Boeing Company (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 call, please press star then one on your telephone. At this time I am turning the call over to Mr. Eric Hill, Vice President of Investor Relations for opening remarks and introductions. Mr. Hill, please go ahead.

Thank you and good morning. Welcome to Boeing's quarterly earnings call. With me today are Kelly Ortberg, Boeing's President and Chief Executive Officer, and Jay Malave, Boeing's Executive Vice President and Chief Financial Officer. This quarter's webcast, earnings release, and presentation, which include relevant disclosures and non-GAAP reconciliations, are available on our website. Today's discussion includes forward-looking statements that are subject to risk and uncertainties, including the ones described in our SEC filings. As always, we will leave time at the end of the call for analyst questions. With that, I will turn the call over to Kelly Orkberg.

Thanks, Eric, and good morning everyone. Thank you for joining today's call. I'd like to take a moment to welcome our new CFO, Jay Malavi. It's been great to have Jay on board and officially welcome him to his first quarterly earnings call for Boeing. So now let's take a closer look at our business as we enter the final quarter of the year. Our sustained focus on safety and quality is driving better performance across the enterprise, and we are re-earning the trust of our stakeholders, including customers, regulators, and employees. Our focus on culture change continues to energize our teams and improve how we work together. By August of this year, we had delivered more commercial airplanes than all of last year. Our defense business is well positioned in the current geopolitical environment, and our service business continues to deliver in a robust aftermarket. Across all of our market segments, we continue to see strong demand, which is reflected in our growing backlog. We marked important milestones in our recovery as operations generated positive free cash flow in the quarter for the first time since 2023. And earlier this month we jointly agreed with the FAA to increase 737 production to 42 airplanes per month. While we're turning the corner, we're well aware of the work ahead of us to fully recover our performance, particularly on our commercial development and certification programs. We'll talk more about our status, but I want to emphasize that we're exploring every lever to deliver better performance on all of our programs. Now turning to the businesses, let me start with Boeing commercial airplanes. We're making meaningful progress in line with our safety and quality plan, and our investments here continue to improve the health of our factories. Notably, we've seen 75% reduction in traveled work on our 737, and a reduction of 60% across all airplane programs. Supported by greater stability, we successfully ramped up the 737 production to 38 airplanes per month as we had planned. We then focused on enablers such as improved quality, training, and workplace coaches to help stabilize at that rate and demonstrate that all of our key performance indicators are healthy. Once we were satisfied with the sustained health and stability of the production system, We then presented our discipline plan to the FAA to increase production to 42 airplanes a month. We continue to be guided by our safety and quality plan and will monitor our performance against these six KPIs as we methodically move to higher rates. As a reminder, we expect rate increases beyond 42 per month will go in increments of five. And while rate increase breaks won't be earlier than six months apart, We will remain disciplined and we won't move to higher rates until we achieve stability and readiness. Also in the quarter, the FAA announced it will allow delegation to Boeing to issue airworthiness certificates for some 737 MAX and 787 airplanes. Our team continues to work under the oversight of the FAA in building safe, high-quality commercial airplanes that comply with all airworthiness certification requirements. And we appreciate the FAA's confidence in Boeing and earning limited delegation authority is a responsibility we take very seriously. On the 787, the team is performing well and the program continues to work towards demonstrating stability at rate seven. As we previously shared, we'll be guided by our KPIs before we transition to planned higher rates and aim to move to eight per month in the near future. having recently completed a successful rate 8 capstone review with the FAA. At the same time, we're investing in the expansion of our South Carolina site to ensure we're prepared to meet exceptional market demand, and we look forward to an exciting future for the 787 program. Turning now to our development programs. On 777X, as we announced earlier this morning, we have delayed our expectations for certification and first delivery resulting in a $4.9 billion non-cash charge during the quarter. As we've previously said in the third quarter, completion of our certification program is taking longer than expected. We have worked to understand the implications to our go-forward plan and now anticipate first delivery of the 777-9 will occur in 2027. Jay will provide further details on this in his prepared remarks. We've accumulated more than 4,000 flight hours, more than double a typical flight test program, and so far there are no major technical issues on the airplane or on the engine. In the quarter, we completed critical testing of the airplane's brakes, engines, takeoff performance, and aerodynamic performance. However, we still have a significant portion of this flight test certification program to go, and our team is executing plans to complete this certification as part of the schedule we shared today. The airplane and the engine are performing well, demand for the airplane remains strong, and we remain confident that the 777X will be the next flagship airplane for our global customers. This is obviously a disappointment, but we just need more time to complete the certification process. With this charge, we now have a higher confidence that we'll complete the certification within the financial estimate. Better news on the 737-7 and 10 programs. With more than 3000 hours of lab testing and analysis, we now have a final depth of design changes to permanently address the engine anti-ice issue. This effort remains on the critical path and we're now following the lead of the FAA as we work to certify the suite of design updates. As we previously shared, we anticipate certification for the 737-7 and the to happen in 2026. Looking now at our defense business, we continue our active management approach, and we're making progress to de-risk our development programs. We again demonstrated stability on our EACs in the quarter, and our BDS team is working hard every day to earn trust of our customers. We also continue to proactively engage with our customers and suppliers. In many cases, we've been able to revise contract baselines to lower execution risk and create win-win outcomes for the customer and for Boeing. We still have work to get these programs through the development phase, and as I've said before, you're never done until you're done, but we clearly are making progress. In the quarter, BDS had several notable milestones, including delivery of the 100th KC-46 tanker across our combined U.S. Air Force and global customer base. We're proud our platform continues to provide unique value and capability to our customers. We also secured key contract awards in the quarter. The U.S. Space Force awarded Boeing a $2.8 billion contract for the Evolve Strategic SATCOM program, solidifying our position as a leader in the national security space. More recently, we signed multi-year contracts valued at $2.7 billion to produce additional PAC-3 Seekers, leveraging the advanced investments we've made to ramp up quickly and meet the demand. In St. Louis, we are executing our contingency plan as our IAM-represented workforce remains on strike. While, of course, we prefer not to be in this position, the team continues to work in support of our customers. We are building JDAMs without IAM workforce at about the same production rate as before the work stoppage, and the team is progressing on our MQ25 and T7A development programs. We'll continue to manage through this with focus on supporting our customers. Now moving on to global services. BGS had another strong quarter delivering exceptional performance for our company as they support our defense and commercial customers. The U.S. Navy awarded Boeing contracts totaling more than $400 million for the repair of the F-18 landing gear and outer wing panels. We're still on track to close the sale of Jefferson and the other portions of our digital business later in this quarter. At the same time, BGS team continues to secure deals for the digital capabilities that we'll retain related to fleet maintenance, operations, and repair. A good example, we recently announced an agreement with EVA Air that includes digital diagnostic tools and advanced analytics to improve efficiency and maintenance operations. Lastly, I'll share another update on our company's culture change. This remains a topic of interesting conversations with many of our stakeholders. I'm pleased with how the employees have embraced culture change. You'll recall that we use feedback and direct employee input to help shape our new values and behaviors earlier this year. Since then, as I've traveled around the company, I'm excited to see how many teams are using the values and behaviors to affect change in their daily work. For example, I have come across production teams that are using their daily tier meetings to call out which values and behaviors help them work better with each other. And during my recent visits in Miami and some of our global sites, teams told me how championing our values around safety and quality is strengthening our relationships with our customers. I'm confident that with our new values, behaviors, and the processes we're putting in place with performance management, leadership development, and new training opportunities, we'll continue to see positive culture change. Before we close out the year, we're also going to do another voice of employee survey like we did back in February. We'll get a feel for how we're doing on the culture change and get feedback on the areas that are working and where we still need to improve. All this work is going to take time to really take hold, and while I don't expect overnight improvement, we'll continue to listen to our people and use the values and behaviors. Now, before I finish my prepared remarks, I'd like to say thank you to our employees for their dedication to safety and quality and enabling another quarter of improved performance. While we're all disappointed with the 777X delays, it shouldn't overshadow the progress we're making. Our customers are giving us great feedback on the quality and delivery performance. We're increasing production rates. We turn cash positive in the quarter and we're winning in the market. We're well positioned to build on the momentum delivering on our more than $600 billion backlog and restore Boeing to the company we all know it can be. Now, let me hand it over to Jay to further discuss our operating results.