Boeing 2009 Annual Report Download - page 39

We continue to work with our customers and suppliers to assess the specific impacts of schedule
changes including delivery delays and supplier assertions. A number of our customers have
contractual remedies for schedule delays and/or performance. We continue to address customer
claims and requests for other contractual relief as brought forth.
The cumulative impacts of the flight test delays, production challenges, schedule delays and customer
and supplier impacts create significant pressure on program revenue and cost estimates. We continue
to assess our mitigation plans and cost reduction efforts to address these pressures.
Fleet Support We provide the operators of our commercial airplanes with assistance and services to
facilitate efficient and safe aircraft operation. Collectively known as fleet support services, these
activities and services begin prior to aircraft delivery and continue throughout the operational life of the
aircraft. They include flight and maintenance training, field service support costs, engineering services
and technical data and documents. The costs for fleet support are expensed as incurred and have
been historically less than 1.5% of total consolidated costs of products and services. This level of
expenditures is anticipated to continue in the upcoming years. These costs do not vary significantly
with current production rates.
Research and Development The following chart summarizes the time horizon between go-ahead and
certification/initial delivery for major Commercial Airplanes derivatives and programs.
Go-ahead and Ce rtification/De live r y
787-8
787-9
777-200LR*
777-F
747-8 Freighter
747-8 Intercontinental
2005 2006 2007 2008 2009 2010 2011 2012 2013
* Go-ahead prior to 2005
Our Research and development expense increased by $2,545 million in 2009. This was due to
reclassification to research and development expense of $2,693 million of production costs related to
the three 787 flight test aircraft and $50 million of lower supplier development cost sharing payments,
partially offset by a $198 million decrease of other research and development expense.
Our Research and development expense decreased $124 million in 2008. Research and development
expense is net of development cost sharing payments received from suppliers. The decrease in
research and development spending for 2008 was primarily due to reduced 787 product development
activities partially offset by $278 million of increased spending on the 747-8 program and $80 million of
lower supplier development cost sharing payments.
Additional Considerations
The 787 and 747-8 programs highlight the risks that are always inherent in new airplane programs and
new derivative airplanes, particularly as both the 747-8 and the 787 begin the demanding flight test and
certification phases of program development. Costs related to development of new programs and
derivative airplanes are expensed as incurred. Costs to produce new aircraft are included in inventory
and accounted for using program accounting. Airplane programs have risk for reach-forward losses if
our estimated production costs exceed our estimated program revenues for the accounting quantity.
Generally commercial airplanes are sold on a firm fixed-price basis with an indexed price escalation
clause and are often sold several years before scheduled delivery. Each customer purchase
27