Boeing 2009 Annual Report Download - page 5

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In the end, it was a year of notable
achievement, culminating with the historic
fi rst fl ight of the breakthrough 787 Dream-
liner. Through the tireless determination
of employees who proudly serve our cus-
tomers every day, I believe we’ve turned
momentum in our favor for addressing the
challenges that still lie ahead.
2009 Review
During the year, we confronted unprec-
edented market environments. The global
recession and record-setting declines
in passenger and cargo air traffi c drove
Boeing Commercial Airplanes orders
down, softened its services revenues and
slowed wide-body airplane production
rates. Boeing Defense, Space & Security
(formerly Integrated Defense Systems)
was challenged by the changing priorities
of the U.S. Department of Defense and
other agencies as they addressed their
own budget pressures; we felt the impact
most in our Army modernization and mis-
sile defense programs.
Despite these stresses, and not-
withstanding our development-program
challenges, our core operating perfor-
mance was strong:
– We booked record revenues; retained a
large, diverse total backlog (which stood
at $316 billion at year end); and main-
tained strong liquidity and cash fl ows.
– Our services businesses and the vast
majority of our production programs —
including the 737, 777 and our portfolio
of military aircraft — generated solid
profi t margins.
– We delivered 481 commercial
airplanes — including the most-ever 737s
and 777s in a given year — along with
121 military aircraft and six satellites.
– Boeing Capital, our fi nancing arm, suc-
cessfully engaged third-party fi nanciers to
support our customers’ deliveries, while
generating solid pre-tax earnings, reducing
its portfolio and returning cash dividends
to the company.
We made important progress on
several development programs — in
delivering the fi rst 777 freighters, winning
full-rate production approval for the
EA-18G electronic-warfare aircraft, fl ying
the fi rst 737-based P-8A maritime patrol
aircraft and performing well on the
Brigade Combat Team Modernization
program (formerly Future Combat
Systems). However, a reclassifi cation of
costs on the 787 program and higher
costs on the 747-8 (due in part to diffi cult
market conditions) signifi cantly affected
our overall fi nancial results. By year’s end,
however, our team had made substantial
progress on these programs, too. Both
airplanes are now in fl ight testing and are
steadily reducing risk as they move
through the certifi cation process.
Preparing for an Eventual Rebound
With two tough years behind us, and our
fi nancial strength and competitive strate-
gies intact, we enter 2010 with growing
confi dence about the future. Yet we are
acutely aware that this is no time for com-
placency. We must execute exceptionally
well, support our customers better every
day and preserve our fi nancial position in
a tenuous economy. Our basic challenge
is to balance the fi nancial with the strate-
gic; it is to produce the short-term results
that will enable us to pursue long-term
growth objectives.
Although the global economy shows
signs of improvement, we believe it will
take some time for economic indicators
to rebound signifi cantly. Fortunately, our
discipline in setting commercial airplane
production rates and diversifying our
customer base during the recent up-cycle
is paying off. We ended 2009 with
Commercial Airplanes’ backlog holding
strong at more than 3,300 fi rm orders
valued at $250 billion. We believe the
strength of this backlog is suffi cient to
keep our production lines full until an ex-
pected recovery in order activity in 2012.
The commercial airplane market remains
a substantial long-term growth opportu-
nity, and we are strongly positioned for
the eventual rebound.
At the same time, we anticipate a
continued fl attening and reprioritization of
U.S. defense budgets, given the size of
the federal defi cit and spending increases
in other areas. Defense markets outside
the U.S. are expanding, however, as
more countries are making market- and
technology-based decisions on defense
and security products. That has created
To the Shareholders and Employees of
The Boeing Company: Breakthrough innovation
is what we do. But it is seldom easy. Add global
economic turbulence to the mix, and the chal-
lenges of 2009 were among the biggest in our
94-year history.