Boeing 2008 Annual Report Download - page 39

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Continued access to global markets remains vital to our ability to fully realize our sales potential and
long-term investment returns. Approximately 10% of Commercial Airplanes’ contractual backlog in
dollar terms is with U.S. airlines.
We face aggressive international competitors who are intent on increasing their market share. They
offer competitive products and have access to most of the same customers and suppliers. Airbus has
historically invested heavily to create a family of products to compete with ours. Regional jet makers
Embraer and Bombardier, coming from the less than 100-seat commercial jet market, continue to
develop larger and more capable airplanes. Additionally, other competitors from Russia, China, and
Japan are likely to enter the 70 to 150 seat aircraft market over the next few years. This market
environment has resulted in intense pressures on pricing and other competitive factors.
Worldwide, airplane sales are generally conducted in U.S. dollars. Fluctuating exchange rates affect
the profit potential of our major competitors, all of whom have significant costs in other currencies. A
decline of the U.S. dollar relative to their local currencies as experienced in 2007 puts pressure on
competitors’ revenues and profits. Competitors often respond by aggressively reducing costs and
increasing productivity, thereby improving their longer-term competitive posture. Airbus has announced
such initiatives targeting overhead cost savings, a reduction in its development cycle and a significant
increase in overall productivity through 2012. If the U.S. dollar continues to strengthen, Airbus can use
the improved efficiency to fund product development, gain market share through pricing, and/or
improve earnings.
We are focused on improving our processes and continuing cost-reduction efforts. We continue to
leverage our extensive customer support services network which includes aviation support, spares,
training, maintenance documents and technical advice for airlines throughout the world. This enables
us to provide a higher level of customer satisfaction and productivity. These efforts enhance our ability
to pursue pricing strategies that enable us to price competitively.
Operating Results
(Dollars in millions)
Years ended December 31, 2008 2007 2006
Revenues $ 28,263 $ 33,386 $ 28,465
% of Total company revenues 46% 50% 46%
Earnings from operations $ 1,186 $ 3,584 $ 2,733
Operating margins 4.2% 10.7% 9.6%
Research and development $ 2,838 $ 2,962 $ 2,390
Contractual backlog $278,575 $255,176 $174,276
Revenues
Year over year changes in Revenue are shown in the following table:
(Dollars in millions)
2008
vs 2007
2007
vs 2006
New airplane sales $(4,876) $3,369
Aircraft trading (264) 120
Commercial aviation services business 17 1,432
Total $(5,123) $4,921
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