http://www.morningstar.com/earnings/18401262-boeing-co-ba-q3-2010.aspx

Boeing Co BA
Q3 2010 Earnings Call Transcript

Transcript Call Date 10/20/2010

Operator: Good day, everyone, and welcome to the Boeing Company's Third Quarter 2010 Earnings Conference Call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst and media question-and-answer sessions are being broadcast live over the Internet.

At this time, for opening remarks and introductions, I'm turning the call over to Mr. Scott Fitterer, Vice President of Investor Relations for the Boeing Company. Mr. Fitterer, please go ahead.

Scott Fitterer - IR: Thank you and good morning. Welcome to Boeing's third quarter earnings call. I am Scott Fitterer, and with me today are Jim McNerney, Boeing's Chairman, President and Chief Executive Officer; and James Bell, Boeing's Corporate President and Chief Financial Officer. After comments by Jim and James, we'll take your questions.

In fairness to others on the call, we ask that you please limit yourself to one question. As always, we have provided detailed financial information in our press release issued earlier today. As a reminder, you can follow today's broadcast and slide presentation through our website at boeing.com.

Before we begin, I need to remind you that any projections and goals we may include in our discussions this morning are likely to involve risks, which are detailed in our news release, in our various SEC filings, and in the forward-looking disclosures at the end of this web presentation.

Now, I'll turn the call over to Jim McNerney.

W. James McNerney, Jr. - Chairman, President and CEO: Thank you, Scott, and good morning. Let me begin with a few brief comments on the business environment, followed by some thoughts on our performance during the third quarter, after that James will walk you through the specifics of our results and then we will be glad to take your questions.

Starting with the business environment on Slide 2; although the pace of the global economic recovery has moderated in certain areas, we continue to see growth in air travel worldwide. This growth is being experienced in all regions, with emerging markets continuing to show the strongest recovery and both passenger and freighter markets rebounding more sharply than originally anticipated.

While the growth, that said, has begun to moderate, as last year at this time the industry started to expand from its low recessionary levels, yields remained strong due to the disciplined capacity management by the airlines over the past few years. In response to the resurgence in air travel growth and strong demand from our customers, we recently announced our third 737 production rate increase this year to 38 airplanes per month, beginning in the second quarter of 2013. This decision was supported by our current backlog of over 2,000 737s, existing options we expect customers to exercise and ongoing sales campaigns. Demand for 777s, 787s and 747-8s continue to support the production rate plans we had previously announced.

In commercial services, we are starting to see an increase in airline discretionary spending, for example, in airplane modifications. But we anticipate a prolonged recovery in this market as compared to prior cycles. On the Defense side, our U.S. Government customers continue to face budget pressures while at the same time trying to meet extensive current requirements. Last month the Department of Defense released details of its approach for achieving major efficiency and productivity gains in defense spending. Without a doubt, we recognized that we are in an era of significant fiscal constraint with our U.S. Government customers. In return, we are accelerating our efforts to aggressively manage costs and drive further productivity to support our customers' objectives and remain competitive with our industry peers.

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