Boeing 2015 Annual Report Download - page 47

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Program Development The following chart summarizes the time horizon between go-ahead and planned
initial delivery for major Commercial Airplanes derivatives and programs.
Reflects models in development during 2015
We launched the 787-10 in June 2013 and the 777X in November 2013.
Additional Considerations
The development and ongoing production of commercial aircraft is extremely complex, involving extensive
coordination and integration with suppliers and highly-skilled labor from thousands of employees and other
partners. Meeting or exceeding our performance and reliability standards, as well as those of customers
and regulators, can be costly and technologically challenging. In addition, the introduction of new aircraft
and derivatives, such as the 787-10, 737 MAX and 777X, involves increased risks associated with meeting
development, production and certification schedules. As a result, our ability to deliver aircraft on time,
satisfy performance and reliability standards and achieve or maintain, as applicable, program profitability
is subject to significant risks. Factors that could result in lower margins (or a material charge if an airplane
program has or is determined to have reach-forward losses) include the following: changes to the program
accounting quantity, customer and model mix, production costs and rates, changes to price escalation
factors due to changes in the inflation rate or other economic indicators, performance or reliability issues
involving completed aircraft, capital expenditures and other costs associated with increasing or adding
new production capacity, learning curve, additional change incorporation, achieving anticipated cost
reductions, flight test and certification schedules, costs, schedule and demand for new airplanes and
derivatives and status of customer claims, supplier assertions and other contractual negotiations. While
we believe the cost and revenue estimates incorporated in the consolidated financial statements are
appropriate, the technical complexity of our airplane programs creates financial risk as additional
completion costs may become necessary or scheduled delivery dates could be extended, which could
trigger termination provisions, order cancellations or other financially significant exposure.
Defense, Space & Security
Business Environment and Trends
United States Government Defense Environment Overview The enactment of The Bipartisan Budget
Act of 2015 in November 2015 established overall defense spending levels for FY2016 and FY2017.
However, uncertainty remains with respect to levels of defense spending for FY2018 and beyond, including
risk of future sequestration cuts. Significant uncertainty also continues with respect to program-level
appropriations for the U.S. Department of Defense (U.S. DoD) and other government agencies, including
the National Aeronautics and Space Administration, within the overall budgetary framework described
above. Future budget cuts, including cuts mandated by sequestration, or future procurement decisions
associated with the authorization and appropriations process could result in reductions, cancellations and/
or delays of existing contracts or programs. Any of these impacts could have a material effect on the results
of the Company’s operations, financial position and/or cash flows.
In addition to the risks described above, if Congress is unable to pass appropriations bills in a timely
manner, a government shutdown could result which may have impacts above and beyond those resulting
from budget cuts, sequestration impacts or program-level appropriations. For example, requirements to