Boeing 2009 Annual Report Download - page 41

equipment recapitalization efforts and continued demand for systems development. The near-term
forecast of the defense budget environment shows limited growth in the 2011 to 2015 period for
investment efforts. Though opportunities may exist following U.S. troop draw-downs in Iraq, they are
offset by recent increases in Afghanistan. We continue to see pressure to reduce OCO requests that
have been used to cover the ongoing costs of the wars.
It is unlikely that the U.S. DoD will be able to fully fund all programs of record already in development
as well as new initiatives. This imbalance between future costs of programs and expected funding
levels is not uncommon in the U.S. DoD and is routinely managed by internally adjusting priorities and
schedules, restructuring programs, and lengthening production runs to meet the constraints of
available funding and occasionally by cancellation of programs. We expect the U.S. DoD will respond
to future budget constraints by focusing on affordability strategies from acquisition reform and
emphasizing utilization of commercial off-the-shelf solutions and network-enabled operations. These
strategies will be enabled through persistent intelligence, surveillance, and reconnaissance (ISR), long-
range strike, special operations, unmanned systems, cyber security, and precision-guided kinetic and
non-kinetic weapons, electronic warfare, as well as selected outsourcing of logistics and support
activities to improve overall effectiveness while maintaining control over costs.
Other nations continue to experience growing demands for new equipment to address operational
requirements, aging inventories, and changing threat environments. Greater U.S. reliance on allies and
coalition partners places additional pressure on nations to emphasize acquisition of material that is
deployable, survivable, and interoperable with the international community. European nations are
struggling to meet defense investment needs as budget deficits create greater pressure on resources.
Though regional financial concerns exist, Middle Eastern military markets remain robust with stable oil
prices and persistent regional security concerns sustaining continued defense investment. In Asia,
growth is slowing with nations pursuing select acquisitions to address growing regional threats. The
international market will continue to be affected by global economic challenges. However, the
continuing threat environment should keep demand stable in 2010.
Missile Defense Environment The proliferation of short- and medium-range ballistic missiles is
considered the greatest current threat to security and is driving missile defense spending. As a result,
the near-term focus for growth is in regional and tactical BMD systems.
Civil Space Transportation and Exploration Environment The National Aeronautics and Space
Administration (NASA) budget is focused on technology development and demonstration programs,
the International Space Station, and new initiatives associated with space exploration. NASA is
developing new approaches to space exploration with added emphasis on commercial spaceflight
systems, space technology development and robotic missions. NASA is also enhancing its focus on
climate change and aeronautics research.
Homeland Security Environment The continuing threat from terrorism is the key driver for the
homeland security market. Key growth areas include aviation security, border security, maritime
security and cyber security. Additionally, the U.S. government is focused on increasing cooperation
with state and local institutions.
Commercial Satellite Environment The commercial satellite market is experiencing improvement in
market demand, partly driven by strong U.S. government demand for commercial satellite systems and
services, but the overall sector continues to be characterized by overcapacity creating strong
competitive pressures on pricing.
Adjacent Market Environment We see growth opportunities across a number of adjacent markets
with both U.S. DoD and other U.S. government customers. These markets, including services,
unmanned systems, intelligence, cyber, and energy, represent key development areas which support
the current engagements overseas as well as emerging national security issues.
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