Boeing 2010 Annual Report Download - page 35

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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 190 seat aircraft market over the next few years. Many of these
competitors have historically enjoyed access to government-provided support, including "launch aid,"
which greatly reduces the commercial risks associated with airplane development activities and
enables planes to be brought to market more quickly than otherwise possible. This market environment
has resulted in intense pressures on pricing and other competitive factors and we expect these
pressures to continue or intensify in the coming years.
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.
Changes in value of the U.S. dollar relative to their local currencies as experienced in 2010 impacted
competitors’ revenues and profits. Competitors routinely respond to relatively weaker dollars 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 strengthens again, 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 high 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, 2010 2009 2008
Revenues $ 31,834 $ 34,051 $ 28,263
% of Total company revenues 50% 50% 46%
Earnings/(loss) from operations $ 3,006 $ (583) $ 1,186
Operating margins 9.4% -1.7% 4.2%
Research and development $ 2,975 $ 5,383 $ 2,838
Contractual backlog $255,591 $250,476 $278,575
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