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Boeing Co (BA) SEC Filing 10-Q Quarterly Report for the period ending Thursday, March 31, 2022

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Boeing Co

CIK: 12927 Ticker: BA
Exhibit 99.1
pressreleaseheadera.jpg
Boeing Reports First-Quarter Results
First Quarter 2022
737 production and deliveries continue to increase; submitted 787 certification plan to the FAA
Launched 777-8 Freighter; now anticipate first 777-9 delivery in 2025
Recorded charges on fixed-price defense development programs as well as for impacts of the war in Ukraine
Operating cash flow of ($3.2) billion; continue to expect positive cash flow for 2022
Revenue of $14.0 billion; GAAP loss per share of ($2.06) and core (non-GAAP)* loss per share of ($2.75)
Total backlog of $371 billion; including nearly 4,200 commercial airplanes
Table 1. Summary Financial Results
First Quarter
(Dollars in Millions, except per share data)20222021Change
Revenues$13,991 $15,217 (8)%
GAAP
Loss From Operations($1,169)($83)NM
Operating Margin(8.4)%(0.5)%NM
Net Loss($1,242)($561)NM
Loss Per Share($2.06)($0.92)NM
Operating Cash Flow($3,216)($3,387)NM
Non-GAAP*
Core Operating Loss($1,452)($353)NM
Core Operating Margin(10.4)%(2.3)%NM
Core Loss Per Share($2.75)($1.53)NM
*Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures."    
    CHICAGO, April 27, 2022
– The Boeing Company [NYSE: BA] reported first-quarter revenue of $14.0 billion, driven by lower defense volume and charges on fixed-price defense development programs, partially offset by commercial services volume. GAAP loss per share of ($2.06) and core loss per share (non-GAAP)* of ($2.75) also reflect $212 million of pre-tax charges for impacts of the war in Ukraine (Table 1). Boeing recorded operating cash flow of ($3.2) billion.
    “While the first quarter of 2022 brought new challenges for our world, industry and business, I am proud of our team and the steady progress we’re making toward our key commitments,” said Dave Calhoun, Boeing president and chief executive officer. “We increased 737 MAX production and deliveries and made important progress on the 787 by submitting our certification plan to the FAA. Despite the pressures on our defense and commercial development programs, we remain on track to generate positive cash flow for 2022, and we’re focused on our performance as we work through certification requirements and mature several key programs to production. Leading with safety and quality, we’re taking the right actions to drive stability throughout our operations, deliver on our commitments to customers and position Boeing for a sustainable future.”



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The following information was filed by Boeing Co (BA) on Wednesday, April 27, 2022 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                      
Commission file number 1-442
 THE BOEING COMPANY
(Exact name of registrant as specified in its charter)
Delaware 91-0425694
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer Identification No.)
100 N. Riverside Plaza,Chicago,IL 60606-1596
(Address of principal executive offices) (Zip Code)
(312)544-2000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405/ of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated FilerAccelerated filer
Non-accelerated filerSmaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $5.00 Par ValueBANew York Stock Exchange
As of April 20, 2022, there were 591,635,833 shares of common stock, $5.00 par value, issued and outstanding.



THE BOEING COMPANY
FORM 10-Q
For the Quarter Ended March 31, 2022
INDEX
Part I. Financial Information (Unaudited)Page
Item 1.
Item 2.
Item 3.
Item 4.
Part II. Other Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


Part I. Financial Information
Item 1. Financial Statements

The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in millions, except per share data)Three months ended March 31
20222021
Sales of products$11,427 $12,518 
Sales of services2,564 2,699 
Total revenues13,991 15,217 
Cost of products(11,412)(11,632)
Cost of services(2,226)(2,167)
Boeing Capital interest expense(7)(9)
Total costs and expenses(13,645)(13,808)
346 1,409 
(Loss)/income from operating investments, net(20)37 
General and administrative expense(863)(1,032)
Research and development expense, net(633)(499)
Gain on dispositions, net1 
Loss from operations(1,169)(83)
Other income, net181 190 
Interest and debt expense(630)(679)
Loss before income taxes(1,618)(572)
Income tax benefit376 11 
Net loss(1,242)(561)
Less: net loss attributable to noncontrolling interest(23)(24)
Net loss attributable to Boeing Shareholders($1,219)($537)
Basic loss per share($2.06)($0.92)
Diluted loss per share($2.06)($0.92)
Weighted average diluted shares (millions)591.7585.4
See Notes to the Condensed Consolidated Financial Statements.
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The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(Dollars in millions)Three months ended March 31
2022 2021 
Net loss($1,242)($561)
Other comprehensive income, net of tax:
Currency translation adjustments24 (36)
Unrealized gain on derivative instruments:
Unrealized gain arising during period, net of tax of ($28) and ($3)
94 11 
Reclassification adjustment for losses/(gains) included in net loss, net of tax of ($9) and $0
35 (2)
Total unrealized gain on derivative instruments, net of tax129 
Defined benefit pension plans and other postretirement benefits:
Amortization of prior service credits included in net periodic pension cost, net of tax of $6 and $6
(23)(23)
Amortization of actuarial losses included in net periodic pension cost, net of tax of ($40) and ($65)
159 228 
Settlements included in net loss, net of tax of $0 and $0
Pension and postretirement cost related to our equity method investments, net of tax of $0 and ($1)
Total defined benefit pension plans and other postretirement benefits, net of tax136 208 
Other comprehensive income, net of tax289 181 
Comprehensive loss, net of tax(953)(380)
Less: Comprehensive loss related to noncontrolling interest(23)(24)
Comprehensive loss attributable to Boeing Shareholders, net of tax($930)($356)
See Notes to the Condensed Consolidated Financial Statements.
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The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Financial Position
(Unaudited)
(Dollars in millions, except per share data)March 31
2022
December 31
2021
Assets
Cash and cash equivalents$7,409 $8,052 
Short-term and other investments4,873 8,192 
Accounts receivable, net2,407 2,641 
Unbilled receivables, net8,991 8,620 
Current portion of customer financing, net157 117 
Inventories79,819 78,823 
Other current assets, net2,356 2,221 
Total current assets106,012 108,666 
Customer financing, net1,580 1,695 
Property, plant and equipment, net of accumulated depreciation of $20,759 and $20,538
10,755 10,918 
Goodwill8,065 8,068 
Acquired intangible assets, net2,492 2,562 
Deferred income taxes91 77 
Investments992 975 
Other assets, net of accumulated amortization of $1,024 and $975
5,814 5,591 
Total assets$135,801 $138,552 
Liabilities and equity
Accounts payable$8,779 $9,261 
Accrued liabilities17,864 18,455 
Advances and progress billings52,458 52,980 
Short-term debt and current portion of long-term debt2,591 1,296 
Total current liabilities81,692 81,992 
Deferred income taxes158 218 
Accrued retiree health care3,471 3,528 
Accrued pension plan liability, net8,719 9,104 
Other long-term liabilities1,879 1,750 
Long-term debt55,150 56,806 
Total liabilities151,069 153,398 
Shareholders’ equity:
Common stock, par value $5.00 — 1,200,000,000 shares authorized; 1,012,261,159 shares issued
5,061 5,061 
Additional paid-in capital9,295 9,052 
Treasury stock, at cost - 420,886,484 and 423,343,707 shares
(51,573)(51,861)
Retained earnings33,189 34,408 
Accumulated other comprehensive loss(11,370)(11,659)
Total shareholders’ deficit(15,398)(14,999)
Noncontrolling interests130 153 
Total equity(15,268)(14,846)
Total liabilities and equity$135,801 $138,552 
See Notes to the Condensed Consolidated Financial Statements.
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The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in millions)Three months ended March 31
20222021
Cash flows – operating activities:
Net loss($1,242)($561)
Adjustments to reconcile net loss to net cash used by operating activities:
Non-cash items – 
Share-based plans expense203 321 
Treasury shares issued for 401(k) contribution329 306 
Depreciation and amortization486 536 
Investment/asset impairment charges, net72 16 
Customer financing valuation adjustments48 
Gain on dispositions, net(1)(2)
Other charges and credits, net175 35 
Changes in assets and liabilities – 
Accounts receivable237 (394)
Unbilled receivables(356)(790)
Advances and progress billings(522)421 
Inventories(1,203)(680)
Other current assets140 153 
Accounts payable(369)(819)
Accrued liabilities(594)(1,615)
Income taxes receivable, payable and deferred(403)(34)
Other long-term liabilities96 (84)
Pension and other postretirement plans(371)(265)
Customer financing, net18 46 
Other41 23 
Net cash used by operating activities(3,216)(3,387)
Cash flows – investing activities:
Payments to acquire property, plant and equipment(349)(291)
Proceeds from disposals of property, plant and equipment 8 
Contributions to investments(1,732)(9,688)
Proceeds from investments5,037 12,738 
Other1 
Net cash provided by investing activities2,965 2,764 
Cash flows – financing activities:
New borrowings2 9,814 
Debt repayments(396)(9,847)
Stock options exercised30 23 
Employee taxes on certain share-based payment arrangements(32)(38)
Net cash used by financing activities(396)(48)
Effect of exchange rate changes on cash and cash equivalents(3)(18)
Net decrease in cash & cash equivalents, including restricted(650)(689)
Cash & cash equivalents, including restricted, at beginning of year8,104 7,835 
Cash & cash equivalents, including restricted, at end of period7,454 7,146 
Less restricted cash & cash equivalents, included in Investments45 87 
Cash and cash equivalents at end of period$7,409 $7,059 
See Notes to the Condensed Consolidated Financial Statements.
4

The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Equity
For the three months ended March 31, 2022 and 2021
(Unaudited)
Boeing shareholders  
(Dollars in millions, except per share data)Common
Stock
Additional
Paid-In
Capital
Treasury StockRetained
Earnings
Accumulated Other Comprehensive LossNon-
controlling
Interests
Total
Balance at January 1, 2021$5,061 $7,787 ($52,641)$38,610 ($17,133)$241 ($18,075)
Net loss(537)(24)(561)
Other comprehensive income, net of tax of ($63)
181 181 
Share-based compensation321 321 
Treasury shares issued for stock options exercised, net
(16)39 23 
Treasury shares issued for other share-based plans, net
(73)37 (36)
Treasury shares issued for 401(k) contribution136 170 306 
Balance at March 31, 2021$5,061 $8,155 ($52,395)$38,073 ($16,952)$217 ($17,841)
Balance at January 1, 2022$5,061 $9,052 ($51,861)$34,408 ($11,659)$153 ($14,846)
Net loss(1,219)(23)(1,242)
Other comprehensive income, net of tax of ($71)
289 289 
Share-based compensation 203 203 
Treasury shares issued for stock options exercised, net(19)49 30 
Treasury shares issued for other share-based plans, net(67)36 (31)
Treasury shares issued for 401(k) contribution126 203 329 
Balance at March 31, 2022$5,061 $9,295 ($51,573)$33,189 ($11,370)$130 ($15,268)
See Notes to the Condensed Consolidated Financial Statements.



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The Boeing Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Summary of Business Segment Data
(Unaudited)
(Dollars in millions)Three months ended March 31
20222021
Revenues:
Commercial Airplanes$4,161 $4,269 
Defense, Space & Security5,483 7,185 
Global Services4,314 3,749 
Boeing Capital46 60 
Unallocated items, eliminations and other(13)(46)
Total revenues$13,991 $15,217 
Earnings/(loss) from operations:
Commercial Airplanes($859)($856)
Defense, Space & Security(929)405 
Global Services632 441 
Boeing Capital(36)21 
Segment operating (loss)/earnings(1,192)11 
Unallocated items, eliminations and other(260)(364)
FAS/CAS service cost adjustment283 270 
Loss from operations(1,169)(83)
Other income, net181 190 
Interest and debt expense(630)(679)
Loss before income taxes(1,618)(572)
Income tax benefit376 11 
Net loss(1,242)(561)
Less: Net loss attributable to noncontrolling interest(23)(24)
Net loss attributable to Boeing Shareholders($1,219)($537)
This information is an integral part of the Notes to the Condensed Consolidated Financial Statements. See Note 17 for further segment results.
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The Boeing Company and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Dollars in millions, except otherwise stated)
(Unaudited)
Note 1 – Basis of Presentation
The condensed consolidated interim financial statements included in this report have been prepared by management of The Boeing Company (herein referred to as “Boeing”, the “Company”, “we”, “us”, or “our”). In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation are reflected in the interim financial statements. The results of operations for the period ended March 31, 2022 are not necessarily indicative of the operating results for the full year. The interim financial statements should be read in conjunction with the audited Consolidated Financial Statements, including the notes thereto, included in our 2021 Annual Report on Form 10-K.
Liquidity Matters
During the first three months of 2022, net cash used by operating activities was $3.2 billion. Our operating cash flows continue to be impacted by lower commercial airplane deliveries and concessions paid to 737 MAX customers. We expect negative operating cash flows until commercial deliveries ramp up. As a result, our cash and short-term investment balance was $12.3 billion at March 31, 2022, down from $16.2 billion at December 31, 2021, while our debt balance was $57.7 billion at March 31, 2022, down from $58.1 billion at December 31, 2021. Short-term debt and the current portion of long-term debt increased to $2.6 billion at March 31, 2022 from $1.3 billion at December 31, 2021. The current portion of long-term debt includes term notes of $0.9 billion maturing in 2022.
As of March 31, 2022, our unused borrowing capacity on revolving credit agreements is $14.7 billion, unchanged from December 31, 2021. We anticipate that these credit lines will remain undrawn and primarily serve as back-up liquidity to support our general corporate borrowing needs. Our borrowing capacity includes $6.3 billion scheduled to expire in October 2022, of which $3.1 billion has a one-year term out option that allows us to extend the maturity of any borrowings one additional year.
Our short-term and long-term credit ratings remained unchanged during the first quarter of 2022. There is risk for future downgrades.
At March 31, 2022 and December 31, 2021, trade payables included $2.1 billion and $2.3 billion payable to suppliers who have elected to participate in supply chain financing programs. We do not believe that future changes in the availability of supply chain financing will have a significant impact on our liquidity.
We are also working with our customers and supply chain to accelerate receipts and conserve cash. For example, the United States Department of Defense (U.S. DoD) has taken steps to work with its industry partners to increase liquidity in the form of increased progress payment rates and reductions in withholds among other initiatives.
We continue to transform and improve our business processes. These activities are not intended to constrain our capacity but to enable the Company to emerge stronger and be more resilient when the market recovers.
Based on our current best estimates of market demand, planned production rates, timing of cash receipts and expenditures, our ability to successfully implement further actions to improve liquidity, as well as our ability to access additional liquidity, if needed, we believe it is probable that we will be able to fund our operations for the foreseeable future.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We believe
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that the accounting estimates and assumptions are appropriate, however, given the increased uncertainties surrounding the severity and duration of the impacts of the COVID-19 pandemic actual results could differ from those estimates.
Long-term Contracts
Changes in estimated revenues, cost of sales, and the related effect on operating income are recognized using a cumulative catch-up adjustment which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a long-term contract’s percentage-of-completion. When the current estimates of total sales and costs for a long-term contract indicate a loss, a provision for the entire reach-forward loss on the long-term contract is recognized.
Net cumulative catch-up adjustments to prior periods' revenue and earnings, including certain reach-forward losses, across all long-term contracts were as follows:
(In millions - except per share amounts)Three months ended March 31
20222021
(Decrease)/increase to Revenue($612)$7 
Increase to Loss from operations($1,130)($176)
Decrease to Diluted EPS($1.47)($0.29)
Note 2 – Earnings Per Share
Basic and diluted earnings per share are computed using the two-class method, which is an earnings allocation method that determines earnings per share for common shares and participating securities. The undistributed earnings are allocated between common shares and participating securities as if all earnings had been distributed during the period. Participating securities and common shares have equal rights to undistributed earnings.
Basic earnings per share is calculated by taking net earnings, less earnings available to participating securities, divided by the basic weighted average common shares outstanding.
Diluted earnings per share is calculated by taking net earnings, less earnings available to participating securities, divided by the diluted weighted average common shares outstanding.
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The elements used in the computation of basic and diluted earnings per share were as follows:
(In millions - except per share amounts)Three months ended March 31
20222021
Net loss attributable to Boeing Shareholders($1,219)($537)
Less: earnings available to participating securities
Net loss available to common shareholders($1,219)($537)
Basic
Basic weighted average shares outstanding
591.7 585.4 
Less: participating securities(1)
0.3 0.4 
Basic weighted average common shares outstanding
591.4 585.0 
Diluted
Basic weighted average shares outstanding
591.7 585.4 
Dilutive potential common shares(2)
Diluted weighted average shares outstanding
591.7 585.4 
Less: participating securities(1)
0.3 0.4 
Diluted weighted average common shares outstanding
591.4 585.0 
Net loss per share:
Basic
($2.06)($0.92)
Diluted
(2.06)(0.92)
(1)Participating securities include certain instruments in our deferred compensation plan.
(2)Diluted earnings per share includes any dilutive impact of stock options, restricted stock units, performance-based restricted stock units and performance awards.
As a result of incurring a net loss for the three months ended March 31, 2022 and 2021, potential common shares of 3.6 million and 1.7 million were excluded from diluted loss per share because the effect would have been antidilutive. In addition, the following table includes the number of shares that may be dilutive potential common shares in the future. These shares were not included in the computation of diluted loss per share because the effect was either antidilutive or the performance condition was not met.
(Shares in millions)Three months ended March 31
20222021
Performance awards1.6 2.6 
Performance-based restricted stock units0.4 0.7 
Restricted stock units0.4 1.4 
Stock options0.6 0.2 
Note 3 – Income Taxes
Our effective tax rates were 23.2% and 1.9% for the three months ended March 31, 2022 and 2021. The 2022 estimated annual effective tax rate reflects the 21% federal tax rate and an increase to the valuation allowance, which is partially offset by research and development tax credits. The 2021 rate also reflected the 21% federal tax rate which was largely offset by discrete tax expenses recorded in the first quarter of 2021 primarily related to an increase in the valuation allowance.
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As of December 31, 2021, the Company had recorded valuation allowances of $2,423 primarily for certain federal deferred tax assets, as well as for certain federal and state net operating loss and tax credit carryforwards. To measure the valuation allowance, the Company estimated in what year each of its deferred tax assets and liabilities would reverse using systematic and logical methods to estimate the reversal patterns. Based on these methods, deferred tax liabilities are assumed to reverse and generate taxable income over the next 5 to 10 years while deferred tax assets related to pension and other postretirement benefit obligations are assumed to reverse and generate tax deductions over the next 15 to 20 years. The valuation allowance primarily results from not having sufficient income from deferred tax liability reversals in the appropriate future periods to support the realization of deferred tax assets.
Federal income tax audits have been settled for all years prior to 2018. The Internal Revenue Service (IRS) began the 2018-2019 federal tax audit in the first quarter of 2021 and added tax year 2020 to the audit in the fourth quarter of 2021. We are also subject to examination in major state and international jurisdictions for the 2008-2020 tax years. We believe appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years.
Note 4 – Allowances for Losses on Financial Assets
The changes in allowances for expected credit losses for the three months ended March 31, 2022 and 2021 consisted of the following:
Accounts receivable Unbilled receivablesOther current assetsCustomer financingOther assetsTotal
Balance at January 1, 2021($444)($129)($72)($17)($140)($802)
Changes in estimates10 (1)(6)(42)(39)
Write-offs
Balance at March 31, 2021($433)($130)($78)($17)($182)($840)
Balance at January 1, 2022($390)($91)($62)($18)($186)($747)
Changes in estimates(7)15 5 (48)(22)(57)
Write-offs6 6 
Recoveries1 1 
Balance at March 31, 2022($390)($76)($57)($66)($208)($797)
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Note 5 – Inventories
Inventories consisted of the following:
March 31
2022
December 31
2021
Long-term contracts in progress$821 $872 
Commercial aircraft programs69,239 68,106 
Commercial spare parts, used aircraft, general stock materials and other
9,759 9,845 
Total$79,819 $78,823 
Commercial spare parts, used aircraft, general stock materials and other includes capitalized precontract costs of $710 at March 31, 2022 and $648 at December 31, 2021 primarily related to KC-46A Tanker and Commercial Crew. See Note 9.
Commercial Aircraft Programs
The increase in commercial aircraft programs inventory during 2022 reflects a continued buildup of 787 aircraft, as well as growth in 777X inventory. Commercial aircraft programs inventory includes approximately 320 737 MAX aircraft and 115 787 aircraft at March 31, 2022 as compared with 335 737 MAX aircraft and 110 787 aircraft at December 31, 2021.
A number of customers have requested to defer deliveries or to cancel orders. We are currently remarketing certain aircraft and may have to remarket additional aircraft in future periods. If we are unable to successfully remarket the aircraft, determine further production rate reductions are necessary, and/or contract the program accounting quantities, future earnings may be reduced and/or additional reach-forward losses may have to be recorded.
At March 31, 2022 and December 31, 2021, commercial aircraft programs inventory included the following amounts related to the 737 program: deferred production costs of $1,753 and $1,296 and unamortized tooling and other non-recurring costs of $600 and $617. At March 31, 2022, $2,343 of 737 deferred production costs, unamortized tooling and other non-recurring costs are expected to be recovered from units included in the program accounting quantity that have firm orders and $10 is expected to be recovered from units included in the program accounting quantity that represent expected future orders.
At March 31, 2022 and December 31, 2021, commercial aircraft programs inventory included the following amounts related to the 777X program: deferred production costs of $1,091 and $652 and $3,572 and $3,521 of unamortized tooling and other non-recurring costs. In April 2022, we decided to pause production of the 777X-9 during 2022 and 2023. We expect that the production pause will result in abnormal production costs that will be period expensed in future periods and continue until 777X-9 production resumes. The 777X program has near break-even margins at March 31, 2022. The level of profitability on the 777X program will be subject to a number of factors. These factors include continued market uncertainty, the impacts of COVID-19 on our production system as well as impacts on our supply chain and customers, further production rate adjustments for the 777X or other commercial aircraft programs, any contraction of the accounting quantity and potential risks associated with the testing program and the timing of aircraft certification. One or more of these factors could result in additional reach-forward losses on the 777X program in future periods.
During the fourth quarter of 2021, we determined that estimated costs to complete the 787 program plus costs already included in 787 inventory exceeded estimated revenues from the program. The resulting reach-forward loss of $3,460 was recorded as a reduction to deferred production costs. At March 31, 2022 and December 31, 2021, commercial aircraft programs inventory included the following amounts related to the 787 program: deferred production costs of $11,753 and $11,693, $1,861 and $1,907 of supplier advances, and $1,818 and $1,815 of unamortized tooling and other non-recurring costs. At March 31, 2022, $8,901 of 787 deferred production costs, unamortized tooling and other non-recurring costs are expected to be recovered from units included in the program accounting quantity that have firm
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orders and $4,670 is expected to be recovered from units included in the program accounting quantity that represent expected future orders. We expensed abnormal production costs of $312 during the three months ended March 31, 2022.
Commercial aircraft programs inventory included amounts credited in cash or other consideration (early issue sales consideration) to airline customers totaling $3,383 and $3,290 at March 31, 2022 and December 31, 2021.
Note 6 – Contracts with Customers
Unbilled receivables increased from $8,620 at December 31, 2021 to $8,991 at March 31, 2022, primarily driven by revenue recognized at Defense, Space & Security (BDS) and Global Services (BGS) in excess of billings.
Advances and progress billings decreased from $52,980 at December 31, 2021 to $52,458 at March 31, 2022, primarily driven by revenue recognized at BDS, Commercial Airplanes (BCA), and BGS and the return of BCA customer advances, partially offset by advances on orders received.
Revenues recognized during the three months ended March 31, 2022 and 2021 from amounts recorded as Advances and progress billings at the beginning of each year were $3,401 and $4,718.
Note 7 – Customer Financing
Customer financing primarily relates to the Boeing Capital (BCC) segment. Financing arrangements typically range in terms from 1 to 12 years and may include options to extend or terminate leases. Certain leases include provisions to allow the lessee to purchase the underlying aircraft at a specified price.
Customer financing consisted of the following:
March 31
2022
December 31
2021
Financing receivables:
Investment in sales-type/finance leases$886 $944 
Notes410 412 
Total financing receivables
1,296 1,356 
Less allowance for losses on receivables(66)(18)
Financing receivables, net1,230 1,338 
Operating lease equipment, at cost, less accumulated depreciation of $62 and $58
507 474 
Total$1,737 $1,812 
At March 31, 2022 and December 31, 2021, $412 and $378 were determined to be uncollectible financing receivables and placed on non-accrual status. The increase in the allowance for losses on receivables during the three months ended March 31, 2022 was primarily due to impacts of the war in Ukraine. Customer financing interest income received was $3 and $6 the three months ended March 31, 2022 and 2021.
Customer financing receivables past due as of March 31, 2022 were $1.
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Our financing receivable balances at March 31, 2022 by internal credit rating category and year of origination consisted of the following:
Rating categoriesCurrent2021202020192018PriorTotal
BBB$98 $98 
BB$9 $231 $118 $42 $13 121 534 
B35 188 223 
CCC7 24 410 441 
Total carrying value of financing receivables$9 $266 $125 $66 $13 $817 $1,296 
At March 31, 2022, our allowance for losses related to receivables with ratings of CCC, B, BB, and BBB. We applied default rates that averaged 88.1%, 26.8%, 3.4%, and 0.1%, respectively, to the exposure associated with those receivables.
Customer Financing Exposure
The majority of our customer financing portfolio is concentrated in the following aircraft models:
March 31
2022
December 31
2021
717 Aircraft ($58 and $62 accounted for as operating leases)
$589 $603 
747-8 Aircraft (accounted for as sales-type finance leases)394 435 
737 Aircraft ($186 and $145 accounted for as operating leases)
204 163 
777 Aircraft ($221 and $225 accounted for as operating leases)
229 233 
MD-80 Aircraft (accounted for as sales-type finance leases)140 142 
757 Aircraft (accounted for as sales-type finance leases)121 126 
747-400 Aircraft ($0 and $1 accounted for as operating leases)
48 50 
Operating lease equipment primarily includes large commercial jet aircraft.
Lease income recorded in revenue on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 included $18 and $13 from sales-type/finance leases, and $15 and $18 from operating leases, of which $4 and $2 related to variable operating lease payments. Profit at the commencement of sales-type leases was recorded in revenue for the three months ended March 31, 2022 and 2021 in the amount of $4 and $16.
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Note 8 – Investments
Our investments, which are recorded in Short-term and other investments or Investments, consisted of the following:
March 31
2022
December 31
2021
Equity method investments (1)
$947 $930 
Time deposits4,331 7,676 
Available for sale debt instruments497 464 
Equity and other investments45 45 
Restricted cash & cash equivalents(2)
45 52 
Total$5,865 $9,167 
(1)Dividends received were $27 and $5 during the three months ended March 31, 2022 and 2021.
(2)Reflects amounts restricted in support of our property sales, workers’ compensation programs, and insurance premiums.
Allowance for losses on available for sale debt instruments are assessed quarterly. All instruments are considered investment grade and, as such, we have not recognized an allowance for credit losses as of March 31, 2022.
Note 9 – Commitments and Contingencies
737 MAX Grounding
Over 185 countries have approved the resumption of 737 MAX operations. The Civil Aviation Administration of China issued an airworthiness directive in the fourth quarter of 2021 outlining actions required for airlines to return to service. The 737 MAX has yet to return to service in China. While we expect 737 MAX deliveries to China to resume in 2022, subject to final regulatory approvals, risk remains around the timing and rate of those deliveries. The 737 MAX remains grounded in a small number of non-U.S. jurisdictions.
We have gradually increased production rates since 2020 and expect to increase the production rate to 31 per month during the second quarter of 2022, as well as implement further gradual production rate increases in subsequent periods based on market demand and supply chain capacity.
We continued to produce at abnormally low production rates through the first quarter of 2022 and expensed abnormal production costs of $188 and $568 during the three months ended March 31, 2022 and 2021. We do not expect the remaining abnormal costs related to the 737 MAX to be significant.
In the first quarter of 2022, we delivered 81 aircraft. We have approximately 320 airplanes in inventory as of March 31, 2022 and we anticipate delivering most of these aircraft by the end of 2023. We continue to work with customers who have requested to defer deliveries or to cancel orders for 737 MAX aircraft, and we are remarketing and/or delaying deliveries of certain aircraft included within inventory. In the event that we are unable to resume aircraft deliveries in China and/or ramp up deliveries consistent with our assumptions, our expectation of delivery timing and our expectation regarding future gradual production rate increases could be impacted.
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The following table summarizes changes in the 737 MAX customer concessions and other considerations liability during the three months ended March 31, 2022 and 2021.
20222021
Beginning balance – January 1$2,940 $5,537 
Reductions for payments made(550)(1,172)
Reductions for concessions and other in-kind considerations(5)(25)
Changes in estimates34 30 
Ending balance – March 31$2,419 $4,370 
The liability balance of $2.4 billion at March 31, 2022 includes $1.8 billion of contracted customer concessions and other liabilities and $0.6 billion that remains subject to negotiation with customers. The contracted amount includes $0.8 billion expected to be liquidated by lower customer delivery payments, $0.8 billion expected to be paid in cash and $0.2 billion in other concessions. Of the cash payments to customers, we expect to pay $0.6 billion in 2022. The type of consideration to be provided for the remaining $0.6 billion will depend on the outcomes of negotiations with customers.
Environmental
The following table summarizes environmental remediation activity during the three months ended March 31, 2022 and 2021.
20222021
Beginning balance – January 1$605 $565 
Reductions for payments made, net of recoveries(13)
Changes in estimates48 15 
Ending balance – March 31$653 $567 
The liabilities recorded represent our best estimate or the low end of a range of reasonably possible costs expected to be incurred to remediate sites, including operation and maintenance over periods of up to 30 years. It is reasonably possible that we may incur charges that exceed these recorded amounts because of regulatory agency orders and directives, changes in laws and/or regulations, higher than expected costs and/or the discovery of new or additional contamination. As part of our estimating process, we develop a range of reasonably possible alternate scenarios that includes the high end of a range of reasonably possible cost estimates for all remediation sites for which we have sufficient information based on our experience and existing laws and regulations. There are some potential remediation obligations where the costs of remediation cannot be reasonably estimated. At March 31, 2022 and December 31, 2021, the high end of the estimated range of reasonably possible remediation costs exceeded our recorded liabilities by $1,094.
Product Warranties
The following table summarizes product warranty activity recorded during the three months ended March 31, 2022 and 2021.
20222021
Beginning balance – January 1$1,900 $1,527 
Additions for current year deliveries35 17 
Reductions for payments made(118)(44)
Changes in estimates149 234 
Ending balance – March 31$1,966 $1,734 
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Commercial Aircraft Commitments
In conjunction with signing definitive agreements for the sale of new aircraft (Sale Aircraft), we have entered into trade-in commitments with certain customers that give them the right to trade in used aircraft at a specified price upon the purchase of Sale Aircraft. The probability that trade-in commitments will be exercised is determined by using both quantitative information from valuation sources and qualitative information from other sources. The probability of exercise is assessed quarterly, or as events trigger a change, and takes into consideration the current economic and airline industry environments. Trade-in commitments, which can be terminated by mutual consent with the customer, may be exercised only during the period specified in the agreement, and require advance notice by the customer.
Trade-in commitment agreements at March 31, 2022 have expiration dates from 2022 through 2029. At March 31, 2022 and December 31, 2021 total contractual trade-in commitments were $1,289 and $612. As of March 31, 2022 and December 31, 2021, we estimated that it was probable we would be obligated to perform on certain of these commitments with net amounts payable to customers totaling $379 and $283 and the fair value of the related trade-in aircraft was $379 and $283.
Financing Commitments
Financing commitments related to aircraft on order, including options and those proposed in sales campaigns, and refinancing of delivered aircraft, totaled $12,761 and $12,905 as of March 31, 2022 and December 31, 2021. The estimated earliest potential funding dates for these commitments as of March 31, 2022 are as follows:

Total
April through December 2022$1,759 
20233,287 
20242,501 
20252,148 
20261,183 
Thereafter1,883 
$12,761 
As of March 31, 2022, all of these financing commitments relate to customers we believe have less than investment-grade credit. We have concluded that no reserve for future potential losses is required for these financing commitments based upon the terms, such as collateralization and interest rates, under which funding would be provided.
Funding Commitments
We have commitments to make additional capital contributions of $244 to joint ventures over the next five years.
Standby Letters of Credit and Surety Bonds
We have entered into standby letters of credit and surety bonds with financial institutions primarily relating to the guarantee of our future performance on certain contracts. Contingent liabilities on outstanding letters of credit agreements and surety bonds aggregated approximately $3,647 and $3,634 as of March 31, 2022 and December 31, 2021.
VC-25B Presidential Aircraft
The Company’s firm fixed-price contract for the Engineering, Manufacturing, and Development (EMD) effort on the U.S. Air Force’s (USAF) VC-25B Presidential Aircraft, commonly known as Air Force One, is a $4.3 billion program to develop and modify two 747-8 commercial aircraft. During the first quarter of 2022, the cumulative reach-forward loss on the contract increased by $660 to $1,146, driven by higher
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supplier costs, higher costs to finalize certain technical requirements and schedule delays. Risk remains that we may be required to record additional losses in future periods.
T-7A Red Hawk EMD Contract & Production Options
In 2018, we were awarded the T-7A Red Hawk program. The EMD portion of the contract is a $860 fixed-price contract and includes five aircraft and seven simulators. In the first quarter of 2022, we recorded an earnings charge of $67 related to the T-7A Red Hawk fixed-price EMD contract, which has close to break-even gross margins at March 31, 2022, primarily due to customer testing requirements and supply chain delays. The production portion of the contract includes 11 production lots for aircraft and related services. In 2018, we recorded a loss of $400 associated with the 11 production lots and associated support options for 346 T-7A Red Hawk aircraft that we believe are probable of being exercised. The first production and support contract option is expected to be exercised in 2023. The estimated loss increased by $300 to $700 during the first quarter of 2022 driven by ongoing supply chain negotiations which are impacted by supply chain constraints, COVID-19, and inflationary pressures. Risk remains that we may be required to record additional losses in future periods.
MQ-25
In the third quarter of 2018, we were awarded the MQ-25 EMD contract by the U.S. Navy. The contract is a fixed-price contract that now includes development and delivery of seven aircraft and test articles at a contract price of $890. In connection with winning the competition, we recognized a reach-forward loss of $291 in the third quarter of 2018. The period of performance runs from 2018 through 2024. During the first quarter of 2022 we recorded a $78 increase to the MQ-25 reach-forward loss primarily driven by additional customer testing requirements and supplier quality challenges. Risk remains that we may be required to record additional losses in future periods.
KC-46A Tanker
In 2011, we were awarded a contract from the USAF to design, develop, manufacture, and deliver four next generation aerial refueling tankers. This EMD contract is a fixed-price incentive fee contract and involves highly complex designs and systems integration. Since 2016, the USAF has authorized seven low rate initial production (LRIP) lots for a total of 94 aircraft. The EMD contract and authorized LRIP lots total approximately $19 billion as of March 31, 2022. As of March 31, 2022, we had approximately $276 of capitalized precontract costs and $609 of potential termination liabilities to suppliers. During the first quarter of 2022, we recorded an increase to the reach-forward loss on the KC-46A Tanker program of $165 primarily reflecting higher supply chain and other costs. Risk remains that we may be required to record additional losses in future periods.
Fixed-Price Contracts
Substantially all contracts at BDS and the majority of contracts at BGS are long-term contracts. Long-term contracts that are contracted on a fixed-price basis could result in losses in future periods. Fixed-price development work is inherently uncertain and subject to significant variability in estimates of the cost and time required to complete the work. The operational and technical complexities of fixed-price contracts create financial risk, which could trigger additional earnings charges, termination provisions, order cancellations, or other financially significant exposure.
Recoverable Costs on Government Contracts
Our final incurred costs for each year are subject to audit and review for allowability by the U.S. government, which can result in payment demands related to costs they believe should be disallowed. We work with the U.S. government to assess the merits of claims and where appropriate reserve for amounts disputed. If we are unable to satisfactorily resolve disputed costs, we could be required to record an earnings charge and/or provide refunds to the U.S. government.
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Note 10 – Arrangements with Off-Balance Sheet Risk
We enter into arrangements with off-balance sheet risk in the normal course of business, primarily in the form of guarantees.
The following table provides quantitative data regarding our third party guarantees. The maximum potential payments represent a “worst-case scenario,” and do not necessarily reflect amounts that we expect to pay. Estimated proceeds from collateral and recourse represent the anticipated values of assets we could liquidate or receive from other parties to offset our payments under guarantees. The carrying amount of liabilities represents the amount included in Accrued liabilities.
Maximum
Potential Payments
Estimated Proceeds from
Collateral/Recourse
Carrying Amount of
 Liabilities
March 31
2022
December 31
2021
March 31
2022
December 31
2021
March 31
2022
December 31
2021
Contingent repurchase commitments
$548 $548 $548 $548 
Credit guarantees
90 90 28 $46 $24 
Contingent Repurchase Commitments The commercial aircraft repurchase price specified in contingent repurchase commitments is generally lower than the expected fair value at the specified repurchase date. Estimated proceeds from collateral/recourse in the table above represent the lower of the contracted repurchase price or the expected fair value of each aircraft at the specified repurchase date.
Credit Guarantees We have issued credit guarantees where we are obligated to make payments to a guaranteed party in the event that the original lessee or debtor does not make payments or perform certain specified services. Generally, these guarantees have been extended on behalf of guaranteed parties with less than investment-grade credit and are collateralized by certain assets. We record a liability for the fair value of guarantees and the expected contingent loss amount, which is reviewed quarterly. Current outstanding credit guarantees expire through 2036.
Other Indemnifications In conjunction with our sales of Electron Dynamic Devices, Inc. and Rocketdyne Propulsion and Power businesses and our BCA facilities in Wichita, Kansas and Tulsa and McAlester, Oklahoma, we agreed to indemnify, for an indefinite period, the buyers for costs relating to pre-closing environmental conditions and certain other items. We are unable to assess the potential number of future claims that may be asserted under these indemnifications, nor the amounts thereof (if any). As a result, we cannot estimate the maximum potential amount of future payments under these indemnities and therefore, no liability has been recorded. To the extent that claims have been made under these indemnities and/or are probable and reasonably estimable, liabilities associated with these indemnities are included in the environmental liability disclosure in Note 9.
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Note 11 – Postretirement Plans
The components of net periodic benefit (income)/cost for the three months ended March 31 were as follows:
PensionPostretirement
2022202120222021
Service cost$1 $1 $18 $22 
Interest cost520 498 24 23 
Expected return on plan assets(947)(966)(2)(2)
Amortization of prior service credits(20)(20)(9)(9)
Recognized net actuarial loss/(gain)227 310 (28)(17)
Settlement/curtailment loss
Net periodic benefit (income)/cost($219)($176)$3 $17 
Net periodic benefit cost included in Loss from operations$1 $1 $19 $22 
Net periodic benefit income included in Other income, net(220)(177)(15)(5)
Net periodic benefit (income)/cost included in Loss before income taxes($219)($176)$4 $17 
Note 12 – Share-Based Compensation and Other Compensation Arrangements
Stock Options
On February 16, 2022, we granted 348,769 premium-priced stock options to our executive officers as part of our long-term incentive program. These stock options have an exercise price equal to 120% of the fair market value of our stock on the date of grant. If certain performance measures are met, the exercise price is reduced to 110% of the grant date fair market value of our stock. The stock options are scheduled to vest and become exercisable three years after the grant date and expire ten years after the grant date. If an executive terminates employment because of retirement, layoff, disability, or death, the executive (or beneficiary) may receive some or all of their stock options depending on certain age and service conditions. The fair value of the stock options granted was $83.04 per unit and was estimated using a Monte-Carlo simulation model using the following assumptions: expected life 6.76 years, expected volatility 36.6%, risk free interest rate 2.0% and no expected dividend yield.
Restricted Stock Units
On February 16, 2022, we granted 1,804,541 restricted stock units (RSU) to our executives as part of our long-term incentive program. The RSUs granted under this program have a grant date fair value of $217.48 per unit. The RSUs granted under this program will generally vest and settle in common stock (on a one-for-one basis) on the third anniversary of the grant date. If an executive terminates employment because of retirement, layoff, disability, or death, the executive (or beneficiary) may receive some or all of their stock units depending on certain age and service conditions. In all other cases, the RSUs will not vest and all rights to the stock units will terminate.
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Note 13 – Shareholders' Equity
Accumulated Other Comprehensive Loss
Changes in Accumulated other comprehensive loss (AOCI) by component for the three months ended March 31, 2022 and 2021 were as follows:
Currency Translation AdjustmentsUnrealized Gains and Losses on Certain InvestmentsUnrealized Gains and Losses on Derivative InstrumentsDefined Benefit Pension Plans & Other Postretirement Benefits
Total (1)
Balance at January 1, 2021($30)$1 ($43)($17,061)($17,133)
Other comprehensive (loss)/income before reclassifications(36)11 (23)
Amounts reclassified from AOCI
(2)206 
(2)
204 
Net current period Other comprehensive (loss)/income(36)208 181 
Balance at March 31, 2021($66)$1 ($34)($16,853)($16,952)
Balance at January 1, 2022($105)$1 $6 ($11,561)($11,659)
Other comprehensive income before reclassifications24 94 118 
Amounts reclassified from AOCI
35 
(3)
136 
(2)
171 
Net current period Other comprehensive income24 129 136 289 
Balance at March 31, 2022($81)$1 $135 ($11,425)($11,370)
(1)     Net of tax.
(2)    Primarily relates to amortization of actuarial losses for the three months ended March 31, 2022 and 2021 of $159 and $228 (net of tax of ($40) and ($65)). These are included in the net periodic pension cost.
(3)    Includes losses of $39 (net of tax of ($11)) from cash flow hedges reclassified to Other income, net because the forecasted transactions are no longer probable of occurring.
Note 14 – Derivative Financial Instruments
Cash Flow Hedges
Our cash flow hedges include foreign currency forward contracts, commodity swaps and commodity purchase contracts. We use foreign currency forward contracts to manage currency risk associated with certain transactions, specifically forecasted sales and purchases made in foreign currencies. Our foreign currency contracts hedge forecasted transactions through 2031. We use commodity derivatives, such as fixed-price purchase commitments and swaps to hedge against potentially unfavorable price changes for commodities used in production. Our commodity contracts hedge forecasted transactions through 2029.
Derivative Instruments Not Receiving Hedge Accounting Treatment
We have entered into agreements to purchase and sell aluminum to address long-term strategic sourcing objectives and non-U.S. business requirements. These agreements are derivative instruments for accounting purposes. The quantities of aluminum in these agreements offset and are priced at prevailing market prices. We also hold certain foreign currency forward contracts and commodity swaps which do not qualify for hedge accounting treatment.
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Notional Amounts and Fair Values
The notional amounts and fair values of derivative instruments in the Condensed Consolidated Statements of Financial Position were as follows:
Notional amounts (1)
Other assetsAccrued liabilities
March 31
2022
December 31
2021
March 31
2022
December 31
2021
March 31
2022
December 31
2021
Derivatives designated as hedging instruments:
Foreign exchange contracts$2,686 $2,630 $53 $30 ($35)($52)
Commodity contracts593 500 190 88 (7)(18)
Derivatives not receiving hedge accounting treatment:
Foreign exchange contracts708 361 3 (52)(3)
Commodity contracts1,059 760 19 (12)(7)
Total derivatives$5,046 $4,251 $265 $128 ($106)($80)
Netting arrangements(46)(30)46 30 
Net recorded balance$219 $98 ($60)($50)
(1)Notional amounts represent the gross contract/notional amount of the derivatives outstanding.
Gains/(losses) associated with our hedging transactions and forward points recognized in Other comprehensive income are presented in the following table:
Three months ended March 31

20222021
Recognized in Other comprehensive income, net of taxes:
Foreign exchange contracts($8)($19)
Commodity contracts102 30 
Gains/(losses) associated with our hedging transactions and forward points reclassified from AOCI to earnings are presented in the following table:
Three months ended March 31
20222021
Foreign exchange contracts
Costs and expenses$5 
General and administrative(1)$3 
Commodity contracts
Costs and expenses1 (3)
General and administrative expense1 
Losses from cash flow hedges reclassified from AOCI to Other income, net because it is probable the forecasted transactions will not occur, were $50 and $0 for the three months ended March 31, 2022 and March 31, 2021. Losses related to undesignated derivatives on foreign exchange and commodity cash flow hedging transactions recognized in Other income, net were insignificant for the three months ended March 31, 2022 and 2021.
Based on our portfolio of cash flow hedges, we expect to reclassify gains of $53 (pre-tax) out of Accumulated other comprehensive loss into earnings during the next 12 months.
We have derivative instruments with credit-risk-related contingent features. For foreign exchange contracts with original maturities of at least five years, our derivative counterparties could require
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settlement if we default on our five-year credit facility. For certain commodity contracts, our counterparties could require collateral posted in an amount determined by our credit ratings. The fair value of foreign exchange and commodity contracts that have credit-risk-related contingent features that are in a net liability position at March 31, 2022 was $1. At March 31, 2022, there was no collateral posted related to our derivatives.
Note 15 – Fair Value Measurements
The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs. The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.
March 31, 2022December 31, 2021
TotalLevel 1Level 2TotalLevel 1Level 2
Assets
Money market funds$978 $978 $1,370 $1,370 
Available-for-sale debt investments:
Commercial paper233 $233 225 $225 
Corporate notes254 254 262 262 
U.S. government agencies10 10
Other equity investments20 19 120 20 
Derivatives219 219 98 98 
Total assets$1,714 $997 $717 $1,976 $1,390 $586 
Liabilities
Derivatives($60)($60)($50)($50)
Total liabilities($60)($60)($50)($50)
Money market funds, available-for-sale debt investments and equity securities are valued using a market approach based on the quoted market prices or broker/dealer quotes of identical or comparable instruments.
Derivatives include foreign currency and commodity contracts. Our foreign currency forward contracts are valued using an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount. Commodity derivatives are valued using an income approach based on the present value of the commodity index prices less the contract rate multiplied by the notional amount.
Certain assets have been measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3). The following table presents the nonrecurring losses recognized for the three months ended March 31 due to long-lived asset impairment and the fair value and asset classification of the related assets as of the impairment date:
20222021
TotalTotal
Losses
TotalTotal
Losses
Investments($31)($7)
Customer financing assets
$44 (2)$18 (9)
Property, plant and equipment(19)
Other Assets and Acquired intangible assets1 (20)
Total$45 ($72)$18 ($16)
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Investments, Property, plant and equipment, Other assets and Acquired intangible assets were primarily valued using an income approach based on the discounted cash flows associated with the underlying assets. The fair value of the impaired customer financing assets includes operating lease equipment and investments in sales type-leases/finance leases and is derived by calculating a median collateral value from a consistent group of third party aircraft value publications. The values provided by the third party aircraft publications are derived from their knowledge of market trades and other market factors. Management reviews the publications quarterly to assess the continued appropriateness and consistency with market trends. Under certain circumstances, we adjust values based on the attributes and condition of the specific aircraft or equipment, usually when the features or use of the aircraft vary significantly from the more generic aircraft attributes covered by third party publications, or on the expected net sales price for the aircraft.
For Level 3 assets that were measured at fair value on a nonrecurring basis during the period ended March 31, 2022, the following table presents the fair value of those assets as of the measurement date, valuation techniques and related unobservable inputs of those assets.
Fair
Value
Valuation
Technique(s)
Unobservable InputRange
Median or Average
Customer financing assets$44Market approachAircraft value publications
$34 - $43(1)
Median $39
Aircraft condition adjustments
$0 - $5(2)
Net $5
(1)The range represents the sum of the highest and lowest values for all aircraft subject to fair value measurement, according to the third party aircraft valuation publications that we use in our valuation process.
(2)The negative amount represents the sum, for all aircraft subject to fair value measurement, of all downward adjustments based on consideration of individual aircraft attributes and condition. The positive amount represents the sum of all such upward adjustments.
Fair Value Disclosures
The fair values and related carrying values of financial instruments that are not required to be remeasured at fair value on the Condensed Consolidated Statements of Financial Position were as follows:
March 31, 2022
Carrying
Amount
Total Fair
Value
Level 1Level 2Level 3
Assets
Notes receivable, net$410 $448 $448 
Liabilities
Debt, excluding finance lease obligations (57,559)(59,428)(59,428)
December 31, 2021
Carrying
Amount
Total Fair
Value
Level 1Level 2Level 3
Assets
Notes receivable, net$412 $485 $485 
Liabilities
Debt, excluding finance lease obligations (57,921)(65,724)(65,724)
The fair values of notes receivable are estimated with discounted cash flow analysis using interest rates currently offered on loans with similar terms to borrowers of similar credit quality. The fair value of our debt that is traded in the secondary market is classified as Level 2 and is based on current market yields. For our debt that is not traded in the secondary market, the fair value is classified as Level 2 and is based
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on our indicative borrowing cost derived from dealer quotes or discounted cash flows. The fair values of our debt classified as Level 3 are based on discounted cash flow models using the implied yield from similar securities. With regard to other financial instruments with off-balance sheet risk, it is not practicable to estimate the fair value of our indemnifications and financing commitments because the amount and timing of those arrangements are uncertain. Items not included in the above disclosures include cash, restricted cash, time deposits and other deposits, commercial paper, money market funds, Accounts receivable, Unbilled receivables, Other current assets, Accounts payable and long-term payables. The carrying values of those items, as reflected in the Condensed Consolidated Statements of Financial Position, approximate their fair value at March 31, 2022 and December 31, 2021. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash (Level 1).
Note 16 – Legal Proceedings
Various legal proceedings, claims and investigations related to products, contracts, employment and other matters are pending against us.
In addition, we are subject to various U.S. government inquiries and investigations from which civil, criminal or administrative proceedings could result or have resulted in the past. Such proceedings involve or could involve claims by the government for fines, penalties, compensatory and treble damages, restitution and/or forfeitures. Under government regulations, a company, or one or more of its operating divisions or subdivisions, can also be suspended or debarred from government contracts, or lose its export privileges, based on the results of investigations. Except as described below, we believe, based upon current information, that the outcome of any such legal proceeding, claim, or government dispute and investigation will not have a material effect on our financial position, results of operations, or cash flows. Where it is reasonably possible that we will incur losses in excess of recorded amounts in connection with any of the matters set forth below, we will disclose either the amount or range of reasonably possible losses in excess of such amounts or, where no such amount or range can be reasonably estimated, the reasons why no such estimate can be made.
Multiple legal actions have been filed against us as a result of the October 29, 2018 accident of Lion Air Flight 610 and the March 10, 2019 accident of Ethiopian Airlines Flight 302. During the fourth quarter of 2021, we entered into a proposed settlement with plaintiffs in a shareholder derivative lawsuit. In March 2022, the court entered an order approving the proposed settlement and the Company committed to making certain governance changes. As a result of the settlement, the Company expects to receive approximately $200 in 2022. Further, we are subject to, and cooperating with ongoing governmental and regulatory investigations and inquiries relating to the accidents and the 737 MAX. Among these is an ongoing investigation by the Securities and Exchange Commission, the outcome of which may be material. We cannot reasonably estimate a range of loss, if any, not covered by available insurance that may result given the current status of the pending lawsuits, investigations, and inquiries related to the 737 MAX.
During 2019, we entered into agreements with Embraer S.A. (Embraer) to establish joint ventures that included the commercial aircraft and services operations of Embraer, of which we were expected to acquire an 80 percent ownership stake for $4,200, as well as a joint venture to promote and develop new markets for the C-390 Millennium. In 2020, we exercised our contractual right to terminate these agreements based on Embraer’s failure to meet certain required closing conditions. Embraer has disputed our right to terminate the agreements, and the dispute is currently in arbitration. We cannot reasonably estimate a range of loss, if any, that may result from the arbitration.
Note 17 – Segment and Revenue Information
Our primary profitability measurements to review a segment’s operating results are Earnings/(loss) from operations and operating margins. We operate in four reportable segments: BCA, BDS, BGS, and BCC. All other activities fall within Unallocated items, eliminations and other. See page 6 for the Summary of Business Segment Data, which is an integral part of this note.
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BCA develops, produces and markets commercial jet aircraft principally to the commercial airline industry worldwide. Revenue on commercial aircraft contracts is recognized at the point in time when an aircraft is completed and accepted by the customer.
BDS engages in the research, development, production and modification of the following products and related services: manned and unmanned military aircraft and weapons systems, surveillance and engagement, strategic defense and intelligence systems, satellite systems and space exploration. BDS revenue is generally recognized over the contract term (over time) as costs are incurred.
BGS provides parts, maintenance, modifications, logistics support, training, data analytics and information-based services to commercial and government customers worldwide. BGS segment revenue and costs include certain services provided to other segments. Revenue on commercial spare parts contracts is recognized at the point in time when a spare part is delivered to the customer. Revenue on other contracts is generally recognized over the contract term (over time) as costs are incurred.
BCC facilitates, arranges, structures and provides selective financing solutions for our customers.
The following tables present BCA, BDS and BGS revenues from contracts with customers disaggregated in a number of ways, such as geographic location, contract type and the method of revenue recognition. We believe these best depict how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors.
BCA revenues by customer location consist of the following:
(Dollars in millions)Three months ended March 31
20222021
Revenue from contracts with customers:
Europe$1,025 $873 
Latin America and Caribbean828 531 
Asia728 363 
Middle East318 129 
Other181 45 
Total non-U.S. revenues3,080 1,941 
United States1,102 2,353 
Estimated potential concessions and other considerations to 737 MAX customers, net(34)(30)
Total revenues from contracts with customers4,148 4,264 
Intersegment revenues eliminated on consolidation13 
Total segment revenues$4,161 $4,269 
Revenue recognized on fixed-price contracts100 %100 %
Revenue recognized at a point in time100 %100 %
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BDS revenues on contracts with customers, based on the customer's location, consist of the following:
(Dollars in millions)Three months ended March 31
20222021
Revenue from contracts with customers:
U.S. customers$4,148 $5,520 
Non U.S. customers(1)
1,335 1,665 
Total segment revenue from contracts with customers$5,483 $7,185 
Revenue recognized over time99 %99 %
Revenue recognized on fixed-price contracts63 %70 %
Revenue from the U.S. government(1)
89 %90 %
(1)Includes revenues earned from foreign military sales through the U.S. government.
BGS revenues consist of the following:
(Dollars in millions)Three months ended March 31
20222021
Revenue from contracts with customers:
Commercial$2,276 $1,625 
Government1,968 2,070 
Total revenues from contracts with customers4,244 3,695 
Intersegment revenues eliminated on consolidation70 54 
Total segment revenues$4,314 $3,749 
Revenue recognized at a point in time49 %43 %
Revenue recognized on fixed-price contracts88 %87 %
Revenue from the U.S. government(1)
35 %43 %
(1)Includes revenues earned from foreign military sales through the U.S. government.
Backlog
Our total backlog includes contracts that we and our customers are committed to perform. The value in backlog represents the estimated transaction prices on performance obligations to our customers for which work remains to be performed. Backlog is converted into revenue, primarily based on the cost incurred or at delivery and acceptance of products, depending on the applicable revenue recognition model.
Our backlog at March 31, 2022 was $370,835. We expect approximately 34% to be converted to revenue through 2023 and approximately 86% through 2026, with the remainder thereafter. There is significant uncertainty regarding the timing of when backlog will convert into revenue due to 787 production issues and associated rework, timing of 737 MAX delivery resumption in China, timing of entry into service of the 777X, 737 MAX 7 and/or 737 MAX 10, and COVID-19 impacts.
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Unallocated Items, Eliminations and other
Unallocated items, eliminations and other include common internal services that support Boeing’s global business operations, intercompany guarantees provided to BCC and eliminations of certain sales between segments. Such sales include airplanes accounted for as operating leases and considered transferred to the BCC segment. We generally allocate costs to business segments based on the U.S. federal cost accounting standards (CAS). Components of Unallocated items, eliminations and other are shown in the following table.
Three months ended March 31
20222021
Share-based plans($83)($128)
Deferred compensation42 (52)
Amortization of previously capitalized interest(23)(22)
Research and development expense, net(52)(42)
Eliminations and other unallocated items(144)(120)
Unallocated items, eliminations and other
($260)($364)
Pension FAS/CAS service cost adjustment$208 $193 
Postretirement FAS/CAS service cost adjustment75 77 
FAS/CAS service cost adjustment$283 $270 
Pension and Other Postretirement Benefit Expense
Pension costs, comprising GAAP service and prior service costs, are allocated to BCA and the commercial operations at BGS. Pension costs are allocated to BDS and BGS businesses supporting government customers using CAS, which employ different actuarial assumptions and accounting conventions than GAAP. These costs are allocable to government contracts. Other postretirement benefit costs are allocated to business segments based on CAS, which is generally based on benefits paid. FAS/CAS service cost adjustment represents the difference between the Financial Accounting Standards (FAS) pension and postretirement service costs calculated under GAAP and costs allocated to the business segments. Non-operating pension and postretirement expenses represent the components of net periodic benefit costs other than service cost. These expenses are included in Other income, net.
Assets
Segment assets are summarized in the table below:
March 31
2022
December 31
2021
Commercial Airplanes$76,784 $75,863 
Defense, Space & Security14,952 14,974 
Global Services16,238 16,397 
Boeing Capital1,656 1,735 
Unallocated items, eliminations and other26,171 29,583 
Total$135,801 $138,552 
Assets included in Unallocated items, eliminations and other primarily consist of Cash and cash equivalents, Short-term and other investments, tax assets, capitalized interest and assets managed centrally on behalf of the four principal business segments and intercompany eliminations.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
The Boeing Company
Chicago, Illinois
Results of Review of Interim Financial Information
We have reviewed the accompanying condensed consolidated statement of financial position of The Boeing Company and subsidiaries (the “Company”) as of March 31, 2022, the related condensed consolidated statements of operations, comprehensive income, equity, and cash flows for the three-month periods ended March 31, 2022 and 2021, and the related notes (collectively referred to as the "condensed consolidated interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the "PCAOB"), the consolidated statement of financial position of the Company as of December 31, 2021, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for the year then ended (not presented herein); and in our report dated January 31, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated statement of financial position from which it has been derived.
Basis for Review Results
This condensed consolidated interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


/s/ Deloitte & Touche LLP

Chicago, Illinois
April 27, 2022
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FORWARD-LOOKING STATEMENTS
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “should,” “expects,” “intends,” “projects,” “plans,” “believes,” “estimates,” “targets,” “anticipates” and similar expressions generally identify these forward-looking statements. Examples of forward-looking statements include statements relating to our future financial condition and operating results, as well as any other statement that does not directly relate to any historical or current fact.
Forward-looking statements are based on expectations and assumptions that we believe to be reasonable when made, but that may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are risks related to:
(1)the COVID-19 pandemic and related industry impacts, including with respect to our operations and access to suppliers, our liquidity, the health of our customers and suppliers, and future demand for our products and services;
(2)the 737 MAX, including the timing and conditions of remaining 737 MAX regulatory approvals, lower than planned production rates and/or delivery rates, and additional considerations to customers and suppliers;
(3)general conditions in the economy and our industry, including those due to regulatory changes;
(4)our reliance on our commercial airline customers;
(5)the overall health of our aircraft production system, planned commercial aircraft production rate changes, our commercial development and derivative aircraft programs, and our aircraft being subject to stringent performance and reliability standards;
(6)changing budget and appropriation levels and acquisition priorities of the U.S. government;
(7)our dependence on U.S. government contracts;
(8)our reliance on fixed-price contracts;
(9)our reliance on cost-type contracts;
(10)uncertainties concerning contracts that include in-orbit incentive payments;
(11)our dependence on our subcontractors and suppliers as well as the availability of raw materials;
(12)changes in accounting estimates;
(13)changes in the competitive landscape in our markets;
(14)our non-U.S. operations, including sales to non-U.S. customers;
(15)threats to the security of our, our customers' and/or our suppliers' information;
(16)potential adverse developments in new or pending litigation and/or government investigations;
(17)customer and aircraft concentration in our customer financing portfolio;
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(18)changes in our ability to obtain debt financing on commercially reasonable terms and at competitive rates;
(19)realizing the anticipated benefits of mergers, acquisitions, joint ventures, strategic alliances or divestitures;
(20)the adequacy of our insurance coverage to cover significant risk exposures;
(21)potential business disruptions, including those related to physical security threats, information technology or cyber attacks, epidemics, sanctions or natural disasters;
(22)work stoppages or other labor disruptions;
(23)substantial pension and other postretirement benefit obligations;
(24)potential environmental liabilities; and
(25)effects of climate change and legal, regulatory or market responses to such change.
Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Any forward-looking information speaks only as of the date on which it is made, and we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Consolidated Results of Operations and Financial Condition
Overview
The COVID-19 pandemic, 787 production issues and associated rework, and the residual impacts of the 737 MAX grounding continue to have significant adverse impacts on our business and are expected to continue to negatively impact revenue, earnings, and operating cash flow in future quarters. The COVID-19 pandemic has caused an unprecedented shock to demand for air travel, creating a tremendous challenge for our customers, our business and the entire commercial aerospace manufacturing and services sector. The latest International Air Transport Association (IATA) release reported that passenger traffic in 2021 recovered to approximately 40% of 2019 levels, as international markets saw continued reopening challenges. Travel restrictions and global economic activity were improving at the end of 2021, but improvements were delayed by the global outbreak of the Omicron variants. Governments continue to change travel policy and restrictions due to the virus as well as the war in Ukraine, with global sanctions and economic effects raising energy and other costs. We continue to expect that the recovery will remain uneven as travel restrictions and varying regional travel protocols continue to ease and lessen their impact on air travel.
Generally, we continue to expect domestic travel to recover faster than international travel. As a result, we expect the narrow-body market to recover faster than the wide-body market. Also, the pace of the commercial market recovery will be heavily dependent on COVID-19 infection rates, vaccination rates, and resultant government restrictions. We are seeing a strong recovery in travel demand for our airline customers in North America and Europe. Demand for dedicated freighters continues to be strong, underpinned by a strong recovery in global trade and overall air cargo growth. Overall cargo capacity remains challenged given the large impact that COVID-19 has had on international passenger operations, which also carry cargo.
Airline financial performance, which influences demand for new capacity, has been adversely impacted by the COVID-19 pandemic. According to IATA, net losses for the airline industry were $138 billion in 2020 and are expected to be approximately $52 billion in 2021. IATA also forecasts $11.5 billion of losses for the industry globally in 2022, with approximately $10 billion of profits in North America driven by the robust domestic market being more than offset by losses in other regions. Our customers are taking actions to combat the effects of the COVID-19 pandemic on the market by preserving liquidity. This comes in many forms such as deferrals of advances and other payments to suppliers, deferrals of deliveries, reduced spending on services and, in some cases, cancellation of orders. While the outlook continues to improve, we continue to face a challenging environment in the near- to medium-term as airlines have adjusted to reduced traffic, which in turn has resulted in lower demand for commercial aerospace products and services. The current environment is also affecting the financial viability of some airlines.
We continue to expect commercial air travel to return to 2019 levels in 2023 to 2024. We expect it will take a few years beyond that for the industry to return to balanced market conditions. As we managed through the effects of the COVID-19 pandemic, we reduced the production rates of several of our Commercial Airplanes (BCA) programs. These rate decisions continue to be based on our ongoing assessments of the demand environment and availability of aircraft financing. There is uncertainty with respect to when commercial air traffic capacity will return to and/or exceed pre-COVID-19 levels. We closely monitor the key factors that affect backlog and future demand for each of our commercial aircraft programs, including customers’ evolving fleet plans, the wide-body replacement cycle and the cargo market. We have implemented appropriate production rate adjustments in response to these factors, but risk remains that we will decide to implement further rate reductions in future quarters. Additionally, if we are unable to make timely deliveries of the large number of aircraft in inventory as of March 31, 2022, future revenues, earnings and cash flows will be adversely impacted.
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During the first quarter of 2022, we made adjustments to our estimates regarding timing of 777X-9 entry into service. We now anticipate that the first 777X-9 delivery will be delayed until 2025, based on an updated assessment of the time required to meet certification requirements. During the first quarter of 2022 we launched the 777X-8 freighter and we expect first delivery to be in 2027.
The 737 MAX 7 and MAX 10 models are also currently going through Federal Aviation Administration (FAA) certification activities. The 737 MAX 7 completed FAA certification flight testing in 2021 and is expected to enter service later in 2022. The 737 MAX 10 is expected to begin FAA certification flight testing later in 2022 and enter service in 2023. Section 116 of the December 2020 Aircraft Certification, Safety and Accountability Act (ACSAA) prohibits the FAA from issuing a type certificate to aircraft after December 27, 2022 unless the aircraft’s flight crew alerting system meets certain requirements. As a result, if the MAX 7 and MAX 10 aircraft are not certified before December 27, 2022 we may encounter further certification delays. We are working closely with the FAA on implementation of ACSAA legislation and expect any necessary actions to be defined later this year. If we are unable to achieve entry into service consistent with our current assumptions, future revenues, earnings and cash flows will be adversely impacted.
Deliveries of the 737 MAX resumed in the fourth quarter of 2020, when the FAA rescinded the order that grounded 737 MAX aircraft in the U.S. Over 185 countries have approved the resumption of 737 MAX operations. The Civil Aviation Administration of China issued an airworthiness directive in the fourth quarter of 2021 outlining actions required for airlines to return to service. The 737 MAX has yet to return to service in China. While we expect 737 MAX deliveries to China to resume in 2022, subject to final regulatory approvals, risk remains around the timing and rate of those deliveries. Orders to suspend operations of 737 MAX aircraft from non-U.S. civil aviation authorities are still in effect in a small number of countries.
Deliveries and production have also been impacted by production issues and associated rework. For example, deliveries of the 787 are currently paused and the production rate has been reduced while we focus on rework of undelivered aircraft and continue to engage in detailed discussions with the FAA regarding required actions for resuming deliveries. Risk remains that these issues may continue to impact the timing of airplane deliveries in inventory and/or our ability to achieve planned production rates. Revenues, earnings and cash flows will continue to be impacted until we are able to resume timely deliveries.
The long-term outlook for the industry remains positive due to the fundamental drivers of air travel demand: economic growth, increasing propensity to travel due to increased trade, globalization and improved airline services driven by liberalization of air traffic rights between countries. The shock from COVID-19 has reduced the near- to medium-term demand, but our Commercial Market Outlook forecast projects a 4% growth rate for passenger and cargo traffic over a 20 year period. Based on long-term global economic growth projections of 2.7% average annual gross domestic product (GDP) growth, we project demand for approximately 43,610 new airplanes over the next 20 years. The industry remains vulnerable to exogenous developments including fuel price spikes, credit market shocks, acts of terrorism, natural disasters, conflicts, epidemics, pandemics and increased global environmental regulations.
At Global Services (BGS), while the outlook is improving, we are continuing to see a direct impact on our commercial supply chain business as fewer flights and more aircraft parked result in a decreased demand for our parts and logistics offerings. Additionally, our commercial customers are curtailing discretionary spending, such as modifications and upgrades and focusing on required maintenance. Similar to BCA, we expect a multi-year recovery period for the commercial services business. The demand outlook for our government services business remains stable; government services comprises approximately half of BGS revenue, which is unchanged from pre-pandemic levels.
At Defense, Space & Security (BDS), we continue to see stable demand reflecting the important role our products and services have in ensuring our national security. Outside of the U.S., we are seeing similar solid demand as governments prioritize security, defense technology and global cooperation given evolving threats. However, we continue to experience near-term production disruptions and inefficiencies due to COVID-19 impacts.
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As a result of the war in Ukraine, we recorded earnings charges totaling $212 million during the first quarter of 2022, primarily related to asset impairments. We have temporarily closed our facilities in Ukraine and Russia and are focused on supporting our employees in those countries. We have also suspended our business in Russia, including parts, maintenance and technical support for Russian airlines, and purchases from Russian suppliers. We are complying with U.S. and international sanctions and export control restrictions. We have sufficient material and parts to avoid production disruptions in the near-term, but future impacts to our production from disruptions in our supply chain are possible. The war in Ukraine is also impacting our airline and lessor customers. We are closely monitoring developments and potential Boeing impacts, and will continue to take mitigating actions as appropriate.
In addition, we and our suppliers are experiencing supply chain disruptions as a result of the impacts of COVID-19, global supply chain constraints, and labor shortages. We and our suppliers are also experiencing inflationary pressures. We continue to monitor the health and stability of the supply chain as we ramp up production. These measures and disruptions have reduced overall productivity and adversely impacted our financial position, results of operations and cash flows.
We continue to transform and improve our business processes. These activities are not intended to constrain our capacity but to enable the Company to emerge stronger and be more resilient when the market recovers. We expect that successful execution of these measures will improve near-term liquidity and long-term cost competitiveness.
Consolidated Results of Operations
The following table summarizes key indicators of consolidated results of operations:
(Dollars in millions, except per share data)Three months ended March 31
20222021
Revenues$13,991 $15,217 
GAAP
Loss from operations($1,169)($83)
Operating margins(8.4)%(0.5)%
Effective income tax rate23.2 %1.9 %
Net loss attributable to Boeing Shareholders($1,219)($537)
Diluted loss per share($2.06)($0.92)
Non-GAAP (1)
Core operating loss($1,452)($353)
Core operating margins(10.4)%(2.3)%
Core loss per share($2.75)($1.53)
(1)These measures exclude certain components of pension and other postretirement benefit expense. See pages 48-49 for important information about these non-GAAP measures and reconciliations to the most comparable GAAP measures.
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Revenues
The following table summarizes Revenues:
(Dollars in millions)Three months ended March 31
20222021
Commercial Airplanes$4,161 $4,269 
Defense, Space & Security5,483 7,185 
Global Services4,314 3,749 
Boeing Capital46 60 
Unallocated items, eliminations and other(13)(46)
Total$13,991 $15,217 
Revenues for the three months ended March 31, 2022 decreased by $1,226 million compared with the same period in 2021 driven by lower revenues at BCA and BDS, partially offset by higher revenues at BGS. BCA revenues decreased by $108 million primarily driven by lower wide-body deliveries, partially offset by higher 737 MAX deliveries. BDS revenues decreased by $1,702 million primarily due to net unfavorable effects of cumulative contract catch-up adjustments, lower revenue on the KC-46A Tanker program resulting from new orders for 27 aircraft received during the first quarter of 2021 and lower P-8 volume resulting from reduced production rates. BGS revenues increased by $565 million primarily due to higher commercial services volume. While commercial services volume is recovering, it remains below pre-pandemic levels.
Revenues will continue to be significantly impacted until the global supply chain stabilizes, labor shortages diminish, deliveries ramp up, and commercial airlines recover from the impacts of COVID-19.
Loss From Operations
The following table summarizes Loss from operations:
(Dollars in millions)Three months ended March 31
20222021
Commercial Airplanes($859)($856)
Defense, Space & Security(929)405 
Global Services632 441 
Boeing Capital(36)21 
Segment operating (loss)/earnings(1,192)11 
Pension FAS/CAS service cost adjustment208 193 
Postretirement FAS/CAS service cost adjustment75 77 
Unallocated items, eliminations and other(260)(364)
Loss from operations (GAAP)($1,169)($83)
FAS/CAS service cost adjustment * (283)(270)
Core operating loss (Non-GAAP) **($1,452)($353)
*    The FAS/CAS service cost adjustment represents the difference between the FAS pension and postretirement service costs calculated under GAAP and costs allocated to the business segments.
**    Core operating earnings/(loss) is a Non-GAAP measure that excludes the FAS/CAS service cost adjustment. See pages 48-49.
Loss from operations for the three months ended March 31, 2022 increased by $1,086 million compared with the same period in 2021. BDS loss from operations for the three months ended March 31, 2022 was $929 million, compared with earnings from operations of $405 million during the same period in 2021,
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primarily due to charges on the VC-25B, T-7A Red Hawk, KC-46A Tanker, and MQ-25 programs in the first quarter of 2022. BGS earnings from operations increased by $191 million primarily due to higher commercial services volume and favorable mix.
Core operating losses for the three months ended March 31, 2022 increased by $1,099 million compared to the same period in 2021, primarily due to changes in Segment operating (loss)/earnings as described above.
For discussion related to Postretirement Plans, see Note 11 to our Condensed Consolidated Financial Statements.
Unallocated Items, Eliminations and Other
The most significant items included in Unallocated items, eliminations and other are shown in the following table:
(Dollars in millions)Three months ended March 31
20222021
Share-based plans($83)($128)
Deferred compensation42 (52)
Amortization of previously capitalized interest(23)(22)
Research and development expense, net(52)(42)
Eliminations and other unallocated items(144)(120)
Unallocated items, eliminations and other ($260)($364)
Share-based plans expense for the three months ended March 31, 2022 decreased by $45 million compared with the same period in 2021 due to expenses incurred in 2021 associated with a grant of restricted stock units to most employees in December 2020.
Deferred compensation income was $42 million for the three months ended March 31, 2022 compared with expense of $52 million in the same period in 2021 primarily driven by broad market conditions and changes in our stock price.
Unallocated research and development expense for the three months ended March 31, 2022 was largely consistent with the same period in 2021.
Other Earnings Items 
(Dollars in millions)Three months ended March 31
20222021
Loss from operations($1,169)($83)
Other income, net181 190 
Interest and debt expense(630)(679)
Loss before income taxes(1,618)(572)
Income tax benefit376 11 
Net loss from continuing operations(1,242)(561)
Less: Net loss attributable to noncontrolling interest(23)(24)
Net loss attributable to Boeing Shareholders($1,219)($537)
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For the three months ended March 31, 2022 and 2021, non-operating pension income included in Other income, net was $220 million and $177 million. Non-operating pension income increased $43 million during the three months ended March 31, 2022 compared with the same period in 2021 primarily due to lower amortization of net actuarial losses, partially offset by higher interest cost and lower expected return on plan assets. Non-operating postretirement income was $15 million during the three months ended March 31, 2022 compared with $5 million of expense during the same period in 2021.
Other income, net included losses of $50 million during the three months ended March 31, 2022 reclassified from Accumulated other comprehensive loss (AOCI) associated with certain cash flow hedges because it is probable the forecasted transactions will not occur.
Interest and debt expense for the three months ended March 31, 2022 was lower compared with the same period in the prior year primarily as a result of lower debt balances.
For discussion related to Income Taxes, see Note 3 to our Condensed Consolidated Financial Statements.
Total Costs and Expenses (“Cost of Sales”)
Cost of sales, for both products and services, consists primarily of raw materials, parts, sub-assemblies, labor, overhead and subcontracting costs. Our BCA segment predominantly uses program accounting to account for cost of sales. Under program accounting, cost of sales for each commercial airplane program equals the product of (i) revenue recognized in connection with customer deliveries and (ii) the estimated cost of sales percentage applicable to the total remaining program. For long-term contracts, the amount reported as cost of sales is recognized as incurred. Substantially all contracts at our BDS segment and certain contracts at our BGS segment are long-term contracts with the U.S. government and other customers that generally extend over several years. Costs on these contracts are recorded as incurred. Cost of sales for commercial spare parts is recorded at average cost.
The following table summarizes cost of sales:
(Dollars in millions)Three months ended March 31
20222021Change
Cost of sales$13,645 $13,808 ($163)
Cost of sales as a % of Revenues
97.5 %90.7 %6.8 %
Cost of sales for the three months ended March 31, 2022 decreased by $163 million, or 1% compared with the same period in 2021, primarily due to lower revenues at BCA and BDS in 2022, partially offset by charges recorded at BDS in 2022 and higher revenues at BGS in 2022. Cost of sales as a percentage of Revenues increased during the three months ended March 31, 2022 compared with the same period in 2021 primarily due to higher charges recorded at BDS in 2022 than in 2021.
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Research and Development
Research and development expense, net is summarized in the following table:
(Dollars in millions)Three months ended March 31
20222021
Commercial Airplanes