Q3 2023 Boeing Co Earnings Call

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Analyst question and answer session are being broadcast live over the Internet.

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At this time for opening remarks and introductions.

Turning the conference over to.

Mr. Matt Walsh.

President of Investor Relations for Boeing Company.

Please go ahead.

And good morning, welcome to Boeing's quarterly earnings call I am not Welch and with me today are Dave Calhoun, Boeing's, President and Chief Executive Officer, and Brian West Boeing's Executive Vice President and Chief Financial Officer.

As a reminder, you can follow today's broadcast and slide presentation at Boeing Dotcom.

As always detailed financial information is included in today's press release.

Furthermore, projections estimates and goals included in todays discussion.

Involve risks.

Including those described in our SEC filings and in the forward looking statement disclaimer at the end of the web presentation.

In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of certain non-GAAP measures.

Now I will turn the call over to Dave Calhoun.

Thank you, Matt and thanks to all for joining us this morning.

Let me start with a comment on the conflict in Israel in Gaza.

We were saddened to see the horrific attacks on Israel.

The escalating conflict in the region that is resulting in a significant humanitarian emergency.

We will continue to monitor the situation, we will focus on the safety of our employees.

And we will aid those in need.

As always we.

We'll follow the lead of the U S government will coordinate closely with government agencies customers and suppliers.

Always with safety security and wellbeing as our top priority.

Now, let me turn to the quarter.

As you know we ran into a few challenges over the last several months.

But we've demonstrated that we know how to overcome obstacles.

And it will continue to do just that.

We knew 2023 would be a bumpy ride.

We have more work to do but overall, we're making progress from a recovery and we are on track to meet the financial goals. We shared for this year and for the 25 26 timeframe.

A timeframe I refer to as stability.

As you know free cash flow has been our primary financial metric through this recovery and based on our performance year to date, we still plan to be in the guidance range for the year as well as the $10 billion target by 2025 and 2026.

This is a complex long cycle business and driving stability takes time.

Especially as an entire industry works its way back from the impact of a global pandemic.

We expect challenges to come our way and when they do we are transparent we take action and we move forward.

So month to month and quarter to quarter.

It can be tough to predict.

But we're focused on the long term and we're taking the tough actions now to ensure that the long term future is strong.

So with that I'll highlight a few key updates around the business.

Boeing commercial BCA.

In commercial demand continues to be incredibly robust.

We booked about 400 net orders in the quarter, including 150 737, Max tens for Ryanair 50, 780 Sevens for United Airlines is 39, 780 Sevens for Saudi Arabian Airlines.

With demand strong our focus remains on delivering airplanes.

We are seeing increased stability and quality performance within our own factories.

But we're working to get the supply chain caught up to the same standards.

Our production system is poised for steady inefficient increases but.

But we won't push the system too fast and will ensure the supply base is in lockstep with us.

Yeah.

On the 737.

We're moving through rework on the most recent non conformance and he asked the pressure bulkhead.

That work slowed production and deliveries down in the course of the quarter.

And given our year to date total we now expect 737 deliveries for the year to be in this 375 to 400 range.

While a setback well.

We will regain our momentum as we progress through the issue.

We are keeping our suppliers hot.

According to the master schedule.

We plan to complete the production transition to 38 per month by the end of the year.

And still plan to reach the key rate of 50 per month by that 25 and 26 timeframe.

Important to note with respect to our supply chain.

Deliveries shortfalls have been driven by non conformance is not.

Not actual supply chain constraints.

On the 787.

The program is demonstrating improved stability.

We're now transitioning production from four to five per month.

And expect to meet our delivery range of 70 to 80 for the year and longer term. We're on track for the rate step up to 10 per month by 25 and 26.

To ensure our broader recovery and return to more normal margins.

Key focus continues to be on liquidating, our 787 and 737 inventory.

So that we can eliminate those shadow factories and focus our resources on the production floor all of our resources.

Nonconformance costs are exponentially higher on all of those finished airplanes.

We still plan to deliver most if not all of the inventory by the end of next year, which will set us on a strong path for 'twenty five 'twenty six.

With respect to China.

We are encouraged by recent signs of progress and continue to work closely with our customers on the timing of returning to delivery.

As I mentioned.

Supply chain performance will be a key enabler.

Our spirit Aerospace systems brings in new leadership.

We're looking forward to working with Pat Pat Shanahan is known by the Boeing Company, we have great respect for his abilities on the shop floor.

And we're pleased to have recently established a mutually beneficial agreement that will enhance the ability of our production system and help us deliver on our customer commitments a true win win.

Lastly on the development side.

Progressing across our commercial programs of our timelines are unchanged on the 737 dash seven and the Dash 10, and the Triple seven X and Triple seven dash eight freighter.

Reminder, as always.

Well ultimately control the timing.

Barring defense systems Bds.

Offensive space, we still have more work to improve operating performance.

Results this quarter were impacted by higher estimated costs on the Vichy twenty-five B program.

We are maturing through this build process incorporating engineering changes to better support the installation process.

And we resolved the important supplier negotiations over the course of the quarter.

I'll note that none of these items will impact the performance and capability of the end product.

The increase estimates reflect the process by which we build the airplanes.

And then a fixed priced environment any unplanned hurdles can introduced unrecoverable costs.

At the end of the day, we have two airplanes to build.

We're getting past these hurdles and are committed to delivering two exceptional airplanes for our customer.

Separately.

As you saw we're also expecting higher costs on a satellite program.

As we build out the constellation and meet our lifecycle commitments for our customer.

We're working on real innovation and advanced capabilities in this space and see real potential market as we deliver against this commitment.

More broadly across Bds were stabilizing operations and taking comprehensive actions to improve performance.

Clothing lean initiatives contracting disciplines factory improvements engineering investments and more.

We're seeing some early signs of progress.

But financial improvement at Bds as lower volumes takes time.

Recovery in Bds is slower than we'd like.

Slower than I'd like.

But we're confident in the future and our path of normalizing Bds margin performance by that 25, and 26 timeframe is intact.

The confidence is due in part to key milestones were starting to hit and the strong demand. We're seeing for example.

We delivered the first <unk> seven eight in the U S Air Force this quarter.

We also captured a key award from the U S Army for 'twenty, one Apache helicopters.

Additionally, we continue to invest and position ourselves for significant opportunities.

In proprietary programs.

The backlog at Bds is $58 billion.

Nearly 30% of that is outside the United States.

We're proud of the role our products play in protecting global security and National Defense.

Demand is strong we're confident in the business and we will continue to improve operational performance to more normalized levels.

Boeing Global services Bgs.

In global services the team had another strong quarter, both on the commercial and the government side with.

With improved revenue and earnings relative to the third quarter of 2022.

Our financials were again, driven by strong operating performance and the team's ability to hit key milestones and capture new business.

In the quarter Bgs delivered the 150 of 737 800 Boeing converted freighter received an award from the U S. Navy for P. A trainer upgrades.

And sorry, the digital maintenance agreement with multiple airlines.

Our services team represents Boeing with our customers nearly every minute of every day.

The work they do to keep military and commercial fleet flying is best in class and we're proud of the performance that they are delivering.

A step back.

With respect to the market outlook.

Looking across all three business units demand for our products and services continues to be incredibly strong.

Our backlog is at 469 billion.

Including over 5100 commercial airplanes.

Over the next 10 years the value of the markets, we serve across commercial defense space and services is estimated at.

A $10 seven trillion.

According to our most recent following market outlook.

Our products deliver exceptional capability and strong in growing markets.

And our portfolio is well aligned with our customers' needs.

The demand is there to support our recovery.

It is on us to perform and we will remain disciplined and patient in the process.

Brian I'll turn it over to you.

Thanks, Dave and good morning, everyone. Let's go to the next slide and start with total company financial performance.

Third quarter revenue was $18 $1 billion, that's up 13% year over year.

Growth was driven by higher commercial volume primarily on higher 787 deliveries.

Core operating margin in the quarter was minus 6% and a core loss per share was $3.26.

Margins and EPS were negatively impacted by unfavorable defense performance, which I'll cover in a moment.

Lower 737 deliveries that were inline with expectations set last month.

And expected abnormal cost appeared expenses.

Free cash flow was a usage of $310 million in the quarter.

This reflects the lower 737 deliveries and in line with our expectations.

With that I'll turn to the next page and cover Boeing commercial airplanes.

BCA booked 398 net orders in the quarter, including a 150, Max Dash tens to Ryanair 50, 80 Sevens for United and 30 987 for Saudi Arabian Airlines.

<unk> now has over 5100 airplanes in the backlog valued at $392 billion.

BCA delivered 105 airplanes in the quarter and revenue was $7 $9 billion, that's up 25% year over year, driven by the higher 77 deliveries.

Operating margin was minus eight 6%.

We saw the impact of the lower 737 deliveries as well as expected abnormal costs appeared expenses, including higher R&D spending primarily on the triple seven ex investment.

Now I will give a little more color on the key programs.

On the 737.

We delivered 70 airplanes in the quarter, reflecting the impact of the recent supplier to slide nine conformance.

Since our early September update additional areas of the ASP pressure bulkhead were identified that require further inspection and rework would you likely read about.

This additional scope impacts unit that had already gone through the initial rework and will take us more time to stabilize production and deliveries.

We are bound to the issue understand the rework steps required and booked a non material financial impact in the quarter.

Considering these latest facts, we expect October deliveries to be in line with September and now expect to deliver between 375 and 400 airplanes for the year.

Performance ultimately will be dictated by the pace of a few slides recovery.

The quarter ended with approximately 250, Max airplanes, and inventory 85 of which are being held for customers in China.

We still expect most of the Max inventory aircraft to be delivered by the end of 'twenty 'twenty four but more are likely to slip into 2025 tied to the few slides recovery.

To support stability suppliers are continuing with planned rate increases and we're selectively managing inventory levels in certain parks where prudent.

We expect to complete the 737 transition to 30 per month by year end and we're maintaining plans increased to 50 per month in the 'twenty five 'twenty six time frame.

On the 77 program we.

We had 19 deliveries in the quarter and 50 year to date, we still expect 70 to 80 deliveries this year.

We started transitioning production to five per month in October and still plan to reach 10 per month in the 'twenty five 'twenty six time frame.

We ended the quarter with 75 airplanes in inventory.

Rework is progressing nicely and we still expect most of the delivered by the end of 2024.

We booked $244 million of abnormal costs in line with expectations. The total estimate is now $3 billion up a bit and we still expect to be largely done by year end.

Moving to the Triple seven X program efforts are ongoing.

The program timeline is unchanged and we plan to resume production later this year.

We booked $180 million of abnormal costs in the quarter inline with expectations.

The total estimate is unchanged at $1 billion and we expect to be done this quarter.

Importantly, as Dave mentioned, we recently reached an agreement with spirit on commercial terms associated with the 737 and 787 programs.

We believe this agreement is a win win for both companies and directly promotes our goal to drive stability and support our airline customers.

Moving on to the next page Boeing defense and space.

Bds booked $6 billion in orders during the quarter and the backlog now stands at $58 billion.

Revenue was $5 5 billion essentially flat year over year, and we delivered 28 aircrafts.

Operating margin was minus 16, 9% in the quarter.

In early September we indicated that margins would be around minus 9%.

The driver being a $482 million charge on the VC twenty-five be fixed price development program due to higher estimated manufacturing costs related to engineering changes labor instability in the resolution of supplier negotiations.

As we close the books at quarter end, we saw another eight points of margin erosion, driven by first a $315 million loss tied to customer considerations and higher estimated costs to deliver a highly innovative satellite constellation contract that we signed several years ago and second.

We had smaller less material cost pressures across a couple of programs totaling $136 million, primarily driven by the MQ25 program.

These are disappointing results in the quarter and year to date.

Operator: and Scott. Today's call is being recorded. The management discussion and slide presentation plus the analyst's question and answer session are being broadcast live over the internet. To ask a question on today's conference, please press the digit one, followed by the digit zero on your touch cell phone. Again, it's one zero for questions. After pressing one zero, you will hear that you have been placed in queue. Pressing one zero again will take you out of queue. It may permit you from being able to ask a question.

This performance is below our expectations and we acknowledged that we aren't as far along in this recovery as we expect it to be at this stage.

I'd like to point out that the team is executing our game plan to get bvs back to the high single digit margins by the 'twenty five 'twenty six time frame as you can see on the right hand side of the slide.

We're driving lean manufacturing program management rigor and cost productivity consistently across the division.

We've invested a new training program to accelerate performance on the factory floor and we've deployed resources at our suppliers to support their recovery.

Matt Welch: At this time for opening remarks and introductions, I'm carrying the conference over to Mr. Matt Welch, Vice President of Investory Relations for Boeing Company. Mr. Welch, please go ahead. Thank you, and good morning. Welcome to Boeing's quarterly earnings call. I am Matt Welch, and with me today are Dave Calhoun, Boeing's president and chief executive officer, and Brian West, Boeing's executive vice president and chief financial officer. As a reminder, you can follow today's broadcast and slide presentation at Boeing.com.

Perhaps most importantly, we instituted much tighter underwriting standards.

As you know part of the challenge, we're dealing with our legacy contracts that we need to get out from under <unk>.

Rest assured we haven't signed any fixed price development contracts nor intend to.

These moves are all fundamental to accelerating the recovery by the 'twenty five 'twenty six time frame.

We have detailed metrics and milestones to evaluate our performance and progress across the three areas that we've previously highlighted.

First we have a solid core business, representing about 60% of our revenue that performed in the mid to high single digit margin range.

Matt Welch: As always, detailed financial information is included in today's press release. Furthermore, projections, estimates and goals included in today's discussion involve risks, including those described in our FCC filings and in the forward-looking statement disclaimer at the end of the web presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of certain non-gap measures.

The demand for these products is strong in particular volume for our missile and weapons products as well as the Apache are very robust given the current threat environment and.

And we need to keep executing competing and growing these offerings.

And then we have the 25% of the portfolio representing specific fighter and satellite programs that had negatively impacted margins in the past several quarters.

In these areas, we took on fixed price production contracts and a pre pandemic environment with real technical innovation that we're working our way through.

Dave Calhoun: Now, I would turn the call over to Dave Calhoun. Thank you, Matt, and thanks to all for joining us this morning.

Dave Calhoun: Let me start with a comment on the conflict in Israel and Gaza. We were saddened to see the horrific attacks on Israel and the escalating conflict in the region that is resolving in a significant humanitarian emergency. We will continue to monitor the situation. We will focus on the safety of our employees and we will aid those in need. As always, we'll follow the lead of the U.S, government and we'll coordinate closely with government agencies, customers, and suppliers, always with safety, security, and well-being as our top priority.

We fully expect to see recovery in these areas as we improve execution delivering next generation capabilities in rural and a new contracts with stronger underwriting disciplines that more accurately reflect the prevailing economic conditions.

We expect to return to the strong performance levels that we've demonstrated historically on these programs as we move into the 25 26 timeframe.

Lastly, we have our large fixed price development programs that represent the remaining 15% of the portfolio.

And we continue to be focused on maturing and retiring these risks.

Specifically on the KC 46, eight program, we're stabilizing the production system, we've seen signs of progress and improved productivity and as of this month, we have delivered 77 tankers to the customer.

Dave Calhoun: Now, let me turn to the quarter. As you know, we ran into a few challenges over the last several months, but we've demonstrated that we know how to overcome obstacles and it will continue to do just that. We knew 2023 would be a bumpy ride. We have more work to do, but overall, we're making progress in our recovery and we are on track to meet the financial goals we shared for this year and for the 25-26 timeframe.

For the V C twenty-five b, we're now maturing through the build process and the key milestones ahead, our power on in first flight.

Both of which will essentially be behind us as we move through the 'twenty five 'twenty six time frame and represent a significant derisking of the program.

For commercial crew, while it has been a long road, we're preparing to execute a successful crewed flight test next year, and then fulfill operational launch commitments all of which will be completed as we exit 'twenty five 'twenty six.

Dave Calhoun: A timeframe I refer to as stability. As you know, free cash flow has been our primary financial metric through this recovery and based on our performance year-to-date, we still plan to be in the guidance range for the year as well as the $10 billion target by 2025 and 2026.

And <unk>, we just delivered the first aircraft the Air Force this quarter and have begun critical phases of the flight test program.

And MQ25, we'll get through key build and flight test milestones and transition out of the development phase as we move through the 25 26 timeframe.

Dave Calhoun: SpaceX. This is a complex, long cycle business, and driving stability takes time, especially as an entire industry works its way back from the impact of a global pandemic. We expect challenges to come our way, and when they do, we are transparent. We take action, and we move forward. So month to month and quarter to quarter, it can be tough to predict. But tough actions now to ensure that the long-term future is strong.

We remain very confident in the T. Seven a and MQ25 investments that will deliver innovative performance to the customer with a strong long term demand profile.

So for Bds. This recovery is challenging at the moment.

But we believe the actions, we're taking will begin to gain traction and then accelerate.

Fast forward to that 25 26 timeframe.

Dave Calhoun: So with that, I'll highlight a few key updates around the business. Boeing commercial, BCA. In commercial demand continues to be incredibly robust. We've booked about 400 net orders in the quarter, including 150, 737 match tens for Ryanair, 50, 787s for United Airlines, and 39, 787s for Saudi Arabian Airlines. With demand strong, our focus remains on delivering airplanes. We are seeing increased stability and quality performance within our own factories. But we're working to get the supply chain caught up to the same standards.

Fixed price development contracts will be substantially derisked will have a healthy order book underwritten with much better economics, and underwriting disciplines and resilient employee base and supply chain, that's executing at a much higher level.

Moving onto the next slide Boeing Global services.

Bgs had another strong quarter.

They receive $5 billion in orders during the quarter and the backlog sits at $18 billion.

Revenue was $4 $8 billion up nine.

Year over year, primarily unfavorable commercial volume and mix.

Operating margins were a strong 16, 3% in line with our expectations.

Dave Calhoun: Our production system is poised for steady and efficient increases. But we won't push the system too fast, and we'll ensure the supply base is in lockstep with us. On the 737, we're moving through rework on the most recent non-conformance in the AFTH pressure bulkhead. That work slowed production and deliveries down in the course of the quarter. And given our year-to-date total, we now expect 737 deliveries for the year to be in this 375-400 range.

Importantly, our commercial and government business continued to deliver double digit margins.

With that I will turn to the next page and cover cash and debt.

On cash marketable securities we ended the quarter at $13 $4 billion.

Our debt balance remained flat at $52 3 billion.

We had access to a $10 billion of revolving credit facilities at the end of the quarter all of which was undrawn.

Our liquidity position is strong.

Investment grade credit rating continues to be a priority and we're deploying capital in line with the priorities that we've shared investment business and pay down debt through strong cash flow generation.

Dave Calhoun: While a setback will regain our momentum as we progress through the issue, we are keeping our suppliers hot according to the master schedule. We plan to complete the production transition to 38 per month by the end of the year, and still plan to reach the key rate of 50 per month by that 25 and 26 timeframe. Important to note, with respect to our supply chain, delivery shortfalls have been driven by non-conformances, not actual supply chain constraints.

And flipping to the last page on our outlook.

The overall financial outlook for 2023 is unchanged from what we previously shared.

Including $35 billion of free cash flow generation, although the updated 737 deliveries now point more towards the low end of the free cash flow range.

We also expect R&D to come in slightly above our original guide tied to the higher Triple seven X investments that I touched on earlier.

Dave Calhoun: On the 787, the program is demonstrating improved stability. We're now transitioning production from 4 to 5 per month and expect to meet our delivery range of 70 to 80 for the year. And longer term, we're on track for the rate step up to 10 per month by 25 and 26. To ensure our broader recovery and return to more normal margins, the key focus continues to be on liquidating our 787 and 737 inventory so that we can eliminate those shadow factories and focus our resources on the production floor, all of our resources.

Stepping back to address the state of the market.

Commercial demand remains strong across our key programs and services.

Global passenger traffic was up nearly 30% year on year in August and is at 96% of pre pandemic levels.

109% domestic and 89% international.

Cargo remains healthy and August was the first month with annual cargo growth since early 2022.

Defense demand is also robust in FY 'twenty for budget continues to be in line with our expectations.

Our portfolio and capabilities are well positioned to support the needs of the nation and of our allies.

Dave Calhoun: Non-conformance costs are exponentially higher on all of those finished airplanes. We still plan to deliver most if not all of the inventory by the end of next year, which will set us on a strong path for 25 and 26.

With demand strong we still find ourselves in a supply constrained environment and our focus continues to be on execution, both within our factories and the supply chain as we steadily increased production.

We're squarely focused on a meaningful step up in operating performance, including deliveries revenue margins and cash flow all of which we expect to improve as we finish out the year on.

Dave Calhoun: Chris, with respect to China, we are encouraged by recent signs of progress and continue to work closely with our customers on the timing of returning to delivery. As I mentioned, supply chain performance will be a key enabler. As spirit aerospace systems brings in new leadership, we're looking forward to working with Pat. Pat Shanahan is known by the Boeing company. We have great respect for his abilities on the shop floor and we're pleased to have recently established a mutually beneficial agreement that will enhance the ability of our production system and help us deliver on our customer commitments, a true win-win.

On <unk>, specifically, we expect BCA margins to improve sequentially, but remained negative more in line with <unk>.

And we're still not anticipating much in terms of Bds profitability.

On the tax expense side, we still expect full year tax expense of approximately $250 million.

As we look into early 2024, we see a number of key milestones that give us confidence and building momentum across the business.

737 factory should be recovered from the current nine conformance and will be stabilizing production at 38 per month with step ups as we move to 50 per month by 'twenty five 'twenty six.

Dave Calhoun: Lastly, on the development side, we're progressing across our commercial programs and our timelines are unchanged on the 737-7 and the 10 and the 777X and 777-8 freighter. A reminder, as always, the FAA will ultimately control the timing.

707 will be stabilizing production at five per month with a focus on stepping up the 10 per month by 'twenty five 'twenty six.

We'll be further along in our inventory unwind with better line of sight to the elimination of the 737 and 787 dual factories keep in mind that correcting nonconformance is get exponentially easier. When this inventory has been delivered to our customers.

Dave Calhoun: Boeing Defense Systems, BDS. In defense and space, we still have more work to improve operating performance. Results of this quarter were impacted by higher estimated costs on the VC-25B program. We are maturing through this build process, incorporating engineering changes to better support the installation process, and we resolved important supplier negotiations over the course of the quarter. I'll note that none of these items will impact the performance and capability of the end product.

Bds will be further along in the recovery as I described earlier.

<unk> will still be generating mid teen margins executing on its high cash conversion capital efficient disciplined growth model and all of this will underwrite our continued strong liquidity position and enable us to further delever the balance sheet early next year.

Dave Calhoun: The increase estimates reflect a process by which we build the airplanes, and in a fixed priced environment, any unplanned hurdles can introduce unrecoverable costs. At the end of the day, we have two airplanes to build. We're getting past these hurdles that are committed to delivering two exceptional airplanes for our customer. Separately, as you saw, we're also expecting higher costs on a satellite program as we build out the constellation and meet our lifecycle commitments for our customer.

With that back over to Dave for closing comments.

Yes, Thanks, Brian.

In closing I, just wanted to make a couple of comments and double down.

On the resiliency of our recovery.

We've had no shortage of challenges this year, you all know that confer.

Conformance items development hurdles.

External challenges within the supply chain and even logistics routes.

These are not uncommon in our industry.

I've heard from a few of you wondering if we've lost a step in this recovery.

Dave Calhoun: We're working on real innovation and advanced capabilities in this space and see real potential market as we deliver against this commitment. More broadly across BDS, we're stabilizing operations and taking comprehensive actions to improve performance, including lean initiatives, contracting disciplines, factory improvements, engineering investments, and more. We're seeing some early signs of progress, but financial improvement at BDS' lower volumes takes time. Recovery in BDS is slower than we'd like, slower than I'd like, but we're confident in the future, and our path in normalizing BDS margin performance by that 25 and 26 timeframe is intact.

You might not be surprised to hear that I view it is exactly the opposite.

Over the last several years, we've added rigor around our quality processes.

We've worked hard to instill a culture of speaking up and transparently, bringing forward any issue no matter. The size. So that we can get things right for a bright future.

As a result, we're finding items that we need to resolve.

They are not newly created defects in the system instead, thanks to the culture. We're building we identified items from the past. So we now have the rigor and the focus to fix.

Once and for all.

Our shadow factories will be shut down.

So this process of transparency and change can be difficult in the moment.

Dave Calhoun: The confidence is due in part to key milestones we're starting to hit and the strong demand we're seeing. For example, we delivered the first T7A to the U.S. Air Force this quarter. We also captured a key award from the U.S. Army for 21 Apache helicopters. Additionally, we continue to invest and position ourselves for significant opportunities in proprietary programs. BGS. The backlog at BDS is $58 billion, and nearly 30% of that is outside the United States. We're proud of the role our products play in protecting global security and national defense. The band is strong, we're confident in the business, and we will continue to improve operational performance to more normalized levels.

But I am proud of our team.

I'm confident we'll look back on this time period as when we got things right and we set Boeing on the right course.

We still have work to do but progress is clear and our focus is long term, we're on the right path to restoring our operational and financial strength and we thank you for your patience.

Okay, now, let's turn it over to questions.

Thank you and your question, we clearly Harry can we ask that you not use a sneaker following cell phone or a phone headset. Please use your handset to ask a question.

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Dave Calhoun: Falling global services, BGS. In global services, the team had another strong quarter, both on the commercial and the government side, with improved revenue and earnings relative to the third quarter of 2022. The financials were again driven by strong operating performance, and the team's ability to hit key milestones in capture new business. In the quarter, BGS delivered the 150th 737-800 Boeing converted freighter, received an award from the U.S. Navy for PA trainer upgrades, and signed a digital maintenance agreement with multiple airlines.

A reminder, in the interest of time, we are at.

Asking that you limit yourself to one single part question.

And our first question will come from the line of Doug Hernan.

Bernstein. Please go ahead.

Yes. Good morning, Thank you.

Got it.

Talking about the recovery here when we look at the 737 Max ramp than we had thought you'd be at 38, a month production back in August and you know were looking we were looking forward to a new line that should be up and running and ever it in 2025, which.

It looks to us that we gave you a capacity for well over 60 a month, but.

Now that <unk> 38, a month rate is coming.

Dave Calhoun: Our services team represents Boeing with our customers nearly every minute of every day. The work they do to keep military and commercial fleets flying is best in class and we're one of the performance that they're delivering.

Still to come later this year.

And if I separate the bottlenecks here in the three topics that are engines spirit and everything else.

And the engine severe fine you've got a new leadership and new leadership at Spirit, a new agreement so.

Dave Calhoun: A step back with respect to the market outlook. Looking across all three business units, demand for our products and services continues to be incredibly strong. Our backlog is at 469 billion, including over 5,100 commercial airplanes. Over the next 10 years, the value of the markets we serve across commercial, defense, space, and services is estimated at $10.7 trillion, according to our most recent Boeing market outlook. Our products deliver exceptional capability and strong and growing markets, and our portfolio is well aligned with our customers' needs. The demand is there to support our recovery. It is on us to perform and we will remain disciplined and patient in the process.

This is not just one part, but I guess.

How much is your longer term ramp outlook changed.

Given the spirit issues, you've had this year in <unk>.

If you could take those spirit risks off the table.

You know what bottlenecks are still out there and the everything else category for the Max.

You know and then put it all together and what could this ramp look like if you can avoid quality escapes like the ones. We have seen this year.

Yes, Doug.

That's the money question.

We think we are synced.

Perfectly with the constraints that we know.

You talked about engine.

Constraints.

We have as clear and as transparent a relationship as we could possibly have with GE and CFM teams.

Brian West: Brian, I'll turn it over to you. Thanks Dave, and good morning everyone. Let's go to the next slide and start with total company financial performance. Third quarter revenue was $18.1 billion. That's of 13% year-to-year. Growth was driven by higher commercial volume, primarily on higher 787 deliveries. Core operating margin in the quarter was minus 6%, and the core loss per share was $3.26. Marges and EPS were negatively impacted by unfavorable defense performance, which I'll cover in a moment.

The rates that we have outlined in our guidance reflect those constraints. We all could go much higher much faster if it were strictly a demand question, but we have to we have to listen hard to those constraints. So we are there on spirit, we really do believe that.

The commercial agreement that can have Brian make a comment on he was in the center of that negotiation the commercial agreement.

It gives them the resources and the breathing room, they need to get a head of our.

Brian West: Lower 737 deliveries, they were in line with expectations set last month, and expected abnormal costs appeared expenses. Free cash flow was a usage of $310 million in the quarter. This reflects the lower 737 deliveries and in line with our expectations.

Rate forecast.

And maybe even more importantly.

I think the selection of Pat at exactly this moment in time.

Get them really focused on factory performance.

Brian West: With that, I'll turn to the next page and cover Boeing commercial airplanes. VCA booked 398 net orders in the quarter, including 150 max-10s Orion Air, 587s for United, and 3987s for Saudi Arabian Airlines. VCA now has over 5,100 airplanes in the backlog value at $392 billion. VCA delivered 105 airplanes in the quarter and revenue was $7.9 billion, that's up 25% year-to-year driven by the higher 787 deliveries. Operating margin was minus 8.6%.

I'm quite optimistic and quite pleased with.

We've had.

Just in the last 30 days as many interactions with Pat as we've had over the last year, even though we've had more than 100 people embedded.

At spirit.

So all the signs are good there I feel like we took a major step forward on relieving that particular constraint and as you know that is mostly a <unk>.

Conformance constraint.

But I got to tell you these fuselages Matt.

They have been gone over with a with a microscope and.

In light of what we've experienced here in the last in the last four months.

So all of that said those are you correctly correctly articulated the constraints that we've had to deal with on the all other.

Brian West: We saw the impact of the lower 737 deliveries as well as expected abnormal costs and feared expenses, including higher R&D spending primarily on the triple-7X investment. Now we'll give a little more color on the key programs. On the 737, we delivered 70 airplanes in the quarter, reflecting the impact of the recent supplier to select 9 conformance. Since our early September update, additional areas of the further inspection and rework, which you likely read about.

We had one that is really taken.

<unk> steps and gotten ahead of us.

So I am feeling better about all other than I have in quite a long time, just because there was another one embedded I'm not going to mention names.

So anyway, that's that's in a nutshell.

I am always tempted based on demand to tell you we can do more than 50 and get to 60 and we are physically.

Pass it ties to do it you are correct in that but I can't call. It out until the supply chain constraints can make it and they haven't yet to get to those kinds of numbers, but we have a couple of years to work it and we'll continue to work it.

Brian West: This additional scope impacts units that had already gone through the initial rework and will take us more time to stabilize production and deliveries. We found the issue, understand the rework steps required, and book the non-material financial impact in the quarter. Considering these latest facts, we expect October deliveries to be in line with September, and now expect to deliver between 375 and 400 airplanes for the year. Performance ultimately will be dictated by the pace of the fuselage recovery.

But right now everything we're doing is based on the constraints, we know and that's what we've outlined to the industry and even in these last.

Just several months with the with the non conformance issues that have sort of constrained our delivery.

As we've said many times, we have kept our master schedule intact to get to that 38, we're definitely building inventory in the process and were paying our suppliers. So theyre not theyre not second guessing where we're going to end up and we think we're going to have a little bit of buffer, particularly at the front end in light of what we've just experienced.

Brian West: The quarter ended with approximately 250 max airplanes in inventory, 85 of which are being held for customers in China. We still expect most of the max inventory aircraft to be delivered by the end of 2024, but more are likely to slip into 2025 tied to the fuselage recovery. To support stability, suppliers are continuing with planned rate increases and we're selectively managing inventory levels on certain parts we're proven. We expect to complete the 737 transition to 38 per month by year end and where maintaining plans increased to 50 per month in the 2526 time frame.

And is there any point that we should be looking toward where you might have more clarity on how that whole supply chain is going to come together for this year.

First of all will well definitely update guidance for next year as we get into the early part of next year put these nonconformance is in our rearview mirror once and for all get to a stable rate at 38, and then we're gonna be anxious to build from there as fast as we can we will give guidance based on everything we know early in that year. So.

Brian West: On the 787 program, we had 19 deliveries in the quarter and 50 year to date. We still expect 70 to 80 deliveries this year. We started transitioning production to 5 per month in October and still plan to reach 10 per month in the 2526 time frame. We ended the quarter with 75 airplanes in inventory. Rework is progressing nicely and we still expect most to be delivered by the end of 2024. We booked 244 million of abnormal costs in line with expectations. The total estimate is now $3 billion up a bit and we still expect to be largely done by year end.

Not avoiding it now, but it's best we get these things in our rearview mirror and the good news is we really do have these in a box with respect to the scope of work Thats required and now it's just executing against it.

Our teams have done a pretty good job on that.

Okay. Thank you.

Thank you. The next question is from the line of Jason Gursky with Citi. Please go ahead.

Hey, good morning, everybody.

Ryan.

Brian you made some comments in September about expectations for cash flow in 2020.

Four.

In the past two year goals in 2025, and described things back in September as potentially being non linear.

Brian West: Moving to the 777X program, efforts are ongoing. The program timeline is unchanged and we plan to resume production later this year. We booked $180 million of abnormal cost in the quarter in line with expectations. The total estimate is unchanged at a billion dollars and we expect to be done this quarter.

You've had some things that have happened since then.

Including the push out some deliveries into 2024, you've incurred some more charges I think that we're a bit greater than you were expecting in the defense business.

Wondering if you can kind of update us on the current thought on 2024 cash flow kind of the puts and takes that you are expecting what's what are the good guys. What are the bad guys.

Brian West: Importantly, as Dave mentioned, we recently reached an agreement with on commercial terms associated with the 737 and 787 program. News. We believe this agreement is a win-win for both companies and directly promotes our goal to drive stability and support our airline customers.

Relative to 'twenty, two 'twenty three and then.

Maybe just provide us some thoughts on the quantum of cash that you expect to generate at the company 'twenty three 'twenty four 'twenty five 'twenty six given all that's occurred here, particularly in the defense business.

Brian West: Moving out of the next page, Boeing Defense and Space. BTS booked $6 billion in orders during the quarter, and the backlog now stands at $58 billion. Revenue was $5.5 billion, essentially flat year-to-year, and we delivered 28 aircraft.

Here since you laid out those goals at your Investor day last year, whether the quantum of cash that you expect to generate over those four years has changed materially.

Brian West: Operating margin was minus 16.9 percent in the quarter. In early September, we indicated that margins would be around minus 9 percent. The driver being a $482 million charge on the VC-25B fixed-price development program due to higher estimated manufacturing costs related to engineering changes, labor instability, and the resolution of supplier negotiations. As we closed the books at quarter-end, we saw another eight points of margin erosion driven by first, a $315 million loss tied to customer considerations and higher estimated costs to deliver a highly innovative satellite constellation contract that we signed several years ago. In second, we had smaller, less material cost pressures across a couple programs totaling $136 million, primarily driven by the NQ-25 program.

Materially thanks, yes, thanks, Jason.

Let me start with the.

The quantum and the 25% 26 timeframe at $10 billion.

And we continue to have line of sight to hitting that target I think that's most important.

In terms of how we get from where we land in 2023 to that moment.

Going to be some things we got to deal with are not going to be linear, but we've got some things that feel good about in terms of momentum let me just highlight a few.

Of course, we'll be more specific in January on next year's free cash flow guidance, but we expected to be higher.

It's too early to be that specific but it'll be underwritten by higher BCA deliveries both on the $3 seven and the 87, we will.

We've made progress on the inventory wind down that Dave mentioned.

And we're also going to factor in the Triple seven X ramp.

So those things are pretty discrete and we just got a follow our ability to deliver in a stable environment b.

Brian West: These are disappointing results in the quarter and year-to-date. This performance is below our expectations and we acknowledge that we aren't as far along in this recovery as we expected to be at this stage. I'd like to point out that the team is executing a game plan to get BTS back to the high single-digit margins by the 25-26 timeframe. As you can see on the right-hand side of the slide, we're driving lean manufacturing, program management, rigor, and cost productivity consistently across the division.

Bgs will be steady.

Yes, as you point out.

We expect cash flows next year to be better than they are this year, but still like we have dragged mostly factoring in the impact of some of the charges that you you mentioned, we just got to put behind us.

So we'll spell this out in January once we finish our planning cycle and get through 2023, but the most important thing to remember is that quantum in 'twenty five 'twenty six is $10 billion and all of the levers that we have to go from where we land. This year to that point are still very clear to us and underwritten by execution and we know how to.

Brian West: We've invested a new training program to accelerate performance on the factory floor and we've deployed resources at our suppliers to support their recovery. Perhaps most importantly, we instituted much tighter underwriting standards. As you know, part of the challenge we're dealing with are legacy contracts that we need to get out from under. Rest assured, we haven't signed any fixed-price development contracts nor intend to. These moves are all fundamental to accelerate in the recovery by the 25-26 timeframe.

To do that.

Okay, and then Brian just if you don't mind.

The 10 billion quantum out in 'twenty five 'twenty six can you talk about the potential for where we might go from there what are the some of the puts and takes that we might see from us but growth perspective beyond that $10 billion.

Yes, we're still looking forward to that stability as Dave called it in the 'twenty five 'twenty six timeframe and that $10 billion, that's where we're laser like focused anything beyond that is going to be outside of our planning window and hopefully it's going to be underwritten by a very attractive robust demand environment, but let's get there first.

Brian West: We have detailed metrics and milestones to evaluate our performance and progress across the three areas that we've previously highlighted. First, we have a solid core business representing about 60 percent of our revenue that performs in the mid to high single-digit margin range. The demand for these products is strong. In particular, volume for a missile and weapons products as well as the Apache are very robust given the current threat environment. And we need to keep executing, competing, and growing these offerings.

Great. Thanks.

Thank you. The next question is from Peter Ahmed from R. W. Baird. Please go ahead.

Yeah, Thanks, Good morning, Dave and Brian.

Okay.

Brian maybe just to talk about stability there because you just brought it up on.

If we look at just the remaining two months of the year, if youre going to deliver about 15 730 sevens in the <unk>.

Brian West: Then we have the 25 percent of the portfolio representing specific fighter and satellite programs that have negatively impacted margins to the past several quarters. In these areas, we took on fixed-price production contracts and a pre-pendemic environment with real technical innovation that we're working our way through. We fully expect to see recovery in these areas as we improve execution, deliver next-generation capabilities, and roll in a new contract with stronger underwriting disciplines that more accurately reflect the prevailing economic conditions.

In October that kind of implies that you need to deliver high thirty's or high 40 is if youre going to be at the upper end of your range.

The confidence level around that for November December I mean, and if you would.

Update us on when you talked about the.

In September I think about the 75% of the Max aircraft in storage had to be inspected what's the latest there and just lastly is there.

Is the getting to 38 a month.

Later in the year does that impact any of your rate break decisions when youre thinking about 'twenty four thanks again.

Brian West: News. We expect to return to the strong performance levels that we've demonstrated historically on these programs as we move into the 25-26 timeframe. Lastly, we have our large fixed price development programs that represent the remaining 15% of the portfolio. And we continue to be focused on maturing and retiring these risks. Specifically, on the KC-46A program, we're stabilized in the production system. We've seen signs of progress and improved new productivity. And as of this month, we have delivered 77 tankers to the customer.

Yes sure.

So October will be a little bit like as I mentioned with November and December being picked up remember we had.

A number of airplanes that were ready to be delivered prior to this latest spirit.

And now we'd have to work them through the system. We do have good line of sight to finishing the year and the team is laser like focused on meeting this updated set of numbers.

And then of course, we feel good about the free cash flow that'll be dragged along with that in terms of the 75% that is still.

Brian West: For the VC-25B, we're now maturing through the build process and the key milestones ahead are power on and first flight, both of which will essentially be behind us as we move through the 25-26 timeframe and represent a significant de-risking of the program. For commercial crew, while it has been a long road, we're preparing to execute a successful crew flight test next year and then fulfill operational launch commitments, all of which will be completed as we exit 25-26.

The way to think about how we have to touch those inventory.

Inventory airplanes.

As we've mentioned and we know the scope, we know what's got to happen and we're working our way through finishing that work across that cohort of airplanes.

So that has remained unchanged and it's just all the work we have to do in front of us.

Clear line of sight and in terms of the rate breaks largely speaking we've had a master schedule out there for some time with the required rate breaks and of course, we're trying to get our way to 50 per month by the 'twenty five 'twenty six time frame none of that's changed and we're still focused on executing that once we can get to that 38 as we exit this year and then move the supply chain with.

Brian West: On P-7A, we just delivered the first aircraft of the Air Force this quarter and have begun critical phases on the flight test program. On MQ-25, we'll get through key build and flight test milestones and transition out of the development phase as we move through the 25-26 timeframe. We remain very confident in the P-7A and MQ-25 investments that will deliver innovative performance to the customer with a strong long-term demand profile. For BDS, this recovery is challenging at the moment, but we believe the actions we're taking will begin to gain traction and then accelerate.

US considering everything Dave described about how we see the supply chain coordinating going forward.

I appreciate the color thanks, guys.

The next question is from the line of Myles Walton.

Most research. Please go ahead.

Thanks, Good morning.

Brian or Dave.

Looking at the $10 billion target for 'twenty five 'twenty six is there a way that we can have confidence yet that even if bds is nearly neutral.

The rest of the organization can still get to that number and then also if you can just highlight the space satellite constellation charge.

Brian West: Fast forward to that 25-26 timeframe, fixed price development contracts will be substantially de-rest. We'll have a healthy order book underwritten with much better economics and underwriting disciplines and a resilient employee base in supply chain that's executing at a much higher level.

He is a little bit curious when I first hear about it if I'm going to hear about it again, so maybe just lay out.

Trajectory of that program. Thanks.

Sure. So I think the last one first.

Brian West: Moving on to the next slide, Boeing Global Services. BDS had another strong quarter. They received $5 billion in order during the quarter and the backlog sits at $18 billion. Revenue was $4.8 billion, up 9% year-to-year, primarily on favorable commercial volume and mix. Operating margins were a strong 16.3% in line with our expectations. Importantly, our commercial and government businesses continued to deliver double-digit margins.

This is a particular contract with the customer that really isn't in the category of development. When we talked about the fixed price development contract is very different.

We are completing the requirements with the customer we have.

Additional work to do to make this constellation bear robust with new technology, it's very innovative.

And we have to work our way through and we will in short order. If this is not going to one that can be dragged out for a long period of time.

And in terms of.

The $10 billion.

We always built that with some understanding that not every piece was going to go exactly correct that we're going to be some puts and takes and we provide ourselves the room with which we could have certain things not go quite perfectly and in the case of Bds, even though it might be a bit different.

Brian West: With that, we'll turn to the next page and cover cash and debt. On cash marketable securities, we ended the quarter at $13.4 billion. And on debt, the balance remained flat and $52.3 billion. We had access to $10 billion over evolving credit facilities at the end of the quarter, all of which was undrawn. Our liquidity position is strong. The investment-grade credit rating continues to be a priority. And we're deploying capital in line with the priorities that we've shared. Invest in the business and pay down debt to strong cash flow generation.

We had thought even a year ago, it's still within the quantum of us being able to deliver that $10 billion and we have a lot of confidence that they will be contributing to that $10 billion, maybe not quite as much but theyre going to be positive and of course bgs remains strong BCA, we always get more and more confidence so we still have.

The path to that $10 billion and just reinforce how confident we are in getting being able to get the whole enterprise there.

Brian West: And flipping to the last page on our outlook. The overall financial outlook for 2023 is unchanged from what we've previously shared, including $35 billion of free cash flow generation. Although the updated 737 deliveries now point more toward the low end of the free cash flow range. Bush. We also expect R&D to come in slightly above our original guide, tied to the higher triple-7X investments that I touched on earlier.

Okay. Thank you.

Thank you and the next question is from the line of Sheila.

Jefferies. Please go ahead.

Good morning, Matt.

Thanks, so much and I just wanted to dig into commercial airplanes, and just the operating loss era that million.

Brian I know you've been in the trenches working with suppliers you called out another loss in Q4.

Brian West: Stepping back to address the state of the market, commercial demand remains strong across our key programs and services. Global passenger traffic was up nearly 30% year on year and August, and is at 96% of pre-pedemic levels. 109% domestic and 89% international. Car government is healthy, and August was a first month with annual cargo growth since early 2022. Defense demand is also robust, and the FY-24 budget continues to be in line with our expectations.

As you think about that production rates normalizing.

And can you maybe parse out how much of the losses are linked to concession pricing supply chain constraints and how you expect that to carry.

Yes.

Thanks, Sheila so it's largely the fact that we were negative again in the quarter as all of the spirit impact that we've described in fourth.

Fourth quarter is going to be sequentially, better, but it's still.

Still going to be negative.

Again, as we work our way through this factory disruption and we still have this.

Brian West: Our portfolio and capabilities are well positioned to support the needs of the nation and of our allies. With demand strong, we still find ourselves in a supply constrained environment, and our focus continues to be on execution, both within our factories and the supply chain, as we steadily increase production. We're squarely focused on a meaningful step up and operating performance, including deliveries, revenue, margins, and cash flow, all of which we expect to improve as we finish out the year.

Normal running through the.

The BCA P&L.

I will tell you that in 2024, we expect margins to be positive and that's going to be underwritten by two things primarily BCA is going to be driven by higher volume for sure and remember all of this abnormal will be essentially done which has been a drag on the BCA margins for quite some time so.

We just got to work our way out of that which we will by the end of this year and then work towards executing on the delivery targets for next year and that will get us back into positive territory and then the good news is by 'twenty five 'twenty six we still have a view where they will be double digit margins.

Brian West: On 4Q specifically, we expect BCA margins to improve sequentially but remain negative more in line with 2Q, and we're still not anticipating much in terms of BDS profitability. On the tax expense side, we still expect full-year tax expense of approximately $250 million.

They have been historically and that will be underwritten by this these dual factories that Dave has talked about will be behind us and all of that labor that today is working on inventory airplanes for both the $3 seven and the 87.

Dave Calhoun: As we look into early 2024, we see a number of key milestones that give us confidence in building momentum across the business. The 737 factory should be recovered from the current 9 conformance, and will be stabilizing production at 38 per month with step-ups as we move to 50 per month by 2526. 787 will be stabilizing production at 5 per month, with a focus on stepping up to 10 per month by 2526.

It's going to be applied to these.

Ramps in the rates up to 50, and 10, respectively in the $3 seven and the 87. So all of that still is right in front of us and it all still.

It gives us confidence that we're going to be able to hit those kind of targets and the BCA team is very focused on delivering that.

Okay, great. Thank you.

Dave Calhoun: We'll be further along and our inventory unwind, with better line of sight to the elimination of the 737 and 787 dual factories. Keep in mind that correcting non-conformances gets exponentially easier when this inventory has been delivered to our customers. BDS will be further along in recovery as I described earlier. BGS will still be generating mid-teen margins, executing on its high-cash conversion, capital-efficient, disciplined growth model, and all of this will underwrite our continued strong liquidity position and enable us to further de-loathe the balance sheet early next year.

Thank you. Our next question is from Cai von <unk> from TD Cowen. Please go ahead.

Yes, Thanks, a lot so Brian.

Triple seven X R&D spiked up it looks like total R&D at BCA was up about $150 million sequentially.

Where do those.

Where does the triple seven ex sort of R&D number go moving forward when does it peak when does it come down and also maybe you could update us on the certification status given we're in a CR.

Dave Calhoun: With that, back over the day for closing comments. Yeah, thanks, Brian. In closing, I just want to make a couple of comments and double down on the resiliency of our recovery. We've had no shortage of challenges this year. You all know that conformance items, development hurdles, external challenges within the supply chain, and even logistics routes. These are not uncommon in our industry. I've heard from a few of you wondering if we've lost a step in this recovery.

We're going to make it on Max seven by year end, what about Max 10, what about achieving TIAA on the Triple seven X.

Yes, so let's start with the R&D question.

So overall R&D.

We continue to spend on the dash seven of the Dash 10, and the uptick is as I pointed out and as you mentioned is on the Triple seven X and the Triple seven eight freighter.

Now as we move forward.

That range of three call it three four ish billion.

Billion of R&D.

Could have modestly.

Modestly go up over the next couple of years, but it's not going to do anything to disrupt our free cash flow target and if it goes up a little bit I think that'll be good news because we're investing in programs. So we're not necessarily worried about that at all and it's all within our expectations, both near term and longer term.

Dave Calhoun: You might not be surprised to hear that I view it as exactly the opposite. Johnson. Over the last several years, we've added rigor around our quality processes. We've worked hard to instill a culture of speaking up and transparently bringing forward any issue, no matter the size so that we can get things right for a bright future. As a result, we're finding items that we need to resolve. They're not newly created defects in the system.

Dave Calhoun: Instead, thanks to the culture we're building, we identified items from the past. But we now have the rigor and the focus to fix once and for all. Our shadow factories will be shut down. So this process of transparency and change can be difficult in the moment. But I'm proud of our team. I'm confident we'll look back on this time period as when we got things right and we set going on the right course. We still have work to do, but progress is clear. And our focus is long term. We're on the right path to restoring our operational and financial strength and we thank you for your patience.

And in terms of the certification milestones that we have in front of us as Dave mentioned Theres been no change to either the dash seven the dash 10, or the Triple seven X. We move forward and in particular, the Triple seven X teams hard at work trying to meet that commitment. So theres really nothing to say other than there's a lot of people hard at work, which.

Why are we continuing to invest in those spots.

I always have to add.

Because I don't want to get in a trap like we did.

A long time ago. The FAA makes makes that call, we're going to give them all the flexibility they need we try to interpret it the best we can and that's what we've done.

No that there haven't been any real changes to the airplanes. So we're mostly working design assurance documentation as required by the new legislation back at the end of 2020.

And on the issue of Triple seven.

Ex TIAA when it when do you expect that.

Operator: Okay, now let's turn it over to questions. Thank you in order that your question be clearly heard. We ask that you not use a speaker phone cell phone or phone headset. Please use your hand said to ask a question. If you're on a speaker phone, please be sure your mute function is switched off so your signal can reach our equipment.

I don't think that we've necessarily put a date out on that for obvious reasons. So we will let the teams do the work and we'll let the regulators dictate those specifics and we're just going to follow their lead.

Operator: As a reminder, in the interest of time, we are asking that you limit yourself to one single part question.

Thank you very much.

Thank you and the next question is from Seth Sigman from J P. Morgan. Please go ahead.

Okay. Thanks very much.

Hey, everyone.

Brian with your comment that the 2023 cash flow is going to come in at the low end of the range your expectation for growth in 2024, I guess should we be expecting 2024 to be in.

Doug Harned: And our first question will come from the line of Doug Harned from Bern to Dean. Please go ahead. Yes, good morning. Thank you. Talking about the recovery here when we look at the 737 Max ramp, you know, we had thought you'd be at 38 a month production back in August. And you know, we're looking, we were looking forward to a new line that should be up and running at Everett in 2025, which looks to us that we give you capacity for well over 60 a month.

In the 2023 range when we're in or trying to get a draw a bead on.

Doug Harned: But you know, now that 38 a month rate is coming is still to come later this year. And if I separate the bottleneck here into three topics, sort of engines, spirit and everything else. You know, engines appear fine. You've got a new leadership, a new leadership at spirit and your agreement. So this is not just one part, but I guess, you know, how much has your longer term ramp outlook changed. You know, given the spirit issues you've had this year and, you know, if you could take those spirit risks off the table, you know, what bottlenecks are still out there in the everything else category for the max. You know, and put it all together, you know, what could this ramp look like if you can avoid quality escape like the ones we have seen this year?

On where 2020 for us and then within that the 730 Sevens, sometimes I think it's hard to.

Bridge between production and deliveries if it's if it's 38 am on to exiting the year can we say at least 38 times 12 next year plus some chunk of the inventory that is remaining.

Yes.

Our SaaS, we're just going to wait until January to be able to describe any kind of range for cash flow next year.

We've got to get through our planning cycle going to close the year. So.

Be patient with us, but we will be specific in January the same way we were this year.

Also probably let you know that that would apply to the your question on deliveries of how to think about them.

Delivery is going to be higher next year, we're going to have momentum going into this year all of those details we're going to flush out and share at the beginning of the year and we asked the right time, and we look forward to doing that.

Okay. Thanks very much.

The next question is from Noah <unk> from Goldman Sachs. Please go ahead.

Hey, good morning, everyone.

No.

Dave Calhoun: Yeah, Doug, that's the money question. We think we are synced perfectly with the constraints that we know. You talked about engine constraints. News. We have as clear and as transparent a relationship as we could possibly have with the GE and CFM teams. The rates that we have outlined in our guidance reflect those constraints. We all could go much higher, much faster if it were strictly a demand question, but we have to listen hard to those constraints.

Brian just staying on the 737 pace from here, recognizing youre not going to give a number for next year. It sounds like but if if October similar to September.

Implies November December are decent delivery numbers. So is it the case that the.

After fuselage issue and the incremental inspection of.

Handrail in addition to laser drilled fasteners.

That is kind of behind you as you get to January 1st it's not impacting 2024 737 deliveries and then when you're talking about being at 38 a month.

Often the off the line final assembly versus where the system is as a different number.

Dave Calhoun: So we are there. On Spirit, we really do believe that the commercial agreement, and I can have Brian make a comment on he was in the center of that negotiation, the commercial agreement, gives them the resources in the breathing room they need to get ahead of our rate forecast. And maybe even more importantly, I think the selection of Pat at exactly this moment in time to sort of get them really focused on factory performance.

Is there a wide gap in that to start the year or can we think about a real clean stable 38, a month to start the year.

And your first question the answer is yes for sure.

And in terms of how we think about the rate.

We the system as Dave mentioned has always maintained to be hot because we wanted to make sure that they know that the demand side goes there and we want them to continue to focus on that master schedule.

How exactly as we start the year, we'll be able to count deliveries relative to that 38, what we'll see.

Dave Calhoun: I'm quite optimistic and quite pleased with. We've had just in the last 30 days as many interactions with Pat as we've had over the last year, even though we've had more than 100 people embedded at Spirit. So all the signs are good there. I feel like we took a major step forward on relieving that particular constraint. And as you know, that is mostly a, you know, a conformance constraint. I got to tell you these fuselages, man, they have been going over with a microscope in light of what we've experienced here in the last four months.

But right now job one is to exit get the nonperformance behind us.

Remember, we had about a 30 aircraft growth.

In the second quarter and the third quarter in terms of inventory airplanes. So that's going to be working its way out of the system relatively quickly, which gives us confidence in the November December timeframe, and then as we think about priming. The pump for 38 per month were going to move towards January and beyond and hopefully some pretty good execution.

So we'll have to wait and see exactly how that plays out but the underlying system is going to stay at 38 and as we get through <unk>.

Dave Calhoun: So all that said, those are you correctly, correctly articulated the constraints that we've added deal with on the all other. We had one that has really taken aggressive steps and gotten ahead of us. And so I'm feeling better about all other than I have in quite a long time, just because there was another one embedded. I'm not going to mention names.

Next year, obviously there'll be certain rate ramps that will describe later, but right now we have everything be coordinated.

Across the broad supply chain I think we'll be fine.

Okay, and I guess.

Putting a lot of this together and everybody is trying to figure out.

Where the 24 of free cash is going to land.

Is it is it kind of reasonable to think of 'twenty. Four is just two halves and that some of your hesitation and give me, giving some of those numbers is you just don't know exactly where the year starts is there still some 737 disruption.

Dave Calhoun: So anyway, that's that's it in a nutshell. I am always tempted based on demand to tell you we can do more than 50 and get to 60 and we are physically capacitized to do it. You're correct in that. But I can't call it out until the supply chain constraints can make it and they haven't yet to get to those kinds of numbers. But we have a couple years to work it and we'll continue to work it.

87% five has a different margin than 77 at 10, maybe Bds margins are still negative in the first half, but they are positive in the second half and so.

It is next year's first half free cash flow just still have some of 2020 threes elements lingering in it but that the second half will be kind of run rating into more of what you're stable looks like and maybe second half 'twenty four looks.

Dave Calhoun: But right now, everything we're doing is based on the constraints we know. And that's what we've outlined in the industry. And even in these last just several months with the with the non conformance issues that have sort of constrained our delivery. As we've said many times, we have kept our master schedule intact to get to that 38. We're definitely building inventory in the process and we're paying our supplier. So they're not they're not second guessing where we're going to end up. And we think we're going to have a little bit of buffer, particularly at the front end in light of what we've just experienced.

The numbers look more like second half of 'twenty, two type of free cash flow numbers and we can comfortably we think of that is run rating into your future.

Yes no.

All of that is going to have to be something that we talked about in January right. Now we have to get the non conformance behind us we have to be able to hit this delivery range that we've just described.

Doug Harned: And is there any point that we should be looking toward where you might have more clarity on how that whole supply chain is going to come together for this? Yeah, I first of all, we'll will definitely update guidance for next year as we get into the early part of next year. We're putting these non conformances in a rearview mirror once and for all get to a stable rate at 38. And then we're going to be anxious to build from there as fast as we can.

And we have a lot a lot to do but confidence we'll get there and then will describe the shape of next year at the right time I, just don't want to get too far ahead of ourselves.

And.

I do believe that as I do believe next year will be better and I do believe we will exit next year better how that folds out between halves, you're just going to have to give us a little bit more time as we work our way through our planning cycle and we get to January.

No if I could just maybe add one thing.

Doug Harned: We will give guidance based on everything we know early in that year. So not avoiding it now, but we it's best we get these things in a rearview mirror. And the good news is we really do have these in a box with respect to the scope of work that's required. And now it's just executing against it. And our teams have done a pretty good job on that.

To make sure everybody knows what at least what I'm all focused on.

We're going to exit this year with a little more than a 100 of the return to service airplanes that we had at the end of.

2020.

That is what our shadow factories are focused on in a big way to make sure that we can bleed that down to basically nothing by the end of next year. So the pace at which we believe that down we'll complete that rework deliver all those airplanes.

Matt Welch: Matt. Okay, thank you. Thank you.

Jason Gursky: The next question is from the line of Jason Gursky with Teddy, please go ahead.

Brian West: Good morning, everybody. Brian, you made some comments in September about expectations for cashflow in 2024 in the path to your goals in 2025 and described things back in September as potentially being nonlinear. So, you've had some things that have happened since then, including the, you know, the push out of some deliveries into 2024. You've incurred some more charges. I think that we're a bit greater than you are expecting in the defense business.

Dictates that.

Brian West: I'm wondering if you can kind of update us on the current sought on 2024 cashflow, kind of the puts and takes that you're expecting. What are the good guys? What are the bad guys? Relative to 2023. And then maybe just, you know, provide us some thoughts on, you know, the quantum of cash that you expect to generate at the company 23, 24, 25, 26. Given all that's occurred here, particularly in the defense business, here's since you laid out those goals that your investor day last year, whether the quantum of cash that you expect to generate over those four years has changed materially, thanks.

A lot about that that cash flow it gets better every month, but to pay it's going to be all about the pace at which we can do it and transfer that workforce into the production rate increases. So we need there's a lot to know about that we're going to give you our best shot.

What that guidance looks like but by way of proxy that is a very important achievement for us.

100% focused on it and I know, Brian is and the team at BCA.

Okay. Thanks, so much.

Thank you. Our next question is from David Strauss from Barclays. Please go ahead.

Thanks, Good morning, everyone. Good morning.

Wanted to ask about the supply chain are there any other spot hot spots in the supply chain, where you either had to infuse a meaningful amount of cash like you did with spirit or are in negotiations to do something.

Similar to what you've done with spirit. That's first question and then the second question I guess, a clarifying comment or for Brian on the the BCA margin progression next year. Turning positive is that is that both on a program on a unit basis or would that just be on a program basis.

Brian West: Yeah, thanks Jason. We start with the quantum in the 25, 26 timeframe, it's 10 billion. And we continue to have line of sight to hitting that target. I think that's most important in terms of how we get from where we land in 2023 to that moment. Yep, gonna be some things we got to deal with, not gonna be linear, but we've got some things that feel good about in terms of momentum.

Brian how about I answer the first part of this one I consider the spirit remedy fairly unique in fact totally unique I don't think that's going to have any ramifications anywhere else and there arent any signals that way, but the linkage really is as important.

At spirit becomes stable and we get to our rates rates solve most of the supply chain problems.

Brian West: Let me just highlight a few. Of course, we'll be more specific in January on next year's free-castle guidance, but we expect to be higher. It's too early to be that specific, but it'll be underwritten by higher BCA deliveries, both on the 3.7 and the 8.7. We'll have made progress on the inventory wind-down that Dave mentioned. And we're also going to factor in the triple-7x ramp. So we just got to follow our ability to deliver in a stable environment.

Got to get to those rates so that they can so that they can make the kind of money that they're that they associated with those rates and we get to where we need. So there is a linkage, but it's not a it's not a copycat linkage and there's no sign of that happening.

And in terms of the margins on both unit and program there'll be positive and program. We will have growth. So we look forward to describing that as we get closer to January but both.

Great. Thanks very much.

Brian West: BGS will be steady, BDS, as you point out. We expect cash flow is next year to be better than there this year, but still like we had drag, mostly factoring in the impact of some of the charges that you mentioned, we just got to put behind us. So we'll spell all of this out in January once we finish our planning cycle and get through 2023. But the most important thing to remember is that quantum in 2025-26 is 10 billion. And all the levers that we have to go from where we land this year to that point are still very clear to us and underwritten by execution. And we know how to do that.

Yes.

Thank you and our next question is from Rich Safran from Seaport Research partners. Please go ahead.

Dave Brian Matt Good morning.

I've got two two part tanker related question for you first.

With Lockheed dropping out when do you expect an award and.

What could that do to your overall assessment of program profitability I'm basically assuming here that you would have to redo the accounting on the program second part is.

With deliveries restarting whats being anticipated I mean, how much of a catch up or should we expect in <unk> and is that being factored in your guide.

Brian West: Okay, then Brian, just if you don't mind, the 10 billion quantum out in 2526, can you talk about the potential for where we might go from there? What are some of the puts and takes that we might see from us by growth perspective beyond that 10 billion? Yeah, we're so looking forward to that stability as Dave calls it in the 2526 timeframe and that 10 billion. That's where we're laser-like focused. Anything beyond that is going to be outside of our planning window and hopefully it's going to be good and underwritten by a very attractive robust demand environment.

Well, let me.

Just comment on the tanker.

Brian West: But let's get there first.

I am not surprised.

What we all read with respect to.

Brian West: Good.

Airbus now going on their own.

I will go so.

We shouldnt expect that there is sort of vacate.

Brian West: Great.

I do I do.

Brian West: Thanks.

Mike.

Ultimately does for us and the competition, we are not afraid of competition.

Brian West: Thank you.

Yes.

That next contract matters, a lot we have to we have to.

Peter Arment: The next question is from Peter Arment from our Delta Barrett, please go ahead. Yeah, thanks. Good morning, Dave and Brian. Hey, Brian, maybe just to talk about stability there because you just brought it up on, you know, if we look at just the remaining two months of the year, if you're going to deliver about 15, 7, 3, 7s in October, that kind of implies that you need to deliver high 30s or high 40s if you're going to be at the upper end of your range, just kind of the confidence level around that for November, December.

Ultimately underwrite the cost and get this right as we've committed to you all along.

We're going to stay disciplined on that front.

And no there is not this isn't program accounting its contract accounting. So I don't think we're going to have any any implication associated with lots and an additional contract now I am not the accountant, so I'll ask Brian to collaborate.

Exactly we don't see that changing we'll just add the volume like we do with any kind of extension and in terms of your question in the fourth quarter of course, any kind of deliveries and cash flow are going to be factored into our look for the quarter and going forward. So that's all baked in.

Peter Arment: I mean, and if you could update this on, you know, when you talked about the in September, I think about the 75% of the max aircraft and storage had to be inspected. What's the latest there? And just lastly, is there, is the getting to 38 a month later in the year? Does that impact any of your rate break decisions when you're thinking about 24? Thanks again.

Thanks, a lot.

Hey, Louis and that concludes our call. This morning I appreciate everybody joining thank you again.

You.

Thanks.

Dave Calhoun: Yeah, sure. So October will be a little bit like, as I mentioned, with November and December being picked up. Remember, we had a number of airplanes that were ready to be delivered prior to this latest SPIR NOE. And now we have to work them through the system. We do have good lot of sight to finish in the year. And the team is laser-like focused on meeting this updated set of numbers. And then, of course, we feel good about the free castle that will be dragged along with that.

Thank you and that completes the Boeing company's third quarter 2020 earnings conference call. Thank you all for joining and you.

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Dave Calhoun: In terms of the 75%, that is still the way to think about how we have to touch those inventory airplanes. As we've mentioned, we know the scope. We know what's got to happen. And we're working our way through finishing that work across that cohort of airplanes. So that has remained unchanged. And it's just quite a lot of time. We've had a master schedule out there for some time with the required rate breaks.

Dave Calhoun: Of course, we're trying to get our way to 50 per month by the 25.26 timeframe. None of that's changed. And we're still focused on executing that once we can get to that 38 as we exit this year and then move the supply chain with us, considering everything Dave described about how we see the supply chain coordinating going forward.

Peter Arment: Appreciate the color. Nice, guys.

Myles Walton: The next question is in the line of miles, what confirmed most research? Please go ahead. Thanks, good morning.

Brian West: Brian or Dave, looking at the $10 billion target for 25.26, is there a way that we can have confidence yet that even if BDS is nearly neutral, that the rest of the organization can still get to that number? And then also, if you can just highlight the space satellite constellation charge, I'm always a little bit curious when I first hear about it. If I'm going to hear about it again, maybe just lay out the trajectory of that program.

Brian West: Thanks. Sure. So I think the last one first. This is a particular contract with the customer that really isn't in the category of development. When we talk about the fixed price development contract, it's very different. We are completing the requirements for the customer. We have additional work to do to make this constellation very robust with new technology. It's very innovative. And we have to work our way through and we will in short order.

Brian West: This is not going to be a dragout for a long period of time. And in terms of the $10 billion, you know, we always built that with some understanding that not every piece was going to go exactly correct. There were going to be some put and takes and we provide ourselves the room with which we could have certain things not go quite perfectly. In the case of BDS, even though it might be a bit different than we had thought even a year ago, it's still within the quantum of us being able to deliver that $10 billion.

Brian West: And we have a lot of confidence that they will be contributing to that $10 billion. Maybe not quite as much, but they're going to be positive. And of course, BDS remains strong, BCA. We always get more and more confidence. So we still have a path to that $10 billion and just reinforce how confident we are and be able to get the whole enterprise there. Okay. Thank you.

Sheila Kahyaoglu: And the next question is from the line of Sheila Kahyaoglu from Jeff Rees. Please go ahead. Good morning, Dave, Brian, and Matt. Thanks so much. And I just wanted to dig into commercial airplanes and just the operating loss there of 600 million. Brian, I know you've been in the trenches working with suppliers. You called out another loss in Q4.

Brian West: The media, as you think about the production rates normalizing, you know, can you maybe parse out how much of the loss is early into concessions, pricing, supply chain constraints, and how you expect that to turn? Yeah, thanks, Sheila. So it's largely the fact that we were negative again in the quarter is all the spirit impact that we've described. And you know, fourth quarter is going to be sequentially better, but it's still going to be negative.

Brian West: And that's again, as we work our way through this factory disruption and we still have this abnormal running through the BCAPNL. I will tell you that in 2024 we expect margins to be positive. And that's going to be underwritten by two things primarily BCA. It's going to be driven by higher volume for sure. And remember, all this abnormal will be essentially done, which has been a drag on the BCA margins for quite some time.

Brian West: So we just got to work our way out of that, which we will by the end of this year, and then work towards executing on the delivery targets for next year. And that will get back as back at a positive territory. And then the good news is by 2526. We still have a view where they will be double digit margins as they have been historically. And that will be underwritten by this.

Brian West: These dual factories that Dave's talked about will be behind us. And all that labor that today is working on inventory airplanes for both the three seven and the eight seven is going to go be applied to these ramps in the rates up to 50 and 10 respectively and the three seven and the eight seven. So all that still is right in front of us and it all still give us confidence that we're going to be able to hit those kind of targets. And the BCA team is very focused on delivering that. Okay. Great. Thank you.

Cai Rumohr: Our next question is from Kaiva and Rumor from TD Cullen. Please go ahead. Yes. Thanks a lot. So Brian, triple seven X R&D spiked up. It looks like total R&D at BCA was up about 150 million sequentially. Where does the triple seven X sort of R&D number go moving forward? When does it peak? When does it come down? And also maybe you could update us on the certification status given we're in a CR. Are we going to make it on max seven by year? And what about max 10? What about achieving TIA on the triple seven X? Yes.

Brian West: So let's start with the R&D question. So overall R&D, we continue to spend on the dash seven to the dash 10 and the uptick is as I pointed out and as you mentioned on the triple seven X and the triple seven eight freighter. Now as we move forward, that range of three called three four-ish billion of R&D, that's could have modestly go up over the next couple of years, but it's not going to do anything to disrupt our free cash flow target.

Brian West: And if it goes up a little bit, I think that'll be good news because we're investing in programs. So we're not necessarily worried about that at all and it's all within our expectations both near term and longer term. And in terms of the certification milestones that we have in front of us, as Dave mentioned, there's been no change to either the dash seven, the dash 10 or the triple seven X. We move forward and particularly the triple seven X seems hard at work at trying to meet that commitment.

Brian West: So there's really nothing to say other than there's a lot of people hard at work, which is why we continue to invest in those spots. House. I always have to add, because I don't want to get the trap like we did a long time ago. The FAA makes that call, and we're going to give them all the flexibility they need. We try to interpret it the best we can, and that's what we've done.

Brian West: Know that there haven't been any real changes to the airplane. So we are mostly working design insurance documentation as required by the new legislation back at the end of 2020. And on the issue of Cripple 7X TIA, when do you expect that? You know, I don't think that we've necessarily put a date out on that for obvious reason. So we'll let the teams do the work, and we'll let the regulators dictate those specifics, and we're just going to follow their lead. Thank you very much.

Seth Seifman: Thank you, and the next question is from Saifman from J.P. Morgan. Please go ahead. Okay. Thanks very much. Good morning, everyone. Brian, with your comment that the 2023 cashflow is going to come in at the low end of the range, you know, your expectation for growth in 2024. I guess, should we be expecting 2024 to be, you know, in the 2023 range, when we're, you know, trying to get a draw beat on, on where 2024 is.

Seth Seifman: And then, you know, within that, the 737s, sometimes I think it's hard to, you know, bridge between production and deliveries. If it's 38 a month to exiting the year, can we say at least, you know, 38 times 12 next year, plus some chunk of the inventory that's remaining?

Brian West: Yeah, so Saif, we're just going to wait until January to be able to describe any kind of range for cashflow next year. We've got to get through our planning cycle. We're going to close the year, so just be patient with us, but we will be specific in January the same way we were this year. And I'll also probably let you know that that would apply to the year question on deliveries. I had to think about them.

Brian West: You know, deliver is going to be higher next year. We're going to have momentum going out of this year. All of those details, we're going to flesh out and share as beginning of the year. And we have the right time, and we look forward to doing that. Okay, thanks very much.

Noah Poponak: The next question is from Noah Papine, from Goldman Sachs. Please go ahead. Hey, good morning, everyone. Brian, just staying on the 737 pace from here, recognizing you're not going to give a number for next year, it sounds like. But if October's similar to September, it implies November, December are decent delivery numbers. So is it the case that the aft fuselage issue and the incremental inspection of hand drilled in addition to laser drilled fasteners?

Noah Poponak: That that is kind of behind you as you get to January 1st, it's not impacting 2024 or 737 deliveries. And then when you're talking about being at 38 a month, you know, often the the off the line final assembly versus where the system is is a different number. Is there a wide gap in that to start the year, or can we think about a real clean stable 38 a month to start the year?

Noah Poponak: and your first question, the answer is yes for sure. And in terms of how we think about the rate, you know, we, the system, as Dave mentioned, has always maintained to be hot because we want to make sure that they know that the demand cycle is there, and we want them to continue focusing that master schedule. How exactly, as we start the year, we'll be able to count deliveries relative at 38, we'll see.

Noah Poponak: But right now, job one is to exit, you know, get the nine reports behind us. Remember we had about a 30 aircraft growth between the second quarter and the third quarter in terms of inventory airplane. So that's going to be working its way out of the system relatively quickly, which gives confidence in the November, December timeframe. And then as we think about priming the pump for 38 per month, we're going to move to the reports January and beyond, and hopefully some pretty good execution.

Noah Poponak: So we'll have to wait and see exactly how that plays out. But the underlying system is going to stay at 38. And as we get through next year, obviously, there'll be certain rate ramps that we'll describe later. But right now, if we have everything be coordinated across the broad supply chain, I think we'll be fine. OK, and I guess putting a lot of this together and everybody trying to figure out, you know, where the 24 free cash is going to land.

Noah Poponak: Is it kind of reasonable to think of 24 as just two halves? And that some of your hesitation in giving some of those numbers is you just don't know exactly where the year starts. Is there still some 737 disruption? You know, 787 at five is a different margin than 787 at 10. Maybe BDS margins are still negative in the first half, but they're positive in the second half. And so, you know, this next year's first half free cash flow just still have some of 2023 elements lingering in it.

Noah Poponak: But that the second half will be kind of run rating into more of what your stable looks like. And maybe second half 24 looks. You know, the numbers look more like second half at 22 type of free cash flow numbers. And we can comfortably think of that as run rating into your future. Yeah, no, all that is going to have to be something we talk about in January right now. We have to get the non conformance behind us.

Noah Poponak: We have to be able to hit this delivery range that we've just described. And we have a lot a lot to do, but comments will get there. And then we'll describe the shape of next year at the right time. I just don't want to get too far ahead of ourselves. And I do believe that as I do believe next year will be better, and I do believe we'll exit next year better.

Noah Poponak: How that fold up between halves, you just going to have to give us a little bit more time as we work our way through our planning cycle and we get to January. No, if I could just maybe add one thing to make sure everybody knows what at least what I'm all focused on. We're going to exit this year with a little more than a hundred of the return to service airplanes that we had at the end of 2020.

Noah Poponak: That is what our shadow factories are focused on in a big way to make sure that we can bleed that down to basically nothing by the end of next year. So the pace at which we bleed that down, we complete that rework, deliver all those airplanes, dictates the, you know, a lot about that cash flow. It gets better every month, but the pay, it's going to be all about the pace at which we can do it and transfer that workforce into the production rate increases.

Noah Poponak: So we need, there's a lot to know about that. We're going to give you our best shot at what that guidance looks like. But by way of proxy, that is a very important achievement for us and I'm 100% focused on it and I know Brian is in the team at BCA. Okay, thanks so much. Yeah.

David Strauss: Thank you for our next question is from David Strauss from Barclays. Please go ahead. Thanks more and everyone.

David Strauss: Good morning. One to ask about, you know, the supply chain. Are there any other spots, spots in the supply chain where you've either had to infuse, you know, a meaningful amount of cash like you did with spirit or are in negotiations to do something similar to what you've done with spirit. That's the first question. Then the second question, I guess a clarifying comment for Brian on the the BTA margin progression next year turning positive is that is that both on a program on a unit basis or would that just be on a program basis.

David Strauss: Thanks Brian. How about I answer the first part of this one. I consider this spirit remedy fairly unique in fact totally unique. I don't think that's going to have any ramifications anywhere else and there aren't any signals that way. But the the linkage really is is important as spirit becomes stable and we get to our rates rates solve most of those supply chains problems. We got to get to those rates so that they can so that they can make the kind of money that they're that they associate with those rates and we get to where we need so there is a linkage but it's not a it's not a copycat linkage and there's no sign of that happening.

David Strauss: And in terms of the margins on both unit and program, they'll be positive and program will have growth. So we look forward to describing that as we get closer to January. But both. Right. Thanks very much. Thank you.

David Strauss: And our next question is from would that run from support research partners please go ahead.

Dave Calhoun: Dave Brian that good morning. I got a two part tanker related question for your first with with Lockheed dropping out when do you expect an award and what could that do to your overall assessment of program profitability. I'm basically assuming here that you would have to redo the accounting on the program. Second part is with deliveries restarting what's being anticipated. I mean how much of a catch up should we expect in 4K when is that being factored in your guide.

Dave Calhoun: Let me just comment on the tanker. I'm not surprised at what we all read with respect to Airbus now going on their own. They will go. So I we shouldn't expect them to sort of vacate. I do I do like what it ultimately does for us in the competition. We are not afraid of competition. And yes, that next contract matters a lot. We have to we have to ultimately underwrite the cost and get this right.

Dave Calhoun: And as we've committed to you all along, we're going to stay disciplined on that front. And no, there's not this isn't program accounting. It's contract accounting. So I don't think we're going to have any any implication associated with lots and an additional contract.

Brian West: Now I'm not the accountant. So I'll ask Brian to corroborate. Yeah, no exactly. We don't see that changing. We'll just add the volume like we do with any kind of extension. And in terms of your question, the fourth quarter, of course, any kind of deliveries and cashflow are going to be factored into our look for the quarter and going forward. So that's all in baked in.

Brian West: Thank you. Thanks a lot. Yep.

Operator: Hey, Lois, and that concludes our call this morning. I appreciate everybody joining. Thank you again. Thank you. Thanks. Thank you.

Operator: And that completes the Boeing Company third quarter 2023 earnings conference call. Thank you all for joining. And you know, disconnect.

Operator: Next.

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