Competing successfullyCompeting successfully
Annual Investor Conference | Boeing Commercial Airplanes
Market-Driving Products and Services
Copyright © 2006 Boeing. All rights reserved. 13
Boeing Commercial Airplanes
Market-Driving Products and Services
CAS
Completing the Family
Even more Value
Breakthrough Capability,Comfort & Economics
Growing Our Business
More Efficiency and Capability
Simplified product family enabling more frequent, non-stop services with breakthrough economics and technology
Simplified product family enabling more frequent, non-stop services with breakthrough economics and technology
Annual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 14
Boeing Commercial Airplanes
Backlog
Model
Single-Aisle32%
Single-Aisle32%
Intermediate Twin-Aisle
61%
Intermediate Twin-Aisle
61%
Large7%
Large7%
747
777
737
767
787
$64$70
$124$132
0
30
60
90
120
150
2003 2004 2005 1Q06$-
Bill
ions
Backlog
Region
Asia Pacific
Americas
AmericasAmericas
Europe & Central Asia
Europe & Central Asia
Leasing & Gov'tLeasing & Gov't
Southeast Asia
Southeast Asia
Middle East & Africa
Middle East & Africa
Asia PacificAsia Pacific
Healthy backlog from established customers… continuing to growHealthy backlog from established customers… continuing to grow
Annual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 15
Boeing Commercial Airplanes
787 Worldwide Market Interest Strong29 Customers 393 Announced Orders & CommitmentsAnnual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 16
Boeing Commercial Airplanes
20052002
787-8FirstFlight
787-8 Enters Service
AirplaneAnnouncement
Firm Configuration
Program Launch
Authorityto Offer
2003 2004 2006 2007 2008 2009 2010
787-3Enters
Service
787-9EntersService
Start of Major
Assembly
Annual Investor Conference | Boeing Commercial Airplanes
787 Proceeding On Schedule
Copyright © 2006 Boeing. All rights reserved. 17
Boeing Commercial Airplanes
GOLDCAREGOLDCARE
Annual Investor Conference | Boeing Commercial Airplanes
Commercial Aviation Services
Copyright © 2006 Boeing. All rights reserved. 18
Boeing Commercial Airplanes
Moving to Business Solutions
Maintenance, Repair& Overhaul
Integrated Materials Management
Safety Reliability Cost
BSAS
Integrated Operations Center
Airplane Health ManagementElectronic Flight Bag
Annual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 19
Boeing Commercial Airplanes
Continuous Quality and Productivity Improvement Lean Global Enterprise
World-class, large-scale system integration
Customer preferred options and shorter order to delivery flow time
Fewer and simpler assemblies that go together easier and faster
Engineering, production, supplier management and customer support aligned and globalized
Fewer and simpler parts and assemblies
Engine Assembly
Bulkhead Assembly
Moving Line
QualityCostDeliverySafetyMorale
Annual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 20
Boeing Commercial Airplanes
Lean Global Enterprise737 and 777 Assembly
50% factory flow time reduction
62% work in process inventory reduction
61% Engineering quality improvement
57% Engineering productivity improvement
29% Factory productivity improvement
15% cycle time reduction
30% inventory turns increase
20% cost of quality reduction
Annual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 21
Boeing Commercial Airplanes
Lean Global Enterprise Fewer and Simpler Parts and Assemblies
Machining Cell
48% factory flow time reduction
49% work in process inventory reduction
20% final assembly footprint (ft) reduction
59% cell footprint (ft) reduction
56% standard hours reduction
Monolithic aluminum and carbon structure Reduced part countLower cost materials
777-300ER Empennage Design for Manufacturing
Annual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 22
Boeing Commercial Airplanes
Passenger Seat Supplier
1st Operation Moving Line
Cycle Time Reduction 24%
Introduced new tooling, point of use parts, some visual controls
Plan to repeat analysis / kaizen/ rebalancing for all operations on entire line
Lean Global EnterpriseGlobal Partnerships Annual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 23
Boeing Commercial Airplanes
Lean Global Enterprise
1998 2005 Future State
Airplane Deliveries 563 290 More efficient atany level
Order to Delivery (Mos.) 14 10 6
Suppliers/Partners 3,750 1,190 900
Employment 119,000 50,000 Stable
Facilities Sq Ft (M) 71 38 Continuedconsolidation
Productivity… our foundation for competitivenessProductivity… our foundation for competitiveness
Annual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 24
Boeing Commercial Airplanes
Lean+
EngineeringEngineering
Lean Resource CenterLean Resource Center
ManufacturingManufacturing
QualityQuality HR &HR &AdminAdmin LawLaw
OIGOIGFinanceFinance
TechnologyTechnologyCommunicationsCommunications DCDCOperationsOperations
IntInt’’llRelationsRelations
BusinessBusinessDevelopmentDevelopment
Best Practices Best Practices -- Website Website -- Toolkit Toolkit -- Opportunities Opportunities -- Team Team -- Training Training -- ResourcesResources
BCABCA IDSIDS CBBCBB
Achieving the Business PlanAchieving the Business Plan
GlobalGlobalPartnersPartners
Annual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 25
Boeing Commercial Airplanes
Lean+ in Action
CFO Deep Dive 11/30/05Contracts Value Stream Mapping
CFO Quarterly Deep Dive -Accounting
“Lean in Action”2/24/06
“Lean Accounting for the Lean Enterprise Seminar”2/15-17/06BCA, IDS, SSG & Corporate participation
Lean AccountingSeminar 4/5-7/06Airplane Production, Finance, PMO & Contracts, Engineering & Manufacturing, 787, Lean Office, SSG, CAS and Corporate participation
Annual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 26
Boeing Commercial Airplanes
Managing the Upturn
Applying lessons learned
Disciplined management processes
Robust production system
Healthy and aligned partners
Successful rate increases
Production system supporting growth and margin expansionProduction system supporting growth and margin expansion
Annual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 27
Boeing Commercial Airplanes
Performance
2005 2006 2007
Deliveries 290 ~395 440 - 445
Revenue $22.7B ~$27.5B $29.5B - $30.5B
Margins 6.3% >9.0% >10.0%
Delivering value and investing for the futureDelivering value and investing for the future
Annual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 28
Boeing Commercial Airplanes
Summary
Good long-term market
Intense customer focus… aggressive competition
Preferred products, services and solutions
Aggressively capturing the current up-cycle
Disciplined rate increases
Growing Products and Services
Continuing lean operations
Focused investments… execution
Skilled and motivated team
Profitable growthProfitable growth
Annual Investor Conference | Boeing Commercial Airplanes
Copyright © 2006 Boeing. All rights reserved. 29