Boeing Company (The)

Thank you for standing by. Good day, everyone, and welcome to the Boeing Company's second quarter 2023 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's 1-0 for questions. After pressing 1-0, you will hear that you have been placed in queue. Pressing 1-0 again will take you out of the queue and may prevent you from being able to ask the 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 and good morning everyone. Welcome to Boeing's second quarter 2023 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 at Boeing.com. As always, detailed financial information included in today's press release. Furthermore, projections, estimates, and goals included in today's discussion involve risk. including those described in our SEC filings and in the forward-looking statement disclaimer at the end of the web presentation. In addition, we refer you to our earnings release for presentation and presentation for disclosures and reconciliation of certain non-GAAP measures. Now, I will turn the call over to Dave Calhoun.

Thank you, Matt. Welcome, everyone. As usual, I'm going to make a few comments up front with respect to the quarter. The quarter was solid, very solid, for all of our businesses. We continue to make steady progress on our recovery. We do have challenges. The supply chain, notably, is the most significant, but it's steadily getting better. Overall, we feel good about our operational and financial outlook, including the free cash flow and delivery ranges that we set for 2023, as well as for that 2025 and 26 timeframe. We're particularly encouraged by generating $2.6 billion in free cash flow in the quarter. Cash flow is the best metric that we have to measure progress against this recovery. We had a very strong second quarter, and we're confident in the $3 to $5 billion target for the year. I'd like to highlight a couple of updates around the business. Commercial airplanes had a very solid quarter. Demand remains high. We booked 460 net orders in the second quarter. And we're proud to announce or firm up key orders. I should say 220 for Air India and we secured our commitment for up to 300 with Ryanair. Broadly, demand is strong and resilient. The need for 42,000 airplanes over the next 20 years is what the industry is telling us. And with demand strong, the supply side of the system is beginning to settle down. Our focus remains on execution and driving stability in the production and the supply chain, and we're making steady progress. We delivered 136 commercial airplanes in a quarter, including 103 737s and 20 787s. Given the progress through the first half of the year, we are on the right path to reach our 737 and 787 delivery guidance for the year. And we're steadily increasing our rates on each program with focus on stability every step of the way. With respect to the spirit quality escapes, the work stoppage, and the bridge impairment, all have been contained and will be remedied as we exit the third quarter. So it will cost us a few deliveries in the quarter itself. We're also progressing across our key development programs, the 737-7, the 10, the 777X and the 777-8F. This quarter is a solid proof point that we're beginning to stabilize our operations and are on the right path, and the financial results speak for themselves. I'd also like to recognize our team and our customers on the 737 MAX return to service. As of this month, the fleet has flown more than 5 million flight hours and over 2 million flights since returning to service. all with exceptional reliability. The return to service in China is now largely complete as well, with more than 90% of the 737 MAX aircraft back in service. More broadly in China, we're encouraged by recent signs of progress. It's an important market for us. We're committed to our customers there, and we'll be ready to deliver when that time comes. Boeing Defense. In defense and space, we still have more work to improve operating performance, but the portfolio is well positioned and we're making progress. Results impacted by continuing losses on three fixed price development programs, commercial crew, the T7A, and the MQ25 have hit us in the quarter. On Starliner, we're in lockstep with our customer. We prioritize safety and we're taking whatever time is required. We're confident in that team and committed to getting it right. On MQ25, schedule pressure added cost to the program, but we've had some recent successes that give us confidence that we're heading in the right direction. We're approximately 25% of the way through the build of our first MQ25. The static test article fuselage is complete with preparation underway for the start of static testing this quarter. And on the T7A, the impact was not due to any performance challenge within the quarter and was more associated with our estimates for higher supply chain and production costs in the future, similar to what many in the industry are facing. Even with the cost growth, we're hitting some key milestones on the program. The Air Force successfully completed its first flight of the T7. We're heading toward the start of a flight test in earnest. We're looking at the program, and if you look at the program from award to this moment, we've had some very important successes. We moved from firm concept to early flight testing in just 36 months on this program. And a combination of model-based engineering, 3D design, and our advanced manufacturing increased first-time quality by 75% and reduced our assembly hours by 80%. We're also making progress on other key BDS programs. On the tanker, for example, we have now completed rework on the production aircraft requiring it. And we have resumed deliveries to the Air Force. As we move through each quarter, we're progressing through these contracts and getting closer to putting them in the rearview mirror. Despite the challenges, we're hitting some important milestones that increase our confidence. Most importantly, these programs will meet or beat the high performance standards of the warfighter. Given the fixed price nature of some of our contracts, we're very transparent about these financial impacts, and we're working to stabilize, to de-risk, and mature them through development. Quarterly charges have declined significantly over the last 18 months. The demand side of BDS is strong. We see solid order activity. In the quarter, we booked orders valued at $6 billion, including key contracts from the U.S. Army for 19 Chinooks, and Germany also shared its plans to purchase 60 Chinooks. We remain confident in our defense business. Demand is strong, and we will continue to improve operational performance to more normalized levels. Boeing Global Services. Another very strong quarter, both on the commercial and government side of BGS. Healthy revenue and expanding earnings and margins. We're really proud of this team. They've had solid, steady performance, and they've enabled both commercial and military customers to keep fleets flying through a very dynamic time. Some of our highlights this quarter include the expansion in Poland with a new parts distribution site, Japan Airlines adopting Boeing Insight Accelerator, our digital predictive maintenance solution for the 787 fleet. To wrap up my comments, We've had no shortage of challenges pop up to the start of this year, and we knew that would be the case. We've had conformance items that we've identified or external challenges within the supply chain, even logistic routes, including washed out bridges. This is a complex business. We expect items to come up, and when they do, we're transparent. We take action and we move forward. This is what progress looks like. We're proud of the team. We are well positioned for the year and for the long term. Relative to the strong demand, we will remain in a supply-constrained world for the foreseeable future. And with that, I'll turn it over to Brian.