Boeing 2012 Annual Report Download - page 49

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37
wholly owned subsidiary of Southwest Airlines Co. (Southwest), negotiated in conjunction with receiving
a full guarantee from Southwest of those lease payment obligations in the fourth quarter of 2011.
The decrease in revenues in 2011 compared with 2010 of $119 million was primarily due to lower operating
lease income from a smaller portfolio of equipment under operating leases as a result of aircraft returns
and lower lease rates on re-leased aircraft and lower interest income on notes receivable resulting from
a lower weighted average notes receivable balance and a decrease in the weighted average annual
effective interest rate during 2011.
Earnings From Operations
BCC’s operating earnings are presented net of interest expense, recovery of losses, asset impairment
expense, depreciation on leased equipment and other operating expenses. Operating earnings decreased
by $31 million in 2012 compared with 2011 primarily due to lower revenues partially offset by lower interest
and asset impairment expense.
Operating earnings decreased by $39 million in 2011 compared with 2010 primarily due to lower revenues
and higher asset impairment expense partially offset by lower interest expense, lower depreciation expense
and a reduction in the allowance for losses.
Financial Position
The following table presents selected financial data for BCC as of December 31:
(Dollars in millions) 2012 2011
BCC customer financing and investment portfolio $4,066 $4,315
Valuation allowance as a % of total receivables 2.0% 2.3%
Debt $2,511 $3,400
Debt-to-equity ratio 5.0-to-1 6.3-to-1
BCC’s customer financing and investment portfolio at December 31, 2012 decreased from December 31,
2011 primarily due to normal portfolio run-off and asset sales, partially offset by the origination of notes
receivable. At December 31, 2012 and 2011, BCC had $354 million and $521 million of assets that were
held for sale or re-lease, of which $266 million and $476 million had either executed term sheets with
deposits or firm contracts to be sold or placed on lease. Additionally, aircraft subject to leases with a carrying
value of approximately $78 million are scheduled to be returned off lease during 2013. These aircraft are
being remarketed or the leases are being extended and approximately $33 million of such aircraft had
either executed term sheets with deposits or firm contracts as of December 31, 2012.
For the years ended December 31, 2012 and 2011, AirTran accounted for 18% and 21% of BCC revenue.
On July 8, 2012, BCC, Boeing, Southwest and Delta Air Lines, Inc. (Delta) reached agreement whereby
78 BCC 717 aircraft on lease to AirTran will be subleased from AirTran to Delta on a phased-in basis
beginning in 2013, with the sublease scheduled for the duration of the lease term between BCC and
AirTran. Delta has committed to lease these 717 aircraft from BCC for an additional seven-year period
following the expiration of the sublease.
BCC enters into certain transactions with Boeing, reflected in the Other segment, in the form of
intercompany guarantees and other subsidies that mitigate the effects of certain credit quality or asset
impairment issues on the BCC segment.