Boeing Company (The)

Good day, everyone, and welcome to the Boeing Company's fourth quarter 2021 earnings conference call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst question and answer session, are being broadcast live over the internet. To ask a question on today's conference, please press the digit 1, followed by the digit 0 on your touchtone telephone. Again, it is 1-0 for questions. After pressing 1-0, you will hear that you've been placed in queue. Pressing 1-0 again will take you out of queue and may prevent you from being able to ask a question. At this time, for opening remarks and introductions, I'm turning the call over to Mr. Matt Welch, Vice President of Investor Relations for the Boeing Company. Mr. Welch, please go ahead.

Thank you, John, and good morning, everyone. Welcome to Boeing's fourth quarter 2021 earnings call. I am Matt Welch, and with me today are Dave Calhoun, Boeing's President and Chief Executive Officer, and Brian West, Boeing's Executive Vice President and Chief Financial Officer. And as a reminder, you can follow today's broadcast and slide presentation through our website at Boeing.com. As always, we have provided detailed financial information in our press release issued earlier today. Projections, estimates, and goals we include in our discussions this morning involve risks, including those described in our SEC filings and in the forward-looking statement disclaimer at the end of this web presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of certain non-GAAP measures. Now I will turn the call over to Dave Calhoun.

Yeah, thanks, Matt. Just up front, we change in this format just a bit so that I can limit my remarks up front to some observations and thoughts with respect to where we are in this rebuilding process. And then Brian will take into more detail on the financial side. With respect to the environment, there's no doubt Omicron has paused the industry recovery, but it has not changed the outlook for the industry recovery. such that while it might be delayed a few more months, the bookings and the customer discussions with respect to fleet plans, medium and long-term, are still quite robust, and we are quite confident in that outlook. 2021, I would characterize for Boeing as a rebuilding year. We came from recovery to rebuilding, and I give our team a lot of credit for, frankly, making a lot of progress on that front. Number one, on the orders front and demand, particularly led by the MAX and the freighter market. I feel very good about where things are and the competitiveness of our product line with respect to that market. Supply constraints to date have not constrained us. On the other hand, I think in the medium to long-term future, it's something we all have to plan for. I've always viewed the unfortunate consequences means by which we got here and the buildup of finished goods inventory, both with respect to the MAX and the 787. That's sort of a double-edged sword. I hate that we have a lot of inventory. On the other hand, it will probably serve us well in what is likely to be a robust recovery. With respect to fleet rebuilding, I would also just like to highlight, you know, the efficiency gains and maybe even more importantly the emissions gains. that our customers enjoy when they replace their current fleet with these new aircraft are significant and the pressures are severe. So I think that creates some additive pressure with respect to fleet renewals as we move forward. And I don't think either of those will let up. The MAX return to service, I'm quite proud of where we are on that. We have regulatory approval now. In almost every jurisdiction in the world, you know that China, Indonesia, and Ethiopia all delivered prior to the end of the year. We delivered 245 airplanes in 21. We've flown safely over 800,000 flight hours, 99.3% service reliability. And we've now flown more post the MAX grounding than we did pre-MAX grounding. China is preparing for their MAX return to service. and for delivery, and we have set up a plan that allows for that in the first quarter. But, of course, they'll take them as the government returns the current fleet to service. Our customers are moving methodically and very well with respect to that return to service. H7, very unfortunate charge that we took here in the fourth quarter. It reflects everything we've learned about the rework process itself, the data required to restart deliveries and obtain ticketing, and then customer expectations regarding concessions as we move forward. With all that said, I still feel fantastic about the future of the 787 airplane for the Boeing company. And anyway, as I think I point out every time we get together, These H-7s today, the fleet and service is flying, is more utilized than any other wide-body airplane. It's 99% of it is in service today with respect to the pre-pandemic levels. And it's the most utilized wide-body out there, 98.99% reliability. So this is a great product line and a competitive product. And as soon as we begin delivery, we feel very good about the ultimate recovery. On BDS, we had a bunch of really important milestones. The MQ-25, we experienced our first refueling, and we began carrier tests. The T7A production line, which is based on significantly improved development process and engineering modeling capabilities, is off to a very good start. And the efficiency associated with that development process is being realized. And then the tanker. The tanker today, despite the charge, again, which we don't feel great about by any respect, but the tanker today is an incredible asset for our customer and now serves 70% of the missions that were intended in the development of the tanker. And our job is to continue to deliver the tanker and to do it more expeditiously as we move forward. The good news is our customer likes the performance of the airplane, and, again, we intend to serve that need. Global services, it is recovering like all the service businesses that surround aviation. It's on a great path. The team's doing a terrific job. We had a small write-off with respect to material that ultimately would not be utilized in this recovery. But BGS is doing quite well and is experiencing the recovery. And then I feel very good about the free cash flow that we generated in the fourth quarter. As everybody knows, we have been focused relentlessly on improving our free cash flow situation. It has been our number one metric, and to be able to achieve that I think is terrific news. Sustainability, it is the one issue every customer wants to talk to us about, not with respect to 2050 or 2035, but they want to make sure that we have a program in place that will support them over that timeframe, and it is very important to every next order that we achieve. So believe it or not, the competition for today's airplanes, is often built around the future plans that we have with respect to sustainability. And I love where we're going on that and the story that we have for our customers. Innovation is strong in every way. I mentioned the MQ-25, the T7A. Future capabilities with respect to the next development program, we've invested a lot. We continue to invest a lot. It's more important to me that we get our development tools where they need to be demonstrate manufacturing capability and capacity where we need to be before we call out the spec on the next new commercial airplane. So I remain focused on that as a priority and so far so good. Talent, we were stable over the course of 21. Turnover was managed I think quite well and quite aggressively. And so I feel good about that and our ability to hire as we move forward. But I will also acknowledge that there are shortages out there in critical skills and we have to be very competitive in order to get them. I'll highlight the priorities we have. I don't think any of them should surprise anybody. They may look boring with respect to words like stability, safety, quality management, but that is still our focus and we're going to be relentless about it. This is a very important year as we begin the year and then exit the year. where we can predict to customers and to all of you the deliveries of our airplanes and ensure the quality is what it needs to be, et cetera. And culturally, our team is getting closer to their work than they've ever been. We feel good about that. And we invest. We're investing heavily in the future capabilities of our company. So that's it with respect to my upfront comments. I'll turn it over to Brian. We can go through the quarters performance and then a little more time for Q&A.