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 ~~September~~June 30, ~~2019~~2020



☐		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 Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller 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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $5.00 Par Value	BA	New York Stock Exchange

As of ~~October 16, 2019,~~July 22, 2020, there were ~~562,791,233~~564,448,738 shares of common stock, $5.00 par value, issued and outstanding.

THE BOEING COMPANY

FORM 10-Q

For the Quarter Ended ~~September~~June 30, ~~2019~~2020

INDEX



Part I. Financial Information (Unaudited)		Page

Item 1.	Financial Statements	1
	Condensed Consolidated Statements of Operations	1
	Condensed Consolidated Statements of Comprehensive Income	2
	Condensed Consolidated Statements of Financial Position	3
	Condensed Consolidated Statements of Cash Flows	4
	Condensed Consolidated Statements of Equity	5
	Summary of Business Segment Data	7
	Note 1 - Basis of Presentation	8
	Note 2 - ~~Acquisitions~~Goodwill and ~~Joint Ventures~~Acquired Intangibles	910
	Note 3 - Earnings Per Share	910
	Note 4 - Income Taxes	1011
	Note 5 - ~~Inventories~~	11
	~~Note 6 - Contracts with Customers~~	11
	~~Note 7 - Customer Financing~~Allowance for Losses on Financial Assets	12
	Note 86 - ~~Investments~~Inventories	1412
	Note 7 - Contracts with Customers	13
	Note 8 - Customer Financing	13
	Note 9 - ~~Other Assets~~Investments	1415
	Note 10 - ~~Leases~~Commitments & Contingencies	15
	Note 11 - ~~Commitments & Contingencies~~	16
	~~Note 12 -~~ Arrangements with Off-Balance Sheet Risk	20
	~~Note 13 - Debt~~	21
	Note 1412 - Debt	22
	Note 13 - Postretirement Plans	22
	Note 1514 - Share-Based Compensation and Other Comprehensive Arrangements	23
	Note 1615 - Shareholders' Equity	24
	Note 1716 - Derivative Financial Instruments	2524
	Note 17 - Fair Value Measurements	26
	Note 18 - ~~Fair Value Measurements~~Legal Proceedings	2728
	Note 19 ~~- Legal Proceedings~~	29
	~~Note 20~~ - Segment and Revenue Information	29
	Report of Independent Registered Public Accounting Firm	34

Forward-Looking Statements		35

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
	Consolidated Results of Operations and Financial Condition	37
	Commercial Airplanes	4243
	Defense, Space & Security	4547
	Global Services	49
	Boeing Capital	4950
	Liquidity and Capital Resources	5051
	Off-Balance Sheet Arrangements	52
	Contingent Obligations	52
	Non-GAAP Measures	53
	~~Critical Accounting Policies~~ ~~and Estimates~~	54
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5554

Item 4.	Controls and Procedures	55

Part II. Other Information

Item 1.	Legal Proceedings	56

Item 1A.	Risk Factors	56

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5758

Item 3.	Defaults Upon Senior Securities	5758

Item 4.	Mine Safety Disclosures	5758

Item 5.	Other Information	5758

Item 6.	Exhibits	5859

Signature		5960

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)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Sales of products		$50,514			$64,848			$17,195			$22,463			$23,254			$33,319			$9,063			$13,094
Sales of services	8,134			7,938			2,785			2,683			5,461			5,349			2,744			2,657
Total revenues	58,648			72,786			19,980			25,146			28,715			38,668			11,807			15,751

Cost of products	(46,584		)	(53,134		)	(14,674		)	(18,882		)	(25,091		)	(31,910		)	(10,378		)	(15,672		)
Cost of services	(6,752		)	(6,215		)	(2,241		)	(2,140		)	(4,632		)	(4,511		)	(2,589		)	(2,122		)
Boeing Capital interest expense	(49		)	(51		)	(15		)	(18		)	(23		)	(34		)	(11		)	(16		)
Total costs and expenses	(53,385		)	(59,400		)	(16,930		)	(21,040		)	(29,746		)	(36,455		)	(12,978		)	(17,810		)
	5,263			13,386			3,050			4,106			(1,031		)	2,213			(1,171		)	(2,059		)
(Loss)/income from operating investments, net	(3		)	112			(8		)	32			(47		)	5			(45		)	(15		)
General and administrative expense	(2,857		)	(3,345		)	(1,001		)	(1,154		)	(2,034		)	(1,856		)	(1,161		)	(672		)
Research and development expense, net	(2,470		)	(2,417		)	(778		)	(826		)	(1,297		)	(1,692		)	(625		)	(826		)
Gain/(loss) on dispositions, net	296			76			(4		)	69
Earnings from operations	229			7,812			1,259			2,227
Other income	334			63			121			12
Gain on dispositions, net													92			300			38			192
Loss from operations													(4,317		)	(1,030		)	(2,964		)	(3,380		)
Other income, net													206			213			94			107
Interest and debt expense	(480		)	(317		)	(203		)	(106		)	(815		)	(277		)	(553		)	(154		)
Earnings before income taxes	83			7,558			1,177			2,133
Income tax benefit/(expense)	291			(522		)	(10		)	230
Net earnings		$374			$7,036			$1,167			$2,363
Loss before income taxes													(4,926		)	(1,094		)	(3,423		)	(3,427		)
Income tax benefit													1,890			301			1,028			485
Net loss													(3,036		)	(793		)	(2,395		)	(2,942		)
Less: net loss attributable to noncontrolling interest													(32		)				(19		)
Net loss attributable to Boeing Shareholders														($3,004	)		($793	)		($2,376	)		($2,942	)

Basic earnings per share		$0.66			$12.08			$2.07			$4.11
Basic loss per share														($5.31	)		($1.40	)		($4.20	)		($5.21	)

Diluted earnings per share		$0.66			$11.95			$2.05			$4.07
Diluted loss per share														($5.31	)		($1.40	)		($4.20	)		($5.21	)

Weighted average diluted shares (millions)	570.4			588.9			569.2			580.8			566.1			566.6			566.4			565.3

See Notes to the Condensed Consolidated Financial Statements.

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(Dollars in millions) Nine months ended September 30 Three months ended September 30
2019
2018
2019
2018
Net earnings
$374

$7,036

$1,167

$2,363
Other comprehensive income/(loss), net of tax:
Currency translation adjustments (61 ) (55 ) (59 ) 2
Unrealized gain on certain investments, net of tax of $0, ($1), $0 and $0 1
3

Unrealized (loss)/gain on derivative instruments:
Unrealized loss arising during period, net of tax of $30, $27, $25 and $1 (106 ) (97 ) (89 ) (4 )
Reclassification adjustment for (gains)/losses included in net earnings, net of tax of ($6), ($5), ($7) and ($3) 22
19
25
9
Total unrealized (loss)/gain on derivative instruments, net of tax (84 ) (78 ) (64 ) 5
Defined benefit pension plans and other postretirement benefits:
Amortization of prior service credits included in net periodic pension cost, net of tax of $18, $30, $5 and $10 (67 ) (106 ) (22 ) (35 )
Net actuarial gain arising during the period, net of tax of $0, $0, $0 and $0
1

Amortization of actuarial losses included in net periodic pension cost, net of tax of ($97), ($182), ($32) and ($60) 350
657
117
219
Settlements and curtailments included in net income, net of tax of $0, ($3), $0 and $0
6

Pension and postretirement cost related to our equity method investments, net of tax of ($5), $1, ($3) and $0 17
(4 ) 9
(1 )
Total defined benefit pension plans and other postretirement benefits, net of tax 300
554
104
183
Other comprehensive income/(loss), net of tax 156
424
(19 ) 190
Comprehensive loss related to noncontrolling interests (22 ) (12 ) (15 ) (2 )
Comprehensive income, net of tax
$508

$7,448

$1,133

$2,551



(Dollars in millions)	Six months ended June 30						Three months ended June 30
	2020			2019			2020			2019
Net loss		($3,036	)		($793	)		($2,395	)		($2,942	)
Other comprehensive (loss)/income, net of tax:
Currency translation adjustments	(33		)	(2		)	44			(3		)
Unrealized gain on certain investments, net of tax of $0 in all periods				1
Unrealized (loss)/gain on derivative instruments:
Unrealized (loss)/gain arising during period, net of tax of $54, $5, ($23) and $8	(186		)	(17		)	89			(28		)
Reclassification adjustment for losses/(gains) included in net loss, net of tax of ($4), $1, ($3) and $0	12			(3		)	10			(1		)
Total unrealized (loss)/gain on derivative instruments, net of tax	(174		)	(20		)	99			(29		)
Defined benefit pension plans and other postretirement benefits:
Amortization of prior service credits included in net periodic pension cost, net of tax of $12, $13, $6 and $7	(45		)	(45		)	(22		)	(22		)
Net actuarial loss arising during the period, net of tax of $3, $0, $3 and $0	(12		)				(12		)
Amortization of actuarial losses included in net periodic pension cost, net of tax of ($103), ($65), ($50) and ($33)	390			233			197			115
Settlements and curtailments included in net loss, net of tax of ($1), $0, ($1) and $0	2						2
Pension and postretirement cost related to our equity method investments, net of tax of $0, ($2), $0, and $0				8
Total defined benefit pension plans and other postretirement benefits, net of tax	335			196			165			93
Other comprehensive income, net of tax	128			175			308			61
Comprehensive loss related to noncontrolling interests				(7		)				(7		)
Comprehensive loss, net of tax	(2,908		)	(625		)	(2,087		)	(2,888		)
Less: Comprehensive loss related to noncontrolling interest	(32		)	(7		)	(19		)	(7		)
Comprehensive loss attributable to Boeing Shareholders, net of tax		($2,876	)		($618	)		($2,068	)		($2,881	)

See Notes to the Condensed Consolidated Financial Statements.

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Financial Position

(Unaudited)


(Dollars in millions, except per share data)	September 30 2019			December 31 2018			June 30 2020			December 31 2019
Assets
Cash and cash equivalents		$9,763			$7,637			$19,992			$9,485
Short-term and other investments	1,150			927			12,438			545
Accounts receivable, net	3,564			3,879			2,793			3,266
Unbilled receivables, net	11,078			10,025			8,570			9,043
Current portion of customer financing, net	166			460			115			162
Inventories	73,279			62,567			83,745			76,622
Other current assets	2,656			2,335
Other current assets, net							2,624			3,106
Total current assets	101,656			87,830			130,277			102,229
Customer financing, net	2,077			2,418			2,054			2,136
Property, plant and equipment, net of accumulated depreciation of $19,125 and $18,568	12,527			12,645
Property, plant and equipment, net of accumulated depreciation of $19,863 and $19,342							12,182			12,502
Goodwill	8,063			7,840			8,064			8,060
Acquired intangible assets, net	3,587			3,429			3,019			3,338
Deferred income taxes	296			284			729			683
Investments	1,117			1,087			1,066			1,092
Other assets, net of accumulated amortization of $561 and $503	3,275			1,826
Other assets, net of accumulated amortization of $617 and $580							5,481			3,585
Total assets		$132,598			$117,359			$162,872			$133,625
Liabilities and equity
Accounts payable		$15,101			$12,916			$13,700			$15,553
Accrued liabilities	19,224			14,808			22,493			22,868
Advances and progress billings	53,167			50,676			53,367			51,551
Short-term debt and current portion of long-term debt	4,354			3,190			2,922			7,340
Total current liabilities	91,846			81,590			92,482			97,312
Deferred income taxes	1,615			1,736			404			413
Accrued retiree health care	4,437			4,584			4,427			4,540
Accrued pension plan liability, net	14,590			15,323			15,663			16,276
Other long-term liabilities	3,621			3,059			2,821			3,422
Long-term debt	20,298			10,657			58,457			19,962
Total liabilities							174,254			141,925
Shareholders’ equity:
Common stock, par value $5.00 – 1,200,000,000 shares authorized; 1,012,261,159 shares issued	5,061			5,061			5,061			5,061
Additional paid-in capital	6,688			6,768			6,648			6,745
Treasury stock, at cost - 449,472,403 and 444,619,970 shares	(54,924		)	(52,348		)
Treasury stock, at cost - 447,840,938 and 449,352,405 shares							(54,829		)	(54,914		)
Retained earnings	53,986			55,941			47,478			50,644
Accumulated other comprehensive loss	(14,927		)	(15,083		)	(16,025		)	(16,153		)
Total shareholders’ equity	(4,116		)	339			(11,667		)	(8,617		)
Noncontrolling interests	307			71			285			317
Total equity	(3,809		)	410			(11,382		)	(8,300		)
Total liabilities and equity		$132,598			$117,359			$162,872			$133,625

See Notes to the Condensed Consolidated Financial Statements.

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


(Dollars in millions)	Nine months ended September 30						Six months ended June 30
	2019			2018			2020			2019
Cash flows – operating activities:
Net earnings		$374			$7,036
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net loss								($3,036	)		($793	)
Adjustments to reconcile net loss to net cash (used)/provided by operating activities:
Non-cash items –
Share-based plans expense	160			150			115			104
Depreciation and amortization	1,643			1,531			1,103			1,067
Investment/asset impairment charges, net	106			63			280			70
Customer financing valuation adjustments	249			(3		)	9			249
Gain on dispositions, net	(296		)	(76		)	(92		)	(300		)
Other charges and credits, net	190			158			815			145
Changes in assets and liabilities –
Accounts receivable	315			10			143			588
Unbilled receivables	(1,053		)	(1,732		)	285			(222		)
Advances and progress billings	2,355			3,457			1,822			1,842
Inventories	(9,565		)	(173		)	(6,741		)	(5,233		)
Other current assets	(224		)	(5		)	433			(887		)
Accounts payable	1,626			1,181			(3,181		)	2,002
Accrued liabilities	5,495			890			514			4,959
Income taxes receivable, payable and deferred	(989		)	(252		)	(1,894		)	(921		)
Other long-term liabilities	(577		)	1			(109		)	(509		)
Pension and other postretirement plans	(570		)	(89		)	(357		)	(390		)
Customer financing, net	391			(175		)	62			347
Other	144			403			247			80
Net cash (used)/provided by operating activities	(226		)	12,375			(9,582		)	2,198
Cash flows – investing activities:
Property, plant and equipment additions	(1,387		)	(1,227		)	(776		)	(922		)
Property, plant and equipment reductions	334			117			96			331
Acquisitions, net of cash acquired	(492		)	(250		)				(492		)
Contributions to investments	(1,439		)	(2,145		)	(12,557		)	(496		)
Proceeds from investments	967			1,369			543			758
Purchase of distribution rights	(20		)	(56		)				(20		)
Other	(10		)	(5		)	8			(12		)
Net cash used by investing activities	(2,047		)	(2,197		)	(12,686		)	(853		)
Cash flows – financing activities:
New borrowings	19,621			4,696			42,302			11,670
Debt repayments	(8,978		)	(4,029		)	(8,265		)	(6,422		)
Contributions from noncontrolling interests	7			35						7
Stock options exercised	51			70			27			47
Employee taxes on certain share-based payment arrangements	(241		)	(247		)	(164		)	(238		)
Common shares repurchased	(2,651		)	(8,415		)				(2,651		)
Dividends paid	(3,473		)	(2,976		)	(1,158		)	(2,317		)
Net cash provided/(used) by financing activities	4,336			(10,866		)
Net cash provided by financing activities							32,742			96
Effect of exchange rate changes on cash and cash equivalents, including restricted	(27		)	(37		)	(11		)	(2		)
Net increase/(decrease) in cash & cash equivalents, including restricted	2,036			(725		)
Net increase in cash & cash equivalents, including restricted							10,463			1,439
Cash & cash equivalents, including restricted, at beginning of year	7,813			8,887			9,571			7,813
Cash & cash equivalents, including restricted, at end of period	9,849			8,162			20,034			9,252
Less restricted cash & cash equivalents, included in Investments	86			128			42			85
Cash and cash equivalents at end of period		$9,763			$8,034			$19,992			$9,167

See Notes to the Condensed Consolidated Financial Statements.

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Equity

For the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019

(Unaudited)


	Boeing shareholders																				Boeing shareholders
(Dollars in millions, except per share data)	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Non- controlling Interests			Total			Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Non- controlling Interests			Total
Balance at January 1, 2018		$5,061		$6,804			($43,454	)		$49,618			($16,373	)		$57			$1,713
Net earnings									7,036						(12		)	7,024
Other comprehensive income, net of tax of ($133)												424						424
Share-based compensation and related dividend equivalents			167						(17		)							150
Treasury shares issued for stock options exercised, net			(37		)	107												70
Treasury shares issued for other share-based plans, net			(220		)	(19		)										(239		)
Common shares repurchased						(8,415		)										(8,415		)
Cash dividends declared ($3.42 per share)									(1,971		)							(1,971		)
Changes in noncontrolling interests															35			35
Balance at September 30, 2018		$5,061		$6,714			($51,781	)		$54,666			($15,949	)		$80			($1,209	)

Balance at January 1, 2019		$5,061		$6,768			($52,348	)		$55,941			($15,083	)		$71			$410			$5,061		$6,768			($52,348	)		$55,941			($15,083	)		$71			$410
Net earnings									374						(22		)	352
Other comprehensive income, net of tax of ($60)												156						156
Net loss																													(793		)				(7		)	(800		)
Other comprehensive income, net of tax of ($48)																																175						175
Share-based compensation and related dividend equivalents			176						(16		)							160					120						(16		)							104
Treasury shares issued for stock options exercised, net			(42		)	82												40					(39		)	82												43
Treasury shares issued for other share-based plans, net			(214		)	(7		)										(221		)			(211		)	(15		)										(226		)
Common shares repurchased						(2,651		)										(2,651		)						(2,651		)										(2,651		)
Cash dividends declared ($4.11 per share)									(2,313		)							(2,313		)									(2,313		)							(2,313		)
Changes in noncontrolling interests															258			258																	315			315
Balance at September 30, 2019		$5,061		$6,688			($54,924	)		$53,986			($14,927	)		$307			($3,809	)
Balance at June 30, 2019																						$5,061		$6,638			($54,932	)		$52,819			($14,908	)		$379			($4,943	)

Balance at December 31, 2019																						$5,061		$6,745			($54,914	)		$50,644			($16,153	)		$317			($8,300	)
Impact of ASU 2016-13																													(162		)							(162		)
Balance at January 1, 2020																						$5,061		$6,745			($54,914	)		$50,482			($16,153	)		$317			($8,462	)
Net loss																													(3,004		)				(32		)	(3,036		)
Other comprehensive income, net of tax of ($39)																																128						128
Share-based compensation and related dividend equivalents																							115															115
Treasury shares issued for stock options exercised, net																							(20		)	47												27
Treasury shares issued for other share-based plans, net																							(192		)	38												(154		)
Balance at June 30, 2020																						$5,061		$6,648			($54,829	)		$47,478			($16,025	)		$285			($11,382	)

See Notes to the Condensed Consolidated Financial Statements.

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Equity

For the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019

(Unaudited)


	Boeing shareholders																			Boeing shareholders
(Dollars in millions, except per share data)	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss			Non- controlling Interests			Total			Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Non- controlling Interests			Total
Balance at July 1, 2018		$5,061		$6,676			($49,342	)		$52,303		($16,139	)		$67			($1,374	)
Net earnings									2,363					(2		)	2,361
Other comprehensive income, net of tax of ($52)											190						190
Balance at April 1, 2019																					$5,061		$6,573			($54,630	)		$58,090			($14,969	)		$107			$232
Net loss																												(2,942		)				(7		)	(2,949		)
Other comprehensive income, net of tax of ($18)																															61						61
Share-based compensation and related dividend equivalents			52														52					73						(16		)							57
Treasury shares issued for stock options exercised, net			(5		)	12											7					(3		)	5												2
Treasury shares issued for other share-based plans, net			(9		)	(1		)									(10		)			(5		)	3												(2		)
Common shares repurchased						(2,450		)									(2,450		)						(310		)										(310		)
Cash dividends declared ($4.11 per share)																												(2,313		)							(2,313		)
Changes in noncontrolling interests														15			15																	279			279
Balance at September 30, 2018		$5,061		$6,714			($51,781	)		$54,666		($15,949	)		$80			($1,209	)
Balance at June 30, 2019																					$5,061		$6,638			($54,932	)		$52,819			($14,908	)		$379			($4,943	)

Balance at July 1, 2019		$5,061		$6,638			($54,932	)		$52,819		($14,908	)		$379			($4,943	)
Net earnings									1,167					(15		)	1,152
Other comprehensive (loss)/income, net of tax of ($12)											(19		)				(19		)
Balance at April 1, 2020																					$5,061		$6,595			($54,842	)		$49,854			($16,333	)		$305			($9,360	)
Net loss																												(2,376		)				(19		)	(2,395		)
Other comprehensive (loss)/income, net of tax of ($68)																															308						308
Share-based compensation and related dividend equivalents			56														56					60															60
Treasury shares issued for stock options exercised, net			(3		)												(3		)			(4		)	11												7
Treasury shares issued for other share-based plans, net			(3		)	8											5					(3		)	2												(1		)
Changes in noncontrolling interests														(57		)	(57		)															(1		)	(1		)
Balance at September 30, 2019		$5,061		$6,688			($54,924	)		$53,986		($14,927	)		$307			($3,809	)
Balance at June 30, 2020																					$5,061		$6,648			($54,829	)		$47,478			($16,025	)		$285			($11,382	)

See Notes to the Condensed ~~-Consolidated~~Consolidated Financial Statements.

The Boeing Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Summary of Business Segment Data

(Unaudited)


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Revenues:
Commercial Airplanes		$24,793			$40,968			$8,249			$14,071			$7,838			$16,544			$1,633			$4,722
Defense, Space & Security	20,265			19,518			7,042			6,937			12,630			13,166			6,588			6,579
Global Services	13,820			12,148			4,658			4,101			8,116			9,162			3,488			4,543
Boeing Capital	207			214			66			77			134			141			69			75
Unallocated items, eliminations and other	(437		)	(62		)	(35		)	(40		)	(3		)	(345		)	29			(168		)
Total revenues		$58,648			$72,786			$19,980			$25,146			$28,715			$38,668			$11,807			$15,751
(Loss)/earnings from operations:
Earnings/(loss) from operations:
Commercial Airplanes		($3,813	)		$5,230			($40	)		$2,033			($4,830	)		($3,773	)		($2,762	)		($4,946	)
Defense, Space & Security	2,577			886			755			(247		)	409			1,827			600			975
Global Services	2,013			1,799			673			548			36			1,340			(672		)	687
Boeing Capital	86			71			29			27			17			57			(7		)	37
Segment operating profit	863			7,986			1,417			2,361
Segment operating loss													(4,368		)	(549		)	(2,841		)	(3,247		)
Unallocated items, eliminations and other	(1,727		)	(1,193		)	(522		)	(471		)	(651		)	(1,210		)	(478		)	(498		)
FAS/CAS service cost adjustment	1,093			1,019			364			337			702			729			355			365
Earnings from operations	229			7,812			1,259			2,227
Other income	334			63			121			12
Loss from operations													(4,317		)	(1,030		)	(2,964		)	(3,380		)
Other income, net													206			213			94			107
Interest and debt expense	(480		)	(317		)	(203		)	(106		)	(815		)	(277		)	(553		)	(154		)
Earnings before income taxes	83			7,558			1,177			2,133
Income tax benefit/(expense)	291			(522		)	(10		)	230
Net earnings		$374			$7,036			$1,167			$2,363
Loss before income taxes													(4,926		)	(1,094		)	(3,423		)	(3,427		)
Income tax benefit													1,890			301			1,028			485
Net loss													(3,036		)	(793		)	(2,395		)	(2,942		)
Less: Net loss attributable to noncontrolling interest													(32		)				(19		)
Net loss attributable to Boeing Shareholders														($3,004	)		($793	)		($2,376	)		($2,942	)

This information is an integral part of the Notes to the Condensed Consolidated Financial Statements. See Note 2019 for further segment results.

The Boeing Company and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Dollars in millions, except ~~per share data)~~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 ~~September~~June 30, ~~2019~~2020 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 ~~2018~~2019 Annual Report on Form 10-K. Certain amounts in prior periods have been adjusted to conform with the current year presentation.

Liquidity Matters

The global outbreak of COVID-19 coupled with the ongoing grounding of the 737 MAX airplane is having a significant adverse impact on our business and is expected to significantly reduce revenue, earnings and operating cash flow in future quarters. The aerospace industry is facing an unprecedented shock to demand for air travel which creates a tremendous challenge for our customers, our business and the entire aerospace manufacturing and services sector. We currently expect it will take approximately three years for travel to return to 2019 levels and a few years beyond that for the industry to return to long-term trend growth. There is significant uncertainty with respect to when commercial air traffic levels will recover, and whether and at what point capacity will return to and/or exceed pre-COVID-19 levels.

During the first half of 2020, net cash used by operating activities was $9.6 billion and we expect negative operating cash flows in future quarters until deliveries ramp up. In the first quarter of 2020, we entered into and fully drew on a $13.8 billion two-year delayed draw term loan credit agreement (delayed draw term loan facility). In the second quarter of 2020, we issued $25 billion of fixed rate senior notes that mature between 2023 and 2060. As a result, our cash and short-term investment balance has increased to $32.4 billion and our debt balance has increased to $61.4 billion at June 30, 2020.

The major credit rating agencies downgraded our short term and long term credit ratings during the first half of 2020, and there is risk for further downgrades. At June 30, 2020, debt includes $2.4 billion of commercial paper down from $6.1 billion at December 31, 2019. Commercial paper at June 30, 2020 includes $0.5 billion and $1.9 billion maturing in the third and fourth quarters of 2020. In the current environment, we may have limited future access to the commercial paper market. In addition, we have term notes of $350 maturing in the fourth quarter of 2020.

At June 30, 2020, trade payables included $4.4 billion payable to suppliers who have elected to participate in supply chain financing programs. While access to supply chain financing could be curtailed if our credit ratings are downgraded, we do not believe that changes in the availability of supply chain financing will have a significant impact on our liquidity.

At June 30, 2020 and December 31, 2019 we had $9.6 billion of unused borrowing capacity on revolving credit agreements. We anticipate that these credit lines will primarily serve as back-up liquidity to support our general corporate borrowing needs. We plan to negotiate extending these facilities in the fourth quarter of 2020 when $3.2 billion of the $9.6 billion comes up for renewal.

In addition to our debt issuances, we have taken a number of actions to improve liquidity. During the first quarter of 2020, our Board of Directors terminated its prior authorization to repurchase shares of the Company’s outstanding common stock and suspended the declaration and/or payment of dividends until further notice. We have also reduced production rates in our commercial business to reflect the impact of COVID-19 on the industry. We have furloughed certain employees and are executing on our plans to reduce our workforce through a combination of voluntary and involuntary layoffs and natural turnover. In the second quarter of 2020, we recorded severance costs for approximately 19,000 employees, of which approximately

6,000 have left the Company as of June 30, 2020, and the remainder are expected to leave in the second half of 2020.

We are reducing discretionary spending as well as reducing or deferring research and development and capital expenditures. 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 are also deferring certain tax payments pursuant to the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

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 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.

Standards Issued and Implemented

In the first quarter of ~~2019,~~2020, we adopted ~~Accounting Standards Update (ASU) 2016-02, Leases~~ASU 2016-13, Financial Instruments - Credit Losses (Topic ~~842) and recognized~~326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), using a modified retrospective method, which resulted in the recognition of allowances for credit losses on our Condensed Consolidated Statement of Financial Position ~~$1,064~~as of ~~lease liabilities~~January 1, 2020 and a $162 cumulative-effect adjustment to retained earnings to align our credit loss methodology with ~~corresponding right-of-use assets for operating leases. Our accounting for finance leases and lessor contracts remains substantially unchanged.~~the new standard. The standard ~~has no impact to cash provided or used by operating, investing, or financing activities on our Condensed Consolidated Statements~~replaces the incurred loss impairment methodology under Topic 310 with a methodology that reflects expected credit losses and requires the use of ~~Cash Flows. As permitted under the standard, we elected prospective application of the new guidance~~a forward-looking expected credit loss model for accounts receivables, loans, and ~~prior periods continue to be presented in accordance with Topic 840. Refer to our 2018 Annual Report on Form 10-K~~certain other financial assets. See Note 5 and 8 for ~~disclosures required by Topic 840. We also elected the package of practical expedients, which among other things, does not require reassessment of lease classification.~~additional disclosures.

In the first quarter of ~~2019,~~2020, we also adopted ASU ~~2017-12, Derivatives~~2017-04, Intangibles-Goodwill and ~~Hedging~~Other (Topic ~~815), using~~350): Simplifying the ~~modified retrospective method. The standard refines and simplifies hedge accounting requirements~~Test for ~~both financial and commodity risks. The impact of the adoption was not material.~~Goodwill Impairment (ASU 2017-04). See Note 172 for additional disclosures.

Significant Accounting Policies - Update

Our significant accounting policies are described in "Note 1: Summary of Significant Accounting Policies" of our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. Our updated significant accounting policies described below reflect the impact of adopting Topic ~~842.~~326.

~~Leases~~ Allowances for losses on certain financial assetsWe determine if an arrangement is, or contains, a lease at the inception date. Operating leases are included in Other assets, with the related liabilities included in Accrued liabilities and Other long-term liabilities. Assets under finance leases are included in Property, plant and equipment, net, with the related liabilities included in Short-term debt and current portion of long-term debt and Long-term debt on the Condensed Consolidated Statements of Financial Position.

~~Operating lease assets represent our right~~We establish allowances for credit losses on accounts receivable, unbilled receivables, customer financing receivables, and certain other financial assets. The adequacy of these allowances are assessed quarterly through consideration of factors including, but not limited to, use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the lease commencement date based on thecustomer credit ratings, bankruptcy filings, published or estimated ~~present value of lease payments over the lease term. We use our estimated incremental borrowing rate in determining the present value of lease payments. Variable components~~credit default rates, age of the ~~lease payments such as fair market value adjustments, utilities,~~receivable, expected loss rates and ~~maintenance costs~~collateral exposures. We assign internal credit ratings for all customers and determine the creditworthiness of each customer based upon publicly available information and information obtained directly from our customers. Our rating categories are ~~expensed as incurred and not included in determining the present value. Our lease terms include options~~comparable to ~~extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.~~

~~We have lease agreements with lease and non-lease components which are accounted for as a single lease component.~~

those used by major credit rating agencies.

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. ~~Actual~~We believe that the accounting estimates and assumptions are appropriate given the increased uncertainties surrounding the severity and duration of the impacts of the COVID-19 pandemic, however actual results could differ from those estimates.

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 ~~years'~~periods' revenue and earnings, including certain reach-forward losses, across all long-term contracts were as follows:

(In millions - except per share amounts) Nine months ended September 30 Three months ended September 30
2019
2018
2019
2018
Increase/(decrease) to Revenue
$166

($14 )
($63 )
($59 )
Increase/(decrease) to Earnings from Operations
$152

($314 )
($23 )
($155 )
Increase/(decrease) to Diluted EPS
$1.20

($0.50 )
($0.04 )
($0.30 )



(In millions - except per share amounts)	Six months ended June 30					Three months ended June 30
	2020			2019		2020		2019
(Decrease)/increase to Revenue		($290	)		$229		$144		$69
(Decrease)/increase to (Loss)/earnings from operations		($749	)		$175		$90		$28
(Decrease)/increase to Diluted EPS		($0.82	)		$0.22		$0.11		$0.04

Note 2 – ~~Acquisitions~~Goodwill and ~~Joint Ventures~~Acquired Intangibles

~~Strategic Partnership with Embraer~~

~~During~~In the first quarter of ~~2019,~~2020, we ~~entered into definitive transaction documents with respect~~adopted ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The standard simplifies the quantitative impairment test from a two-step process to a ~~strategic partnership with Embraer S.A. (Embraer).~~one-step process. The ~~partnership contemplates~~quantitative test is performed by comparing the carrying value of net assets to the estimated fair value of the related operations. If the fair value is determined to be less than carrying value, the shortfall up to the carrying value of the goodwill represents the amount of goodwill impairment. The standard continues to permit a company to test goodwill for impairment by performing a qualitative assessment or using the quantitative test.

We completed our annual assessment of goodwill as of April 1, 2020 and determined that the ~~parties enter into~~fair value of each reporting unit exceeded its corresponding carrying value and that there is no impairment of goodwill.

The COVID-19 pandemic continues to impact our Commercial Airplanes and Commercial Services businesses. Therefore, we believe the COVID-19 pandemic is a joint venture comprising the commercial aircraft and services operations of Embraer, in which Boeing will acquire an 80 percent ownership stake for $4,200, as well as a joint venture to promote and develop new markets for the multi-mission medium airlift KC-390, in which Boeing will hold a 49 percent ownership stake. Embraer shareholders approved the transaction, which remains subject to regulatory approvals and other customary closing conditions. We are actively engaged with authorities in relevant jurisdictions and have obtained a number of regulatory approvals, including clearance to closetriggering event in the ~~United States. In October 2019,~~second quarter of 2020 for testing whether goodwill recorded by our Commercial Airplanes and Commercial Services reporting units is impaired. At June 30, 2020, Commercial Airplanes has $1,315 of goodwill and Commercial Services has $3,056. We performed a qualitative assessment and determined it is not more likely than not that the ~~European Commission commenced a Phase II investigation in connection with its regulatory review~~fair values of our Commercial Airplane and Commercial Services reporting units were less than their carrying values as of June 30, 2020. We will continue to monitor the impacts of the ~~transaction, and~~COVID-19 pandemic in future quarters. Changes in our forecasts or further decreases in the ~~transaction is now expected~~value of our common stock could cause book values to ~~close~~exceed fair values which may result in ~~early 2020. If the transaction is not completed due to failure to obtain antitrust approvals, we would be required to pay a termination fee of $100.~~goodwill impairment charges in future periods.

Note 3 – 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.

The elements used in the computation of basic and diluted earnings per share were as follows:


(In millions - except per share amounts)	Nine months ended September 30				Three months ended September 30				Six months ended June 30						Three months ended June 30
	2019		2018		2019		2018		2020			2019			2020			2019
Net earnings		$374		$7,036		$1,167		$2,363
Net loss attributable to Boeing Shareholders										($3,004	)		($793	)		($2,376	)		($2,942	)
Less: earnings available to participating securities			5		1		2
Net earnings available to common shareholders		$374		$7,031		$1,166		$2,361
Net loss available to common shareholders										($3,004	)		($793	)		($2,376	)		($2,942	)
Basic
Basic weighted average shares outstanding	566.2		582.7		565.2		574.8		566.1			566.6			566.4			565.3
Less: participating securities	0.6		0.7		0.6		0.6		0.5			0.6			0.5			0.6
Basic weighted average common shares outstanding	565.6		582.0		564.6		574.2		565.6			566.0			565.9			564.7
Diluted
Basic weighted average shares outstanding	566.2		582.7		565.2		574.8		566.1			566.6			566.4			565.3
Dilutive potential common shares⁽¹⁾	4.2		6.2		4.0		6.0
Diluted weighted average shares outstanding	570.4		588.9		569.2		580.8		566.1			566.6			566.4			565.3
Less: participating securities	0.6		0.7		0.6		0.6		0.5			0.6			0.5			0.6
Diluted weighted average common shares outstanding	569.8		588.2		568.6		580.2		565.6			566.0			565.9			564.7
Net earnings per share:
Net loss per share:
Basic		$0.66		$12.08		$2.07		$4.11		($5.31	)		($1.40	)		($4.20	)		($5.21	)
Diluted	0.66		11.95		2.05		4.07		(5.31		)	(1.40		)	(4.20		)	(5.21		)


⁽¹⁾	Diluted earnings per share includes any dilutive impact of stock options, restricted stock units, performance-based restricted stock units and performance awards.

~~The~~As a result of incurring a net loss for the six and three months ended June 30, 2020 potential common shares of 1.8 million and 1.2 million were excluded from diluted loss per share because the effect would have been antidilutive. As a result of incurring a net loss for the six and three months ended June 30, 2019 potential common shares of 4.4 million and 4.0 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 ~~earnings/(loss)~~loss per share because the effect was either antidilutive or the performance condition was not met.


(Shares in millions)	Nine months ended September 30		Three months ended September 30		Six months ended June 30		Three months ended June 30
	2019	2018	2019	2018	2020	2019	2020	2019
Performance awards	2.6	2.6	2.6	2.2	6.1	2.7	5.5	2.7
Performance-based restricted stock units	0.6	0.3	0.6	0.2	1.4	0.6	1.4	0.6

Note 4 – Income Taxes

Our effective income tax rates were ~~(350.6)%~~38.4% and ~~0.8%~~30.0% for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019~~2020 and ~~6.9%~~27.5% and ~~(10.8)%~~14.2% for the same periods in the prior year. The ~~tax rates in 2019 and 2018 reflect the U.S. federal~~2020 tax rate ~~of 21% reduced by~~includes tax benefits from the CARES Act enacted on March 27, 2020 due to the Act's five year net operating loss carry back provision while the 2019 tax rate reflects tax benefits associated with intangible income derived from serving non-U.S. ~~markets,~~markets. The carry back provisions enable us to benefit from certain losses and re-measure certain deferred tax assets and liabilities at the former federal tax rate of 35%. The tax rates in 2020 and 2019 also reflect research and development tax credits and excess tax benefits related to share-based payments. Additionally, in the third quarter of 2018, $412 of discrete tax benefits were recorded related to the settlement of the 2013-2014 federal tax audit. The year to date tax rate variance is primarily due to lower pre-tax income in 2019, resulting in larger 2019 discrete tax rate benefits.

Federal income tax audits have been settled for all years prior to 2015. The Internal Revenue Service (IRS) began the 2015-2017 federal tax audit in the first quarter of 2019. We are also subject to examination in major state and international jurisdictions for the ~~2001-2017~~2007-2018 tax years. We believe appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years.

Audit outcomes and the timing of audit settlements are subject to significant uncertainty. It is reasonably possible that within the next 12 months unrecognized tax benefits related to ~~state~~federal matters under audit may decrease by up to ~~$480~~$690 based on current estimates.

Note 5 - Allowances for Losses on Financial Assets

Upon adoption of ASU 2016-13, we recorded a $162 cumulative-effect adjustment to retained earnings to increase our allowances for credit losses, resulting in a balance of $337 as of January 1, 2020. The change in allowances for expected credit losses for the six months ended June 30, 2020 consisted of the following:



	Accounts receivable, net			Unbilled receivables, net			Other Current Assets, net			Customer financing, net			Other Assets, net			Total
Balance at January 1, 2020		($138	)		($81	)		($38	)		($5	)		($75	)		($337	)
Changes in estimates	(246		)	(107		)	(10		)	(9		)	(34		)	(406		)
Write-offs	3															3
Balance at June 30, 2020		($381	)		($188	)		($48	)		($14	)		($109	)		($740	)

Note 6 – Inventories

Inventories consisted of the following:


	September 30 2019		December 31 2018		June 30 2020		December 31 2019
Long-term contracts in progress		$966		$2,129		$957		$1,187
Commercial aircraft programs	63,518		52,753		71,945		66,016
Commercial spare parts, used aircraft, general stock materials and other	8,795		7,685		10,843		9,419
Total		$73,279		$62,567		$83,745		$76,622

Long-Term Contracts in Progress

Long-term contracts in progress includes Delta launch program inventory that is being sold at cost to United Launch Alliance (ULA) under an inventory supply agreement that terminates on March 31, 2021. The inventory balance was $176 ~~and $227~~ at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019. See indemnifications to ULA in Note ~~12.~~11.

Included in inventories are capitalized precontract costs of ~~$679~~$794 at ~~September~~June 30, 2020 and $711 at December 31, 2019 primarily related to the KC-46A Tanker and Commercial ~~Crew and $644 atDecember 31, 2018 primarily related to the KC-46A Tanker.~~Crew. See Note ~~11.~~10.

Commercial Aircraft Programs

At ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, commercial aircraft programs inventory included $1,209 and $1,313 of deferred production costs and $506 and $521 of unamortized tooling and other non-recurring costs related to the 737 program. At June 30, 2020, $1,678 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 $37 is expected to be recovered from units included in the program accounting quantity that represent expected future orders.

At June 30, 2020 and December 31, 2019, commercial aircraft programs inventory included the following amounts related to the 777X program: $6,854 and $5,628 of work in process and $3,141 and $2,914 of unamortized tooling and other non-recurring costs.

At June 30, 2020 and December 31, 2019, commercial aircraft programs inventory included the following amounts related to the 787 program: ~~$26,593~~$27,515 and ~~$27,852~~$24,772 of work in process (including deferred production costs of ~~$19,825~~$16,035 and ~~$22,967)~~$18,716), ~~$2,273~~$2,006 and ~~$2,453~~$2,202 of supplier advances, and ~~$2,215~~$1,924 and ~~$2,638~~$2,092 of unamortized tooling and other non-recurring costs. At ~~September~~June 30, ~~2019, $14,454~~2020, $15,496 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 orders and ~~$7,586 is expected to be recovered from units included in the program accounting quantity that represent expected future orders.~~

At September 30, 2019 and December 31, 2018, commercial aircraft programs inventory included $1,481 and $463 of deferred production costs and $522 and $471 of unamortized tooling and other non-recurring costs related to the 737 program. At September 30, 2019, $1,999 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 $4$2,463 is expected to be recovered from units included in the program accounting quantity that represent expected future orders.

Commercial aircraft programs inventory included amounts credited in cash or other consideration (early issue sales consideration) to airline customers totaling ~~$2,767~~$2,941 and ~~$2,844~~$2,863 at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

Note 67 – Contracts with Customers

Unbilled receivables ~~increased~~decreased from ~~$10,025~~$9,043 at December 31, ~~2018~~2019 to ~~$11,078~~$8,570 at ~~September~~June 30, ~~2019,~~ 2020, primarily driven by ~~revenue recognized~~an increase in billings at ~~BDS~~Defense, Space & Security (BDS) and ~~BGS~~Global Services (BGS), as well as an increase in ~~excess of billings~~.allowances for expected credit losses at BGS.

Advances and progress billings increased from ~~$50,676~~$51,551 at December 31, ~~2018~~2019 to ~~$53,167~~$53,367 at ~~September~~June 30, ~~2019,~~ 2020, primarily driven by advances on orders received in excess of revenue recognized at ~~BCA,~~Commercial Airplanes (BCA), BDS and BGS.

Revenues recognized during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 from amounts recorded as Advances and progress billings at the beginning of each year were ~~$13,216~~$5,255 and ~~$19,006.~~$10,116. Revenues recognized during the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 from amounts recorded as Advances and progress billings at the beginning of each year were ~~$3,100~~$1,465 and ~~$6,249.~~

Certain commercial airplane customers are experiencing liquidity issues and seeking additional capital. Should these customers fail to address their liquidity issues, accounts receivable, unbilled receivables and certain inventory could become impaired. In addition we would have to remove contracts related to these customers from backlog and remarket any undelivered aircraft.$4,219.

Note 78 – Customer Financing

Customer financing primarily relates to the Boeing Capital (BCC) segment and consisted of the following:


	September 30 2019			December 31 2018			June 30 2020			December 31 2019
Financing receivables:
Investment in sales-type/finance leases		$1,016			$1,125			$965			$1,029
Notes	446			730			433			443
Total financing receivables	1,462			1,855			1,398			1,472
Operating lease equipment, at cost, less accumulated depreciation of $245 and $203	789			782
Operative lease incentive				250
Operating lease equipment, at cost, less accumulated depreciation of $248 and $235							785			834
Gross customer financing	2,251			2,887			2,183			2,306
Less allowance for losses on receivables	(8		)	(9		)	(14		)	(8		)
Total		$2,243			$2,878			$2,169			$2,298

We acquire aircraft to be leased to customers through trades, lease returns, purchases in the secondary market, and new aircraft transferred from our ~~Commercial Airplanes~~BCA segment. Leasing arrangements typically range in terms from 1 to 12 years and may include options to extend or terminate the lease. Certain leases include provisions to allow the lessee to purchase the underlying aircraft at a specified price. A minority of leases contain variable lease payments based on actual aircraft usage and are paid in arrears.

We determine a receivable is impaired when, based on current information and events, it is probable that we will be unable to collect amounts due according to the original contractual terms. At ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we individually evaluated for impairment customer financing receivables of ~~$401~~$393 and ~~$409,~~

$400, of which ~~$388~~$381 and ~~$398~~$388 were determined to be impaired. We recorded no allowance for losses on these impaired receivables as the collateral values exceeded the carrying values of the receivables.

We determine a receivable is past due when cash has not been received upon the due date specified in the contract.Customer financing receivables past due as of June 30, 2020 is $8.

We evaluate the collectability of customer financing receivables at commencement and on a recurring basis. If a customer financing receivable is deemed uncollectable, the customer is categorized as non-accrual status. When a customer is in non-accrual status at commencement, revenue is deferred until substantially all cash has been received or the customer is removed from non-accrual status. If a customer status changes to non-accrual after commencement and sufficient collateral is available, we recognize contractual interest income as payments are received to the extent payments exceed past due principal payments. If there is not sufficient collateral, then revenue is not recognized until payments exceed the principal balance. Receivables in non-accrual status as of June 30, 2020 and December 31, 2019 were $381 and $388. Interest income received for the six and three months ended June 30, 2020 was $21 and $13.

The adequacy of the allowance for losses is assessed quarterly. ~~Three~~Four primary factors influencing the level of our allowance for losses on customer financing receivables are customer credit ratings, default rates, expected loss rate and collateral ~~values.~~values, which may be adversely affected by impacts that COVID-19 has on our customers. We assign internal credit ratings for all customers and determine the creditworthiness of each customer based upon publicly available information and information obtained directly from our customers. Our rating categories are comparable to those used by the major credit rating agencies.

Our financing receivable balances at June 30, 2020 by internal credit rating category ~~are shown below:~~and year of origination consisted of the following:


Rating categories	September 30 2019		December 31 2018		Current		2019		2018		2017		2016		Prior		Total
BBB		$594		$883												$400		$400
BB	348		430			$69		$54		$17					152		292
B	125		135									$53			171		224
CCC	395		407				38				251			$180	13		482
Total carrying value of financing receivables		$1,462		$1,855		$69		$92		$17		$304		$180		$736		$1,398

At ~~September~~June 30, ~~2019,~~2020, our allowance related to receivables with ratings of CCC, B, BB, and BBB. We applied default rates that averaged ~~22.1%~~26%, ~~5.8%~~8.8%, 3.1%, and ~~0.6%~~0.2%, respectively, to the exposure associated with those receivables.

Customer Financing Exposure

Customer financing is collateralized by security in the related asset. The value of the collateral is closely tied to commercial airline performance and overall market conditions and may be subject to reduced valuation with market decline. Certain collateral values are being adversely impacted by COVID-19. Declines in collateral values could result in asset impairments, reduced finance lease income, and an increase in the allowance for losses. Our customer financing collateral is concentrated in out-of-production aircraft and 747-8 aircraft. Generally, out-of-production aircraft have experienced greater collateral value declines than in-production aircraft.

The majority of customer financing carrying values are concentrated in the following aircraft models:

September 30
2019
December 31
2018
717 Aircraft ($184 and $204 accounted for as operating leases)
$778

$918
747-8 Aircraft ($130 and $132 accounted for as operating leases) 474
477
737 Aircraft ($243 and $263 accounted for as operating leases) 266
290
757 Aircraft ($22 and $24 accounted for as operating leases) 186
200
MD-80 Aircraft (accounted for as sales-type finance leases) 184
204
777 Aircraft ($126 and $60 accounted for as operating leases) 131
68
747-400 Aircraft ($33 and $45 accounted for as operating leases) 95
116



	June 30 2020		December 31 2019
717 Aircraft ($113 and $124 accounted for as operating leases)		$689		$736
747-8 Aircraft ($124 and $130 accounted for as operating leases)	483		475
737 Aircraft ($231 and $240 accounted for as operating leases)	253		263
777 Aircraft ($230 and $236 accounted for as operating leases)	232		240
MD-80 Aircraft (accounted for as sales-type finance leases)	171		186
757 Aircraft ($14 and $22 accounted for as operating leases)	166		182
747-400 Aircraft ($28 and $31 accounted for as operating leases)	81		90

As part of selected lease transactions, Boeing may provide incentives to commercial customers. At December 31, 2018, Customer Financing included $250 of lease incentives with one customer experiencing liquidity issues. In the first quarter of 2019, we concluded that these lease incentives were impaired and recorded a charge of $250.

Lease income recorded in Revenue on the Condensed Consolidated Statements of Operations for the ~~nine and three~~six months ended ~~September~~June 30, 2020 and 2019 included ~~$47~~$29 and ~~$15~~$32 from sales-type/finance leases, and ~~$105~~$62 and ~~$34~~$71 from operating leases, of which $4 and $5 related to variable operating lease payments. Lease income recorded in Revenue on the Condensed Consolidated Statements of Operations for the three months ended June 30, 2020 and 2019 included $14 and $6$16 from sales-type/finance leases, and $31 and $35 from operating leases, of which $3 and $2 related to variable operating lease payments.

~~As of September 30, 2019, undiscounted cash flows for sales-type/finance and operating leases over the next five years and thereafter are as follows:~~

Sales-type/finance leases
Operating leases
Year 1
$179

$118
Year 2 134
93
Year 3 97
83
Year 4 109
61
Year 5 121
46
Thereafter 140
57
Total lease receipts 780
458
Less imputed interest (167 )

Estimated unguaranteed residual values 403

Total
$1,016

$458

~~At September 30, 2019 and December 31, 2018 unguaranteed residual values were $403 and $425. Guaranteed residual values at September 30, 2019 were not significant.~~

Note 89 – Investments

Our investments, which are recorded in Short-term and other investments or Investments, consisted of the following:


	September 30 2019		December 31 2018		June 30 2020		December 31 2019
Equity method investments ⁽¹⁾		$1,079		$1,048		$998		$1,031
Time deposits	529		255		11,981		50
Available for sale debt instruments	530		491		411		405
Equity and other investments	43		44		72		65
Restricted cash & cash equivalents⁽²⁾	86		176		42		86
Total		$2,267		$2,014		$13,504		$1,637


⁽¹⁾	Dividends received were ~~$153~~$53 and ~~$60~~$20 for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019~~2020 and ~~$222~~$93 and ~~$79~~$30 during the same periods in the prior year.


⁽²⁾	Reflects amounts restricted in support of our workers’ compensation programs, employee benefit programs, and insurance premiums.

~~Note~~ 9 ~~– Other Assets~~

~~Sea Launch~~

~~At September~~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 June 30, 2019 and December 31, 2018, Other assets included $244 of receivables related to our former investment in the Sea Launch venture which became payable by certain Sea Launch partners following Sea Launch’s bankruptcy filing in June 2009. At September 30, 2019, the net amounts owed to Boeing by each of the partners were as follows: S.P. Koroley Rocket and Space Corporation Energia of Russia (RSC Energia) – $111, PO Yuzhnoye Mashinostroitelny Zavod of Ukraine – $89 and KB Yuzhnoye of Ukraine – $44.

In 2013, we filed an action in the United States District Court for the Central District of California seeking reimbursement from the other Sea Launch partners. In 2016, the United States District Court for the Central District of California issued a judgment in favor of Boeing. Later that year, we reached an agreement which we believe will enable us to recover the outstanding receivable balance from RSC Energia over the next several years. We continue to pursue collection efforts against the former Ukrainian partners in connection with the court judgment. We continue to believe the partners have the financial wherewithal to pay and intend to pursue vigorously all of our rights and remedies. In the event we are unable to secure reimbursement from RSC Energia and the Ukrainian Sea Launch partners, we could incur additional charges.2020.

Note 10 – ~~Leases~~

Our operating lease assets primarily represent manufacturing and research and development facilities, warehouses, and offices. Our finance leases primarily represent computer equipment and are not significant. Total operating lease expense was $241 and $82 for nine and three months ended September 30, 2019, of which $40 and $15 was attributable to variable lease expenses.

For the nine and three months ended September 30, 2019 cash payments against operating lease liabilities totaled $205 and $70 and non-cash transactions totaled $315 and $177 to recognize operating assets and liabilities for new leases.

~~Supplemental Condensed Consolidated Statement of Financial Position information related to leases was as follows:~~



	September 30 2019
~~Operating leases:~~
~~Operating lease right-of-use assets~~		~~$1,178~~

~~Current portion of lease liabilities~~	~~260~~
~~Non-current portion of lease liabilities~~	~~969~~
~~Total operating lease liabilities~~		~~$1,229~~

~~Weighted average remaining lease term~~ ~~(years)~~	9
~~Weighted average discount rate~~	~~3.07~~		%

~~Maturities of lease liabilities were as follows:~~



	~~Operating leases~~
~~Year 1~~		~~$292~~
~~Year 2~~	~~238~~
~~Year 3~~	~~190~~
~~Year 4~~	~~153~~
~~Year 5~~	93
~~Thereafter~~	~~598~~
~~Total lease payments~~	~~1,564~~
~~Less imputed interest~~	~~(335~~		)
~~Total~~		~~$1,229~~

As of September 30, 2019, we have entered into an operating lease that has not yet commenced of $160, primarily related to research and development and manufacturing facilities. This lease will commence in 2020 with a lease term of 15 years.

~~Note~~ 11 – Commitments and Contingencies

737 MAX Grounding and COVID-19 Impacts

On March 13, 2019, the Federal Aviation Administration (FAA) issued an order to suspend operations of all 737 MAX aircraft in the U.S. and by U.S. aircraft operators following two fatal 737 MAX accidents. Non-U.S. civil aviation authorities have issued directives to the same effect. We are working closely with the relevant government authorities to support both accident investigations. We are also fully cooperating with other U.S. government investigations related to the accidents. While production continues onDeliveries of the 737 MAX ~~deliveries~~ have been suspended until clearance is granted by the appropriate regulatory authorities. In addition, multiple legal actions have been filed against us as a result of the accidents. We also are fully cooperating with U.S. government investigations related to the accidents and the 737 MAX program, including investigations by the U.S. Department of Justice and 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 lawsuits, investigations and inquiries related to the 737 MAX.

We have developed software and pilot training updates for the 737 MAX. During the week of June 29, 2020, the FAA completed a series of flight tests to assess whether the 737 MAX meets certification safety standards. The FAA has stated that while this is an important milestone, a number of key tasks remain including evaluating data gathered during the flight tests. On July 21, 2020 the FAA announced a 45 day public comment period for their notice of proposed rulemaking relative to 737 MAX certification. The impact this will have on timing and conditions of return to service, if any, is uncertain. We continue to work with the FAA and non-U.S. civil aviation authorities to complete remaining steps toward certification and readiness for return to service including addressing their questions on the software ~~changes~~updates and how pilots will interact with the airplane controls and displays in different flight scenarios. ~~The FAA~~We have assumed that computer and ~~other civil aviation authorities worldwide~~simulator training will ~~determine the timing~~be required and ~~conditions of return to service in each relevant jurisdiction. Charges recognized during 2019 associated with the software updates and related pilot~~as a result, we have provisioned for certain training ~~were not material.~~costs.

Prior to the grounding, ~~Boeing had delivered 387 737 MAX aircraft of which 57 were delivered in the first quarter of 2019. On April 5, 2019, we announced plans to reduce~~ the 737 production rate ~~from~~was 52 ~~aircraft~~ per month, and we had planned to 42increase the rate to 57 per month ~~effective April 15,~~during 2019. ~~The resulting impacts, which were reflected~~Beginning in the first quarter, increased costs to produce aircraft included in the current accounting quantity by $1,016. Estimated costs to produce aircraft included in the current accounting quantity increased by $1,748 during the second quarter of 2019, ~~and $872~~we reduced the production rate to 42 per month. We continued to produce at a rate of 42 per month through December 2019. We temporarily suspended 737 MAX production beginning in January 2020. During the first quarter of 2020, we completed airplanes that were already in process at the end of the fourth quarter of 2019. In March 2020, we announced a temporary suspension of production operations in the Puget Sound area as a result of the COVID-19 pandemic. Production operations in Puget Sound resumed during the ~~third~~week of April 20, 2020, at which point the 737 team resumed preparations for restarting 737 MAX production. We resumed early stages of 737 MAX production in May 2020 and expect to continue to produce at low rates for the remainder of 2020. We have approximately 450 airplanes in inventory as of June 30, 2020.

The COVID-19 pandemic has significantly impacted air travel and reduced near-term demand, resulting in lower production and delivery rate assumptions. During the first quarter of 2020, we lowered our production rate assumptions in response to COVID-19 impacts to expected demand. During the second quarter of 2020, we further delayed our production rate ramp assumptions and now expect to gradually increase the production rate to 31 by the beginning of 2022. We expect further gradual production rate increases in subsequent periods based on market demand. We have assumed that the timing of regulatory approvals will enable 737 MAX deliveries to resume during the fourth quarter of 2020. A number of customers have requested to defer deliveries or to cancel orders for 737 MAX aircraft, which may require us to remarket and/or delay deliveries of certain aircraft included within inventory. We expect that the majority of the approximately 450 737 MAX airplanes in inventory will be delivered during the first year after the resumption of deliveries.

During 2019, ~~primarily to reflect updates~~the cumulative impacts of changes to assumptions regarding timing of return to service and timing of planned production ~~rate increases. These increases in~~rates and deliveries increased the estimated costs to produce and deliver the 3,100 undelivered aircraft then included in the ~~current~~ accounting quantity by approximately $6.3 billion. During 2020, additional reductions in planned production rates further increased the estimated costs to produce and deliver aircraft included in the accounting quantity, but were partially offset by headcount and other cost reductions. These costs will ~~reduce~~result in lower 737 ~~program and overall BCA segment operating~~ margins in future ~~quarters~~periods after deliveries resume. Prior to the grounding, we expected 737 MAX deliveries to approximate 90 percent of total 737 deliveries in 2019 and we had planned to increase the production rate to 57 per month in 2019. In addition to the grounding, the timing of 737 MAX deliveries during

During the first quarter ~~was adversely affected by delays~~of 2020, we reduced the number of aircraft included in the ~~supply chain. We may face additional costs, delays in return~~accounting quantity by 400 units as a result of reductions to ~~service, and/or further reductions in~~planned production rates due to COVID-19 driven market uncertainties. The accounting quantity was unchanged during the ~~production rate. We are continuing~~second quarter. As we continue to produce at ~~42 aircraft per month~~abnormally low production rates in 2020 and 2021, we ~~will continue~~expect to ~~evaluate potential future~~incur approximately $5 billion of abnormal production costs that are being expensed as incurred. The slowdown in the planned production rate ramp-up increased expected abnormal costs however this increase was offset by adjustments to the determination of the normal production level due to COVID-19 impacts on customer demand, as well as cost reduction activities, including significant reductions in employment levels. We expensed $712 and $1,509 of abnormal production costs during the ~~production rate, including~~three and six months ended June 30, 2020.

We have also recorded additional expenses of $121 as a temporary shutdown in 737 production. For example, significant additional regulatory requirements and/or delays in return to service beyond our current assumption could cause customers to cancel or defer orders, which could also cause us to reduce or temporarily ceaseresult of the 737 MAX ~~production.~~ grounding in the first half of 2020. These expenses include costs related to storage, pilot training and software updates.

The ~~grounding has reduced revenues, operating earnings~~following table summarizes changes in the 737 MAX customer concessions and ~~cash flows in 2019 and will continue to adversely affect our results until deliveries resume and production rates increase.~~ other considerations liability during 2020.



	2020
Beginning balance – January 1		$7,389
Reductions for payments made	(1,211		)
Reductions for concessions and other in-kind considerations	(35		)
Changes in estimates	521
Ending balance – June 30		$6,664

We are ~~also~~ working with our customers to minimize the impact to their ~~operations. In the second quarter, we recorded an earnings charge of $5,610, net of insurance recoveries of $500, in connection with estimated potential concessions~~operations from grounded and ~~other considerations~~undelivered aircraft. We continue to customers for disruptions related to the 737 MAX grounding and associated delivery delays. This charge is reflected in the financial statements as a reduction in revenue, an increase in Other current assets and an increase in Accrued liabilities. During the third quarter of 2019, we collected the anticipated $500 from our insurance carriers and reduced the liability of $6,110 by $252 for payments, concessions and other in-kind considerations agreed to with customers. In addition, we reassessedreassess the liability for estimated potential concessions and other considerations to ~~customers.~~customers on a quarterly basis. This reassessment ~~included~~includes updating estimates to reflect ~~revised~~revisions to return to service, delivery and production rate assumptions driven by timing of regulatory approvals, as well as latest information based on engagements with 737 MAX customers. ~~Based on this reassessment, we concluded that no significant adjustments to the recorded liability were required in the third quarter.~~ The liability represents our current best estimate of future concessions and other considerations to customers, and is necessarily based on a series of assumptions. ~~While~~It is subject to change in future quarters as negotiations with customers mature and timing and conditions of return to service are better understood. The liability balance of $6.7 billion at June 30, 2020 includes $1.9 billion expected to be liquidated by lower customer delivery payments, $1.1 billion expected to be paid in cash and $0.1 billion in other concessions. Of the cash payments to customers, we expect to pay $0.4 billion in 2020 and $0.5 billion in 2021. The type of consideration to be provided for the remaining $3.6 billion will depend on the outcomes of negotiations with customers.

The FAA and other non-U.S. civil aviation authorities will determine the timing and conditions of return to ~~service, we have assumed that regulatory approval of 737 MAX return to service begins in the fourth quarter of 2019. This assumption reflects~~service. Our assumptions reflect our current best estimate, ~~at this time,~~ but actual timing and conditions of return to service and resumption of deliveries could differ from this estimate, the effect of which could be material. ~~In addition, we have assumed that we will gradually increase the 737 production rate from 42 per month to 57 per month by late 2020. Following return to service we expect the 737 MAX~~

~~airplanes produced during the grounding and included within inventory will be delivered over several quarters with the majority of them delivering in the first year.~~ We are unable at this time to reasonably estimate potential future additional financial impacts or a range of loss, if any, due to continued uncertainties related to the timing and conditions of return to service, uncertainties related to the impacts of COVID-19 on our operations, supply chain and customers, future changes to the production rate, supply chain impacts, and/or the results of negotiations with particular customers. Any such impacts, including any changes in our estimates, could have a material adverse effect on our financial position, results of operations, and/or cash flows. For example, we expect that, in the event that we are unable to resume aircraft deliveries consistent with our assumptions, the continued absence of revenue, earnings, and cash flows associated with 737 MAX deliveries would continue to have ~~the most~~a material impact on our operating results. In the event that ~~we decide to further reduce the 737~~future production rate increases occur at a slower rate or ~~temporarily cease production,~~take longer than we are currently assuming, we expect that the growth in inventory and other cash flow impacts associated with production would decrease. However, while any ~~such reduction~~prolonged production suspension or ~~cessation of~~delays in planned production rate increases could mitigate the impact ~~of continued production~~ on our liquidity, it could significantly increase the overall expected costs to produce aircraft included in the accounting quantity, which would reduce 737 program margins and/or increase abnormal production costs in the future.

~~737NG Structure (Pickle Fork)~~

During the third quarter of 2019, we detected cracks in the "pickle forks," a component of the structure connecting the wings to the fuselages, of three 737-800NGs we were converting into freighters. We notified the FAA, which issued a directive requiring that 737NG airplanes with over 30,000 flight cycles be inspected for this condition by October 10, 2019, and that airplanes with over 22,600 flight cycles be inspected over the next 1,000 flight cycles. To date, all airplanes with over 30,000 flight cycles and approximately one third of planes with over 22,600 flights cycles have been inspected and this conditionCommercial air traffic has been found on a small percentage of aircraft, and those aircraft will be repaired. Additional assessments are underway to determine the cause and potential implications of this condition for airplanes with fewer than 22,600 flight cycles. Depending on the results of these assessments, additional inspections or repairs may be required. Charges recognized in the third quarter in connection with estimated repair costs for aircraft with over 22,600 flight cycles were not material. However, we cannot reasonably estimate potential future financial impacts, if any,fallen dramatically due to the ~~ongoing nature~~COVID-19 pandemic. While this trend has impacted passenger traffic most severely, near-term cargo traffic has also fallen significantly due to the global economic downturn and the reduction in cargo capacity on passenger airplanes. Airlines have significantly reduced their capacity, and many could implement further reductions in the near future. Many airlines are also implementing significant reductions in staffing. These capacity changes are causing, and are expected to continue to cause, negative impacts to our customers’ revenue, earnings, and cash flow, and in some cases may threaten the future viability of some of our customers, potentially causing defaults within our customer financing portfolio and/or requiring us to remarket aircraft that have already been produced and/or are currently in backlog. If 737 MAX aircraft remain grounded for an extended period of time, we may experience additional reductions to backlog and/or significant order cancellations. Additionally, we may experience fewer new orders and increased cancellations across all of our commercial airplane programs as a result of the ~~inspections~~COVID-19 pandemic and ~~repairs~~associated impacts on demand. Our customers may also lack sufficient liquidity to purchase new aircraft due to impacts from the pandemic. We are also observing a significant increase in the number of requests for payment deferrals, contract modifications, lease restructurings and ~~pending~~similar actions,

and these trends may lead to additional earnings charges, impairments and other adverse financial impacts in our business over time. In addition, to the ~~completion~~extent that customers have valid rights to cancel undelivered aircraft, we may be required to refund pre-delivery payments, putting additional constraints on our liquidity. In addition to the near-term impact, there is risk that the industry implements longer-term strategies involving reduced capacity, shifting route patterns, and mitigation strategies related to impacts from COVID-19 and the risk of ~~investigations into~~future public health crises. In addition, airlines may experience reduced demand due to reluctance by the ~~cause~~flying public to travel due to travel restrictions and/or social distancing requirements.

As a result, there is significant uncertainty with respect to when commercial air traffic levels will begin to recover, and whether and at what point capacity will return to and/or exceed pre-COVID-19 levels. The COVID-19 pandemic also has increased, and its aftermath is also expected to continue to increase, uncertainty with respect to global trade volumes, putting significant negative pressure on cargo traffic. Any of these factors would have a significant impact on the ~~condition.~~demand for both single-aisle and wide-body commercial aircraft, as well as for the services we provide to commercial airlines. In addition, a lengthy period of reduced industry-wide demand for commercial aircraft would put additional pressure on our suppliers, resulting in increased procurement costs and/or additional supply chain disruption. To the extent that the COVID-19 pandemic or its aftermath further impacts demand for our products and services or impairs the viability of some of our customers and/or suppliers, our financial condition, results of operations, and cash flows could be adversely affected, and those impacts could be material.

Environmental

The following table summarizes environmental remediation activity during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.


	2019			2018			2020			2019
Beginning balance – January 1		$555			$524			$570			$555
Reductions for payments made	(34		)	(17		)	(21		)	(24		)
Changes in estimates	61			61			11			17
Ending balance – September 30		$582			$568
Ending balance – June 30								$560			$548

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 ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the high end of the estimated range of reasonably possible remediation costs exceeded our recorded liabilities by ~~$1,064~~$1,088 and ~~$796.~~

$1,077.

Product Warranties

The following table summarizes product warranty activity recorded during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.


	2019			2018			2020			2019
Beginning balance – January 1		$1,127			$1,211			$1,267			$1,127
Additions for current year deliveries	128			176			34			83
Reductions for payments made	(166		)	(135		)	(149		)	(64		)
Changes in estimates	(7		)	(151		)	395			(83		)
Ending balance – September 30		$1,082			$1,101
Ending balance – June 30								$1,547			$1,063

The increase in the product warranty reserve during the six months ended June 30, 2020 is primarily driven by charges related to “pickle forks” on 737NG aircraft. During 2019, we detected cracks in the "pickle forks", a frame fitting component of the structure connecting the wings to the fuselages of 737NG aircraft. We notified the FAA, which issued a directive requiring that certain 737NG airplanes be inspected. We have estimated the number of aircraft that will have to be repaired in the future and provisioned for the estimated costs of completing the repairs. We recognized charges of $135 in 2019 for current and projected future aircraft repairs. During the first quarter of 2020, we recognized additional charges of $336 based on revised engineering and fleet utilization estimates as well as updated repair cost estimates. We cannot estimate a range of reasonably possible losses, if any, in excess of amounts recognized due to the ongoing nature of the inspections and repairs and pending the completion of investigations into the cause of the condition.

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 ~~September~~June 30, ~~2019~~2020 have expiration dates from ~~2019~~2020 through 2026. At ~~September~~June 30, ~~2019,~~2020 and December 31, ~~2018~~2019 total contractual trade-in commitments were ~~$1,421~~$1,165 and ~~$1,519.~~$1,407. As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we estimated that it was probable we would be obligated to perform on certain of these commitments with net amounts payable to customers totaling ~~$723~~$621 and ~~$522~~$711 and the fair value of the related trade-in aircraft was ~~$690~~$602 and ~~$485.~~$678.

Financing Commitments

Financing commitments related to aircraft on order, including options and those proposed in sales campaigns, and refinancing of delivered aircraft, totaled ~~$15,607~~$12,784 and ~~$19,462~~$13,377 as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019. The estimated earliest potential funding dates for these commitments as of ~~September~~June 30, ~~2019~~2020 are as follows:


	Total		Total
October through December 2019		$560
2020	3,104
July through December 2020				$2,462
2021	2,989		2,472
2022	1,348		1,368
2023	2,169		1,755
2024			1,373
Thereafter	5,437		3,354
		$15,607		$12,784

As of ~~September~~June 30, ~~2019, $15,452~~2020, all of these financing commitments ~~related~~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 ~~$246~~$243 to joint ventures over the next ~~eight~~seven 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 ~~$3,598~~$3,761 and ~~$3,761~~$3,769 as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

United States Government Defense Environment Overview

The Bipartisan Budget Act ~~(BBA)~~ of 2019 raised the Budget Control Act limits on federal discretionary defense and non-defense spending for fiscal years 2020 and 2021 (FY20 and FY21), reducing budget uncertainty and the risk of sequestration. ~~Although overall funding levels have been agreed to, the timeliness of~~The consolidated appropriations acts for FY20, ~~funding~~enacted in December 2019, provided FY20 appropriations for government departments and agencies, including the ~~Department of Defense (DoD),~~U.S. DoD, the National Aeronautics and Space Administration (NASA) and the ~~Federal Aviation Administration (FAA), remains a risk.~~ FAA. In February 2020, the U.S. administration submitted its request for $740.5 billion in base national defense spending for FY21, congruent with the amended spending limit.

The ~~Continuing Resolution (CR),~~ enacted ~~on September 27, 2019, continues federal funding at FY19 appropriations levels through November 21, 2019. Congress and the President must enact either full-year~~ FY20 appropriations ~~bills or an additional CR to fund government departments~~included funding for Boeing’s major programs, such as the F/A-18 Super Hornet, F-15EX, CH-47 Chinook, AH-64 Apache, V-22 Osprey, KC-46A Tanker, P-8 Poseidon and ~~agencies beyond November 21, 2019 in order to prevent a future government shutdown.~~

A government shutdown may impact the Company's operations. For example, requirements to furlough employees in the U.S. DoD, the Department of Transportation or other government agencies could result in payment delays, impair our ability to perform work on existing contracts, and/or negatively impact future orders. Congress may fund FY20 by passing one or more CRs; however, this could restrict the execution of certain program activities and delay new programs or competitions.

~~There~~Space Launch System. However, there continues to be uncertainty with respect to future program-level appropriations for the U.S. DoD and other government agencies, including NASA. Future budget cuts or investment priority changes, including changes associated with the authorizations and appropriations process, could result in reductions, cancellations and/or delays of existing contracts or programs. Any of these impacts could have a material effect on our results of operations, financial position and/or cash flows.

BDS Fixed-Price Development Contracts

Fixed-price development work is inherently uncertain and subject to significant variability in estimates of the cost and time required to complete the work. BDS fixed-price contracts with significant development work include Commercial Crew, ~~USAF~~ KC-46A Tanker, MQ-25, T-7A Red Hawk, ~~(formerly T-X Trainer),~~ VC-25B ~~Presidential Aircraft, MQ-25,~~ and commercial and military ~~satellites~~.satellites. The operational and technical complexities of these contracts create financial risk, which could trigger termination provisions, order cancellations or other financially significant exposure. Changes to cost and revenue estimates could result in lower margins or material charges for reach-forward losses. For example, we have recorded a reach-forward ~~losses~~loss of $978 on ~~the~~ KC-46A Tanker ~~and we continue to have risk for further losses if we experience further production, technical or quality issues. In addition,~~ in ~~2018,~~the first half of 2020. The KC-46A Tanker reach-forward loss in ~~connection with winning~~ the ~~T-7A Red Hawk and MQ-25 competitions, we recorded a loss~~first quarter of ~~$400~~2020 reflects $551 of costs associated with ~~options for 346 T-7A Red Hawk aircraft~~the agreement signed in April 2020 with the U.S. Air Force (USAF) to develop and integrate a ~~loss of $291~~new Remote Vision System, and the remaining costs reflect productivity inefficiencies and COVID-19 related ~~to the MQ-25 Engineering, Manufacturing and Development (EMD) contract.~~factory disruption. Moreover, our fixed-price development programs remain subject to additional reach-forward losses if we experience further production, technical or quality issues, schedule delays, or increased costs.

KC-46A Tanker

In 2011, we were awarded a contract from the U.S. Air Force ~~(USAF)~~ to design, develop, manufacture and deliver four next generation aerial refueling tankers. This Engineering, Manufacturing and Development (EMD) contract is a fixed-price incentive fee contract ~~valued at $4.9 billion~~ and involves highly complex designs and systems integration. InSince 2016, the USAF has authorized ~~two~~five low rate initial production (LRIP) lots for 7a total of 67 aircraft. The EMD contract and ~~12 aircraft~~authorized LRIP lots are valued at ~~$2.8 billion. In January 2017, the~~ ~~USAF~~ authorized an additional LRIP lot for 15 aircraft valued at $2.1 billion. On September 10, 2018, the USAF authorized an additional 18 aircraft valued at $2.9 billion. On September 27, 2019, the USAF authorized an additional LRIP lot for 15 aircraft valued at $2.6approximately $15 billion.

At ~~September~~June 30, ~~2019,~~2020, we had approximately ~~$304~~$374 of capitalized precontract costs and ~~$150~~$548 of potential termination liabilities to suppliers.

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.

Severance

During the second quarter of 2020, the Company recorded severance costs of $652 that are expected to be paid during 2020 to approximately 19,000 employees expected to leave the Company through a combination of voluntary and involuntary terminations. The severance packages are consistent with the Company’s ongoing compensation and benefits plans. As of June 30, 2020 approximately 6,000 employees had left the Company and the remaining 13,000 employees are expected to leave in the third and fourth quarter of 2020. The remaining liability at June 30, 2020 was $405. In July 2020, the Company announced that the prolonged impact of COVID-19, further reductions in production rates and lower demand for commercial services will result in further assessments of the size of the Company’s workforce to align with a smaller market.

Note 1211 – 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		Maximum Potential Payments				Estimated Proceeds from Collateral/Recourse				Carrying Amount of Liabilities
	September 30 2019		December 31 2018		September 30 2019		December 31 2018		September 30 2019	December 31 2018	June 30 2020		December 31 2019		June 30 2020		December 31 2019		June 30 2020		December 31 2019
Contingent repurchase commitments		$1,599		$1,685		$1,599		$1,685				$1,480		$1,570		$1,480		$1,570
Indemnifications to ULA:
Contributed Delta program launch inventory	30		52
Other Delta contracts	176		176
Contributed Delta inventory											30		30
Inventory supply agreement											34		34
Questioned costs													317									$48
Credit guarantees	92		106		33		51		16	16	92		92		35		36			$24	16

Contingent Repurchase Commitments The 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.

Indemnifications to ULA ~~In 2006, we agreed to indemnify~~During the first quarter of 2020, the USAF and ULA through December 31, 2020 against potential non-recoverability and non-allowability of $1,360 of Boeing Delta launch program inventory included in contributed assets plus $1,860 of inventory subject to an inventory supply agreement which ends on March 31, 2021. See Note 5. ULA has yet to consume $30 of contributed inventory.

~~Potential payments for Other Delta contracts include $85 related to~~reached a settlement regarding previously questioned deferred support ~~costs~~ and ~~$91 related to~~ deferred production costs. ~~In June 2011, the Defense Contract Management Agency (DCMA) notified ULA that it had determined that $271 of deferred support costs are not recoverable under government contracts.~~

~~In December 2011, the DCMA notified ULA~~As part of the ~~potential non-recoverability of an additional $114 of deferred production costs.~~ ~~ULA~~ ~~and Boeing believe that all costs are recoverable and in November 2011, ULA filed a certified claim with~~settlement the USAF agreed to reimburse ULA for ~~collection~~$307 of ~~deferred support and production costs. The USAF issued a final decision denying~~ those costs, which was received by ULA~~’s certified claim in May 2012. In 2012, Boeing and ULA, through its subsidiary United Launch Services, filed a suit~~ in the Court of Federal Claims seeking recovery of the deferred support and production costs from the U.S. government, which subsequently asserted a counterclaim for credits that it alleges were offset by deferred support cost invoices. We believe that the U.S. government’s counterclaim is without merit.second quarter. The ~~discovery phase of the litigation completed in 2017. The parties have since agreed~~settlement substantially retires our indemnification risks to engage in alternative dispute resolution, and the court has stayed the litigation pending that process. If, contrary to our belief, it is determined that some or all of the deferred support or production costs are not recoverable, we could be required to record pre-tax losses and make indemnification payments to ULA for up to $317 of the costs questioned by the DCMA.ULA.

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 ~~11.~~10.

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.

Note 1312 – Debt

In the first quarter of ~~2019,~~2020, we entered into a $13,825, two-year delayed draw term loan facility, which includes additional commitments made subsequent to the initial closing date. As of June 30, 2020, we have fully drawn on the $13,825 delayed draw term loan facility, with February 6, 2022 as the final maturity date. Borrowings outstanding bear interest at the Eurodollar rate (determined in accordance with the delayed draw term loan facility agreement) plus between 0.75% and 1.25%, depending on our credit rating.

In the second quarter of 2020, we issued ~~$1,500~~$25,000 of fixed rate senior notes consisting of ~~$400~~$3,000 due ~~March~~May 1, ~~2024~~2023 that bear an annual interest rate of ~~2.8%~~4.508%, ~~$400~~$3,500 due ~~March~~May 1, ~~2029~~2025 that bear an annual interest rate of ~~3.2%~~4.875%, ~~$400~~$2,000 due ~~March~~May 1, ~~2039~~2027 that bear an annual interest rate of ~~3.5%~~5.04%, ~~and $300~~$4,500 due ~~March~~May 1, ~~2059~~2030 that bear an annual interest rate of ~~3.825%~~5.15%, $3,000 due May 1, 2040 that bear an annual interest rate of 5.705%, $5,500 due May 1, 2050 that bear an annual interest rate of 5.805%, and $3,500 due May 1, 2060 that bear an annual interest rate of 5.93%. The notes are unsecured senior obligations and rank equally in right of payment with our existing and future unsecured and unsubordinated indebtedness. The net proceeds of the issuance totaled ~~$1,451, after deducting underwriting discounts, commissions and offering expenses.~~

~~In the second quarter of 2019, we issued $3,500 of fixed rate senior notes consisting of $600 due~~ ~~May 1, 2022~~ ~~that bear an annual interest rate of 2.7%, $650 due~~ ~~May 1, 2026~~ ~~that bear an annual interest rate of 3.1%, $600 due~~ ~~March 1, 2029~~ ~~that bear an annual interest rate of 3.2%, $850 due~~ ~~May 1, 2034~~ ~~that bear an annual interest rate of 3.6%, and $800 due~~ ~~May 1, 2049~~ that bear an annual interest rate of 3.9%. The notes are unsecured senior obligations and rank equally in right of payment with our existing and future unsecured and unsubordinated indebtedness. The net proceeds of the issuance totaled $3,454, after deducting underwriting discounts, commissions and offering expenses.

~~In the second quarter of 2019, we entered into a $1,500 short-term credit agreement, which is scheduled to terminate on~~ ~~October 30, 2019. At September 30, 2019, we had $6,620 of unused borrowing capacity on revolving credit line agreements.~~

~~In the third quarter of 2019, we issued $5,500 of fixed rate senior notes consisting of $750 due~~ ~~August 1, 2021~~ ~~that bear an annual interest rate of 2.3%, $1,000 due~~ ~~February 1, 2027~~ ~~that bear an annual interest rate of 2.7%, $750 due~~ ~~February 1, 2030~~ ~~that bear an annual interest rate of 2.95%, $750 due~~ ~~February 1, 2035~~ ~~that bear an annual interest rate of 3.25%, $1,250 due~~ ~~February 1, 2050~~ ~~that bear an annual interest rate of 3.75%, and $1,000 due~~ ~~August 1, 2059~~ that bear an annual interest rate of 3.95%. The notes are unsecured senior obligations and rank equally in right of payment with our existing and future unsecured and unsubordinated indebtedness. The net proceeds of the issuance totaled $5,442,$24,802, after deducting underwriting discounts, commissions, and offering expenses.

Note 1413 – Postretirement Plans

The components of net periodic benefit (income)/cost were as follows:


	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
Pension Plans	2019			2018			2019			2018			2020			2019			2020			2019
Service cost		$2			$322						$107			$1			$2			$1			$1
Interest cost	2,193			2,086				$731		696			1,228			1,462			614			731
Expected return on plan assets	(2,896		)	(3,007		)	(966		)	(1,002		)	(1,878		)	(1,930		)	(939		)	(965		)
Amortization of prior service credits	(59		)	(42		)	(19		)	(14		)	(40		)	(40		)	(20		)	(20		)
Recognized net actuarial loss	482			847			161			282			516			321			258			160
Settlement/curtailment/other losses				43									3						3
Net periodic benefit (income)/cost		($278	)		$249			($93	)		$69
Net periodic benefit income														($170	)		($185	)		($83	)		($93	)

Net periodic benefit cost included in Earnings from operations		$234			$237			$76			$79
Net periodic benefit income included in Other income	(280		)	(98		)	(93		)	(50		)
Net periodic benefit (income)/cost included in Earnings before income taxes		($46	)		$139			($17	)		$29
Net periodic benefit cost included in Loss from operations														$1			$158			$1			$80
Net periodic benefit income included in Other income, net													(171		)	(187		)	(84		)	(94		)
Net periodic benefit income included in Loss before income taxes														($170	)		($29	)		($83	)		($14	)


	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
Other Postretirement Plans	2019			2018			2019			2018			2020			2019			2020			2019
Service cost		$58			$71			$19			$24			$43			$39			$22			$20
Interest cost	147			145			49			48			72			98			36			49
Expected return on plan assets	(6		)	(6		)	(2		)	(2		)	(5		)	(4		)	(3		)	(2		)
Amortization of prior service credits	(26		)	(94		)	(8		)	(31		)	(17		)	(18		)	(8		)	(9		)
Recognized net actuarial gain	(35		)	(8		)	(12		)	(3		)	(23		)	(23		)	(11		)	(12		)
Net periodic benefit cost		$138			$108			$46			$36			$70			$92			$36			$46

Net periodic benefit cost included in Earnings from operations		$66			$63			$21			$21
Net periodic benefit cost included in Other income	80			77			27			29
Net periodic benefit cost included in Earnings before income taxes		$146			$140			$48			$50
Net periodic benefit cost included in Loss from operations														$44			$45			$23			$23
Net periodic benefit cost included in Other income, net													27			53			14			26
Net periodic benefit cost included in Loss before income taxes														$71			$98			$37			$49

Note 1514 – Share-Based Compensation and Other Compensation Arrangements

Restricted Stock Units

On February ~~25, 2019,~~24, 2020, we granted to our executives ~~233,582~~325,108 restricted stock units (RSUs) as part of our long-term incentive program with a grant date fair value of ~~$428.22~~$319.04 per unit. The RSUs granted under this program will vest and settle in common stock (on a one-for-one basis) on the third anniversary of the grant date.

Performance-Based Restricted Stock Units

On February ~~25, 2019,~~24, 2020, we granted to our executives ~~214,651~~290,202 performance-based restricted stock units (PBRSUs) as part of our long-term incentive program with a grant date fair value of ~~$466.04~~$357.38 per unit. Compensation expense for the award is recognized over the three-year performance period based upon the grant date fair value estimated using a Monte-Carlo simulation model. The model used the following assumptions: expected volatility of ~~23.88%~~27.04% based upon historical stock volatility, a risk-free interest rate of ~~2.46%~~1.21%, and no expected dividend yield because the units earn dividend equivalents.

Performance Awards

On February ~~25, 2019,~~28, 2020, we granted to our executives performance awards as part of our long-term incentive program with a payout based on the achievement of financial goals for the three-year period ending December 31, ~~2021~~2022. At ~~September~~June 30, ~~2019,~~2020, the minimum payout amount is $0 and the maximum amount we could be required to pay out is ~~$393.~~$305.

Note 1615 – Shareholders' Equity

Accumulated Other Comprehensive Loss

Changes in Accumulated other comprehensive loss (AOCI) by component for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 were as follows:


	Currency Translation Adjustments			Unrealized Gains and Losses on Certain Investments			Unrealized Gains and Losses on Derivative Instruments			Defined Benefit Pension Plans & Other Postretirement Benefits				Total⁽¹⁾
Balance at January 1, 2018		($15	)		($2	)		$54			($16,410	)			($16,373	)
Other comprehensive (loss)/income before reclassifications	(55		)	3			(97		)	(3		)		(152		)
Amounts reclassified from AOCI							19			557			⁽²⁾	576
Net current period Other comprehensive (loss)/income	(55		)	3			(78		)	554				424
Balance at September 30, 2018		($70	)		$1			($24	)		($15,856	)			($15,949	)
																	Currency Translation Adjustments			Unrealized Gains and Losses on Certain Investments		Unrealized Gains and Losses on Derivative Instruments			Defined Benefit Pension Plans & Other Postretirement Benefits				Total⁽¹⁾
Balance at January 1, 2019		($101	)					($62	)		($14,920	)			($15,083	)		($101	)				($62	)		($14,920	)			($15,083	)
Other comprehensive (loss)/income before reclassifications	(61		)	1			(106		)	17				(149		)	(2		)	1		(17		)	8				(10		)
Amounts reclassified from AOCI							22			283			⁽²⁾	305								(3		)	188			⁽²⁾	185
Net current period Other comprehensive (loss)/income	(61		)	1			(84		)	300				156			(2		)	1		(20		)	196				175
Balance at September 30, 2019		($162	)		$1			($146	)		($14,620	)			($14,927	)
Balance at June 30, 2019																		($103	)		$1		($82	)		($14,724	)			($14,908	)

Balance at June 30, 2018		($72	)	$1				($29	)		($16,039	)			($16,139	)
Balance at January 1, 2020																		($128	)	$1			($84	)		($15,942	)			($16,153	)
Other comprehensive (loss)/income before reclassifications	2						(4		)	(1		)		(3		)	(33		)			(186		)	(12		)		(231		)
Amounts reclassified from AOCI							9			184			⁽²⁾	193								12			347			⁽²⁾	359
Net current period Other comprehensive (loss)/income	2						5			183				190			(33		)			(174		)	335				128
Balance at September 30, 2018		($70	)		$1			($24	)		($15,856	)			($15,949	)
Balance at June 30, 2020																		($161	)		$1		($258	)		($15,607	)			($16,025	)

Balance at June 30, 2019		($103	)		$1			($82	)		($14,724	)			($14,908	)
Balance at March 31, 2019																		($100	)		$1		($53	)		($14,817	)			($14,969	)
Other comprehensive (loss)/income before reclassifications	(59		)				(89		)	9				(139		)	(3		)			(28		)					(31		)
Amounts reclassified from AOCI							25			95			⁽²⁾	120								(1		)	93			⁽²⁾	92
Net current period Other comprehensive (loss)/income	(59		)				(64		)	104				(19		)	(3		)			(29		)	93				61
Balance at September 30, 2019		($162	)		$1			($146	)		($14,620	)			($14,927	)
Balance at June 30, 2019																		($103	)		$1		($82	)		($14,724	)			($14,908	)

Balance at March 31, 2020																		($205	)		$1		($357	)		($15,772	)			($16,333	)
Other comprehensive (loss)/income before reclassifications																	44					89			(12		)		121
Amounts reclassified from AOCI																						10			177			⁽²⁾	187
Net current period Other comprehensive (loss)/income																	44					99			165				308
Balance at June 30, 2020																		($161	)		$1		($258	)		($15,607	)			($16,025	)


⁽¹⁾	Net of tax.


⁽²⁾	Primarily relates to amortization of actuarial losses for the six and three months ended June 30, 2019 totaling $233 and $115 (net of tax of ($65) and ($33)) and for the six and three months ended June 30, 2020 totaling $390 and $197 (net of tax of ($103) and ($50)). These are included in the net periodic pension cost.

⁽¹⁾~~Net of tax.~~

⁽²⁾Primarily relates to amortization of actuarial losses for the nine and three months ended September 30, 2018 totaling $657 and $219 (net of tax of ($182) and ($60)) and for the nine and three months ended September 30, 2019 totaling $350 and $117 (net of tax of ($97) and ($32)).~~These are included in the net periodic pension cost.~~

Note 1716 – Derivative Financial Instruments

~~Disclosures reflect the adoption of ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815), in the first quarter of 2019. Prior period amounts have not been restated.~~

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 2025. We use commodity derivatives, such as fixed-price purchase commitments and swaps to hedge against potentially unfavorable price changes for items used in production. Our commodity contracts hedge forecasted transactions through 2023.

~~Fair Value Hedges~~

~~Interest rate swaps under which we agree~~We continue to ~~pay variable rates of interest are designated as fair value hedges of fixed-rate debt. The net change in fair value~~monitor the effects of the ~~derivatives and~~COVID-19 pandemic on our commodity cash flow hedges, including reductions in our forecasted purchases of certain commodities. As of June 30, 2020, the ~~hedged items is reported in Boeing Capital interest expense.~~impact of the COVID-19 pandemic on our cash flow hedges was not significant.

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.

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 assets						Accrued liabilities						Notional amounts⁽¹⁾				Other assets						Accrued liabilities
	September 30 2019		December 31 2018		September 30 2019			December 31 2018			September 30 2019			December 31 2018			June 30 2020		December 31 2019		June 30 2020			December 31 2019			June 30 2020			December 31 2019
Derivatives designated as hedging instruments:
Foreign exchange contracts		$2,733		$3,407		$17			$32			($105	)		($132	)		$3,233		$2,590		$7			$29			($165	)		($60	)
Interest rate contracts	125		125
Commodity contracts	669		57		4			9			(93		)	(2		)	366		645		2			4			(119		)	(72		)
Derivatives not receiving hedge accounting treatment:
Foreign exchange contracts	824		414		6			11			(18		)	(2		)	399		285		7			1			(6		)	(6		)
Commodity contracts	1,713		478														796		1,644								(25		)
Total derivatives		$6,064		$4,481		$27			$52			($216	)		($136	)		$4,794		$5,164		$16			$34			($315	)		($138	)
Netting arrangements					(20		)	(24		)	20			24							(14		)	(20		)	14			20
Net recorded balance						$7			$28			($196	)		($112	)						$2			$14			($301	)		($118	)


⁽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:


	Nine months ended September 30						Three months ended September 30					Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018		2020			2019			2020		2019
Recognized in Other comprehensive income, net of taxes:
Foreign exchange contracts		($6	)		($80	)		($34	)		$4		($112	)		$31			$85		$9
Commodity contracts	(78		)	2			(30		)	1		(74		)	(48		)	4		(37		)

Gains/(losses) associated with our hedging transactions and forward points reclassified from AOCI to earnings are presented in the following table:


	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Foreign exchange contracts
Revenues								($6	)					($1	)		$6						$1
Costs and expenses		($21	)		($17	)	(9		)		($9	)	(6		)	(12		)		($5	)	(7		)
General and administrative	(9		)	(8		)	(18		)	(5		)	(5		)	9			(5		)	8
Commodity contracts
Revenues
Costs and expenses	1			1						1			(3		)	1			(2		)
General and administrative expense	1						1			1			(1		)				(1		)	(1		)

~~Gains/(losses)~~Gains related to undesignated derivatives on foreign exchange and commodity cash flow hedging transactions recognized in Other income, net were ~~gains of $1~~$6 and ~~losses of~~ $1 for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019~~2020 and ~~losses of~~ $2 and $1$0 for the ~~nine~~six and three months ended ~~September~~June 30, ~~2018. Forward points related to foreign exchange cash flow hedging transactions recognized in~~ ~~Other income~~ ~~were gains of $5 and $0 for the nine and three months ended September 30, 2018.~~2019.

Based on our portfolio of cash flow hedges, we expect to reclassify losses of $1533 (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 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 ~~September~~June 30, ~~2019~~2020 was $4254. At ~~September~~June 30, ~~2019,~~2020, there was no collateral posted related to our derivatives.

Note 1817 – 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.


	September 30, 2019								December 31, 2018								June 30, 2020								December 31, 2019
	Total			Level 1		Level 2			Total			Level 1		Level 2			Total			Level 1		Level 2			Total			Level 1		Level 2
Assets
Money market funds		$1,371			$1,371					$1,737			$1,737					$8,877			$8,877					$2,562			$2,562
Available-for-sale debt investments:
Commercial paper	146						$146		78						$78		93						$93		108						$108
Corporate notes	352					352			420					420			321					321			242					242
U.S. government agencies	109			109																					55			55
Other equity investments	10			10					12			12					40			40					33			33
Derivatives	7					7			28					28			2					2			14					14
Total assets		$1,995			$1,490		$505			$2,275			$1,749		$526			$9,333			$8,917		$416			$3,014			$2,650		$364
Liabilities
Derivatives		($196	)				($196	)		($112	)				($112	)		($301	)				($301	)		($118	)				($118	)
Total liabilities		($196	)				($196	)		($112	)				($112	)		($301	)				($301	)		($118	)				($118	)

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 ~~commodity~~ and ~~interest rate~~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. ~~The fair value of our interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the interest rate curve.~~

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 ~~nine~~six months ended ~~September~~June 30 due to long-lived asset impairment and the fair value and asset classification of the related assets as of the impairment date:


	2019					2018					2020					2019
	Fair Value		Total Losses			Fair Value		Total Losses			Fair Value		Total Losses			Fair Value		Total Losses
Operating lease equipment		$10		($1	)		$45		($16	)
Customer financing assets												$71		($17	)		$10		($1	)
Investments	51		(84		)			(47		)	64		(49		)	72		(51		)
Property, plant and equipment	41		(4		)						82		(59		)	41		(1		)
Acquired intangible assets	3		(17		)
Other Assets and Acquired intangible assets											201		(155		)	3		(17		)
Total		$105		($106	)		$45		($63	)		$418		($280	)		$126		($70	)

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 ~~operating lease equipment~~customer financing assets 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 ~~nine months~~year ended ~~September~~June 30, 2020, 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 Input	Range Median or Average
~~Operating lease equipment~~Customer financing assets	$1071	Market approach	Aircraft value publications	$~~12- $20~~57 - $118⁽¹⁾ Median ~~$16~~$79
~~Operating lease equipment~~Customer financing assets	$1071	Market approach	Aircraft condition adjustments	($6)8) - $0⁽²⁾ Net ($6)8)


⁽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:


	September 30, 2019													June 30, 2020
	Carrying Amount			Total Fair Value			Level 1	Level 2			Level 3			Carrying Amount			Total Fair Value			Level 1	Level 2			Level 3
Assets
Notes receivable, net		$446			$451				$451						$433			$429				$429
Liabilities
Debt, excluding capital lease obligations and commercial paper	(21,432		)	(24,518		)		(24,480		)		($38	)
Debt, excluding commercial paper and capital lease obligations														(58,788		)	(61,367		)		(61,350		)		($17	)


	December 31, 2018													December 31, 2019
	Carrying Amount			Total Fair Value			Level 1	Level 2			Level 3			Carrying Amount			Total Fair Value			Level 1	Level 2			Level 3
Assets
Notes receivable, net		$730			$735				$735						$443			$444				$444
Liabilities
Debt, excluding capital lease obligations and commercial paper	(11,796		)	(12,746		)		(12,682		)		($64	)	(20,964		)	(23,119		)		(23,081		)		($38	)

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 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 ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019. 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 1918 – 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. WeExcept 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. Further, we are ~~fully~~subject to, and cooperating with, ~~all~~ ongoing governmental and regulatory investigations and inquiries relating to the accidents and the 737 ~~MAX.~~MAX, including investigations by the U.S. Department of Justice and 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 ~~ongoing~~current status of ~~these~~the lawsuits, investigations, and ~~inquiries.~~inquiries related to the 737 MAX.

During the first quarter of 2019, we entered into definitive transaction documents with respect to a strategic partnership with Embraer S.A. (Embraer). The partnership contemplated the establishment of 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.

The transaction documents permitted either party to terminate the proposed partnership beginning on April 24, 2020, provided that certain closing conditions were not met. Based on Embraer’s failure to satisfy required closing conditions, we exercised our contractual termination right during the second quarter of 2020, which Embraer has disputed. We would have been required to pay a termination fee of $100 had the transaction been terminated due to a failure to obtain antitrust approvals. Because the transaction was terminated due to a failure by Embraer to meet other closing conditions, we do not expect to be required to pay a termination fee in connection with the termination of the transaction. Boeing and Embraer are arbitrating their dispute over Boeing’s termination of the agreement. We cannot reasonably estimate a range of loss, if any, that may result from the arbitration.

Note 2019 – Segment and Revenue Information

Effective at the beginning of ~~2019, all revenues~~2020, certain programs were realigned between our BDS segment and ~~costs associated with military derivative aircraft production are reported in the BDS segment. Revenues~~Unallocated items, eliminations and ~~costs associated with military derivative aircraft production were previously reported in the BCA and BDS segments.~~other. Business segment data for ~~2018 reflects~~2019 has been adjusted to reflect the ~~realignment for military derivative aircraft, as well as the realignment of certain programs from BDS to BGS.~~realignment.

Our primary profitability measurements to review a segment’s operating results are Earnings from operations and operating margins. We operate in 4 reportable segments: BCA, BDS, BGS, and BCC. All other activities fall within Unallocated items, eliminations and other. See page 7 for the Summary of Business Segment Data, which is an integral part of this note.

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 Boeing 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)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Revenue from contracts with customers:
Europe		$3,944			$7,189			$1,260			$1,882			$2,302			$2,684			$332			$1,023
China	4,393			9,433			1,237			4,677
Asia, other than China	5,832			5,966			1,454			1,886
Asia													1,464			7,534			305			4,360
Middle East	2,926			3,931			1,121			1,598			556			1,805			7			695
Other	2,533			3,598			166			1,098			453			2,367			142			829
Total non-U.S. revenues	19,628			30,117			5,238			11,141			4,775			14,390			786			6,907
United States	10,591			10,824			3,004			2,922			3,557			7,587			1,383			3,417
Estimated potential concessions and other considerations to 737 MAX customers, net⁽¹⁾	(5,610		)
Estimated potential concessions and other considerations to 737 MAX customers, net													(521		)	(5,610		)	(551		)	(5,610		)
Total revenues from contracts with customers	24,609			40,941			8,242			14,063			7,811			16,367			1,618			4,714
Intersegment revenues eliminated on consolidation	184			27			7			8			27			177			15			8
Total segment revenues		$24,793			$40,968			$8,249			$14,071			$7,838			$16,544			$1,633			$4,722

Revenue recognized on fixed-price contracts	100		%	100		%	100		%	100		%	100		%	100		%	100		%	100		%

Revenue recognized at a point in time	100		%	100		%	100		%	99		%	99		%	99		%	99		%	99		%


⁽¹⁾	~~Net of insurance recoveries~~

BDS revenues on contracts with customers, based on the customer's location, consist of the following:


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Revenue from contracts with customers:
U.S. customers		$15,234			$14,586			$5,459			$5,381			$9,153			$9,719			$4,837			$4,836
Non U.S. customers⁽¹⁾	5,031			4,932			1,583			1,556			3,477			3,447			1,751			1,743
Total segment revenue from contracts with customers		$20,265			$19,518			$7,042			$6,937			$12,630			$13,166			$6,588			$6,579

Revenue recognized over time	98		%	98		%	97		%	98		%	99		%	99		%	99		%	99		%

Revenue recognized on fixed-price contracts	69		%	69		%	70		%	70		%	68		%	69		%	69		%	69		%

Revenue from the U.S. government⁽¹⁾	89		%	88		%	90		%	88		%	89		%	88		%	89		%	89		%


⁽¹⁾	Includes revenues earned from foreign military sales through the U.S. government.

BGS revenues consist of the following:


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Revenue from contracts with customers:
Commercial		$7,621			$6,419			$2,510			$2,167			$3,894			$5,111			$1,371			$2,526
Government	6,075			5,584			2,101			1,882			4,099			3,974			2,066			1,977
Total revenues from contracts with customers	13,696			12,003			4,611			4,049			7,993			9,085			3,437			4,503
Intersegment revenues eliminated on consolidation	124			145			47			52			123			77			51			40
Total segment revenues		$13,820			$12,148			$4,658			$4,101			$8,116			$9,162			$3,488			$4,543

Revenue recognized at a point in time	56		%	52		%	54		%	52		%	49		%	57		%	41		%	57		%

Revenue recognized on fixed-price contracts	89		%	88		%	90		%	85		%	88		%	89		%	86		%	90		%

Revenue from the U.S. government⁽¹⁾	33		%	32		%	35		%	32		%	40		%	32		%	46		%	32		%


⁽¹⁾	Includes revenues earned from foreign military sales through the U.S. government.

Backlog

Our total backlog represents the estimated transaction prices on performance obligations to our customers for which work remains to be performed. Backlog is converted into revenue in future periods as work is performed, primarily based on the cost incurred or at delivery and acceptance of products, depending on the applicable accounting method.

Our backlog at ~~September~~June 30, ~~2019~~2020 was ~~$470,225.~~$408,650. We expect approximately ~~26%~~27% to be converted to revenue through ~~2020~~2021 and approximately ~~72%~~70% through ~~2023,~~2024, with the remainder thereafter. The future periods when backlog is expected to convert to revenue could be impacted if the timing of aircraft deliveries is adjusted due to COVID-19 impacts.

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. Components of Unallocated items, eliminations and other are shown in the following table.


	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Share-based plans		($57	)		($60	)		($21	)		($24	)		($43	)		($36	)		($25	)		($22	)
Deferred compensation	(154		)	(112		)	(25		)	(56		)	73			(129		)	(120		)	(27		)
Amortization of previously capitalized interest	(68		)	(67		)	(23		)	(19		)	(50		)	(45		)	(27		)	(21		)
Research and development expense, net	(270		)	(69		)	(97		)	(50		)	(116		)	(183		)	(62		)	(105		)
Customer financing impairment	(250		)													(250		)
Litigation	(109		)	(148		)										(109		)				(109		)
Eliminations and other unallocated items	(819		)	(737		)	(356		)	(322		)	(515		)	(458		)	(244		)	(214		)
Unallocated items, eliminations and other		($1,727	)		($1,193	)		($522	)		($471	)		($651	)		($1,210	)		($478	)		($498	)

Pension FAS/CAS service cost adjustment		$823			$780			$274			$260			$513			$549			$258			$275
Postretirement FAS/CAS service cost adjustment	270			239			90			77			189			180			97			90
FAS/CAS service cost adjustment		$1,093			$1,019			$364			$337			$702			$729			$355			$365

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 U.S. Government Cost Accounting Standards (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 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:


	September 30 2019		December 31 2018		June 30 2020		December 31 2019
Commercial Airplanes		$74,994		$64,788		$80,160		$73,995
Defense, Space & Security	19,431		19,594		15,407		15,757
Global Services	18,696		17,921		18,438		18,605
Boeing Capital	2,246		2,809		2,116		2,269
Unallocated items, eliminations and other	17,231		12,247		46,751		22,999
Total		$132,598		$117,359		$162,872		$133,625

Assets included in Unallocated items, eliminations and other primarily consist of Cash and cash equivalents, Short-term and other investments, Deferred tax assets, capitalized interest and assets ~~held~~managed centrally ~~as well as~~on behalf of the 4 principal business segments and intercompany eliminations. From December 31, 2019 to June 30, 2020, assets in BCA increased primarily due to higher inventory balances and assets in Unallocated items, eliminations, and other increased due to higher cash and short-term investment balances from debt issued during the first half of 2020.

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 ~~September~~June 30, ~~2019,~~2020, the related condensed consolidated statements of operations, comprehensive income, and equity for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, and of cash flows for the ~~nine months~~six-month periods ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, 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) (PCAOB), the consolidated statement of financial position of the Company as of December 31, ~~2018,~~2019, and the related consolidated statements of operations, comprehensive income, equity, and cash flows ~~and equity~~ for the year then ended (not presented herein); and in our report dated ~~February 8, 2019,~~January 31, 2020, we expressed an unqualified opinion on those consolidated financial ~~statements and included an explanatory paragraph related to the Company’s change in method of accounting for revenue from contracts with customers.~~statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of December 31, ~~2018,~~2019, 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

~~October 23, 2019~~July 29, 2020



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 ~~timing~~COVID-19 pandemic and ~~conditions surrounding return~~related government actions, including with respect to ~~service~~our operations and access to suppliers, our liquidity, the health of ~~the 737 MAX fleet;~~our customers and suppliers, and future demand for our products and services;

(2)	the 737 MAX, including the timing and conditions of 737 MAX regulatory approvals, lower than planned production rates and/or delivery rates, and increased considerations to customers and suppliers;

(3)	general conditions in the economy and our industry, including those due to regulatory changes;

~~(3)~~(4)	our reliance on our commercial airline customers;

~~(4)~~(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;

~~(5)~~(6)	changing budget and appropriation levels and acquisition priorities of the U.S. government;

~~(6)~~(7)	our dependence on U.S. government contracts;

~~(7)~~(8)	our reliance on fixed-price contracts;

~~(8)~~(9)	our reliance on cost-type contracts;

~~(9)~~(10)	uncertainties concerning contracts that include in-orbit incentive payments;

~~(10)~~(11)	our dependence on our subcontractors and suppliers as well as the availability of raw materials;

~~(11)~~(12)	changes in accounting estimates;

~~(12)~~(13)	changes in the competitive landscape in our markets;

~~(13)~~(14)	our non-U.S. operations, including sales to non-U.S. customers;

~~(14)~~(15)	threats to the security of our or our customers' information;

~~(15)~~(16)	potential adverse developments in new or pending litigation and/or government investigations;

~~(16)~~(17)	customer and aircraft concentration in our customer financing portfolio;

~~(17)~~(18)	changes in our ability to obtain debt on commercially reasonable terms and at competitive rates;


~~(18)~~
(19)	realizing the anticipated benefits of mergers, acquisitions, joint ventures, strategic alliances or divestitures;



~~(19)~~(20)	the adequacy of our insurance coverage to cover significant risk exposures;

~~(20)~~(21)	potential business disruptions, including those related to physical security threats, information technology or cyber attacks, epidemics, sanctions or natural disasters;

~~(21)~~(22)	work stoppages or other labor disruptions;

~~(22)~~(23)	substantial pension and other postretirement benefit obligations; and

~~(23)~~(24)	potential environmental liabilities.

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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Consolidated Results of Operations and Financial Condition

Overview

The aerospace industry is facing an unprecedented shock to demand for air travel which creates a tremendous challenge for our customers, our business and the entire aerospace manufacturing and services sector. The latest IATA forecast projects full-year passenger traffic to be down 55% this year compared to 2019 as global economic activity slows down due to COVID-19 and governments severely restrict travel to contain the spread of the virus.

Our customers are taking actions to adjust to these new market realities and preserve liquidity. This comes in many forms such as deferrals of advance payments, deferrals of deliveries, reduced spending on services, and, in some cases, cancellations. We face a challenging environment in the near to medium term as airlines adjust to reduced traffic which in turn will lower demand for commercial aerospace products and services. It could also affect the financial viability of some airlines.

We currently expect it will take approximately three years for travel to return to 2019 levels and a few years beyond that for the industry to return to long-term trend growth. To balance the supply and demand given the COVID-19 shock and to preserve our long-term potential and competitiveness, we are reducing the production rates of several of our Commercial Airplanes (BCA) programs. These rate decisions are based on our ongoing assessments of the demand environment. There is significant uncertainty with respect to when commercial air traffic levels will recover, and whether, and at what point, capacity will return to and/or exceed pre-COVID-19 levels. We will closely monitor the key factors that affect backlog and future demand including customers’ evolving fleet plans, the wide-body replacement cycle and the cargo market. We will maintain a disciplined rate management process, and make adjustments as appropriate in the future.

~~Earnings~~At Global Services (BGS), we are seeing a direct impact on our commercial supply chain business as fewer flights and more aircraft retirements 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, which in 2019 accounted for just under half of BGS revenue, remains stable.

At Defense, Space & Security (BDS), we continue to see a healthy market with solid demand for our major platforms and programs both domestically and internationally. Despite some near-term production impacts associated with our temporary suspension of operations at various locations, we believe that our portfolio of programs and technologies remains well aligned to our customers’ missions and well positioned to address their current needs.

In March and April of 2020, we temporarily suspended operations at multiple locations including the Puget Sound area, South Carolina and Philadelphia. Operations in Puget Sound and Philadelphia resumed during the week of April 20, while operations in South Carolina resumed beginning on May 3. We have implemented procedures to promote employee safety in our facilities, including more frequent and enhanced cleaning and adjusted schedules and work flows to support physical distancing. These actions have resulted, and will continue to result, in increased operating costs. In addition, a number of our suppliers have suspended or otherwise reduced their operations, and we are experiencing some supply chain shortages. Our suppliers are also experiencing liquidity pressures and disruptions to their operations as a result of COVID-19. We also continue to have large numbers of employees working from home. These measures and disruptions have reduced overall productivity and adversely impacted our financial position, results of operations, and cash flows in the first half of 2020. We expect further adverse impacts in future quarters.

Loss From Operations and Core Operating ~~Earnings~~Loss (Non-GAAP)

The following table summarizes key indicators of consolidated results of operations:


(Dollars in millions, except per share data)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Revenues		$58,648			$72,786			$19,980			$25,146			$28,715			$38,668			$11,807			$15,751

GAAP
Earnings from operations		$229			$7,812			$1,259			$2,227
Loss from operations														($4,317	)		($1,030	)		($2,964	)		($3,380	)
Operating margins	0.4		%	10.7		%	6.3		%	8.9		%	(15.0		)%	(2.7		)%	(25.1		)%	(21.5		)%
Effective income tax rate	(350.6		)%	6.9		%	0.8		%	(10.8		)%	38.4		%	27.5		%	30.0		%	14.2		%
Net earnings		$374			$7,036			$1,167			$2,363
Diluted earnings per share		$0.66			$11.95			$2.05			$4.07
Net loss attributable to Boeing Shareholders														($3,004	)		($793	)		($2,376	)		($2,942	)
Diluted loss per share														($5.31	)		($1.40	)		($4.20	)		($5.21	)

Non-GAAP ⁽¹⁾
Core operating (loss)/earnings		($864	)		$6,793			$895			$1,890
Core operating loss														($5,019	)		($1,759	)		($3,319	)		($3,745	)
Core operating margins	(1.5		%)	9.3		%	4.5		%	7.5		%	(17.5		%)	(4.5		%)	(28.1		%)	(23.8		%)
Core (loss)/earnings per share		($1.13	)		$10.55			$1.45			$3.58
Core loss per share														($6.49	)		($2.60	)		($4.79	)		($5.82	)


⁽¹⁾	These measures exclude certain components of pension and other postretirement benefit expense. See page 53 for important information about these non-GAAP measures and reconciliations to the most comparable GAAP measures.

Revenues

The following table summarizes Revenues:


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020		2019
Commercial Airplanes		$24,793			$40,968			$8,249			$14,071			$7,838			$16,544			$1,633		$4,722
Defense, Space & Security	20,265			19,518			7,042			6,937			12,630			13,166			6,588		6,579
Global Services	13,820			12,148			4,658			4,101			8,116			9,162			3,488		4,543
Boeing Capital	207			214			66			77			134			141			69		75
Unallocated items, eliminations and other	(437		)	(62		)	(35		)	(40		)	(3		)	(345		)	29		(168		)
Total		$58,648			$72,786			$19,980			$25,146			$28,715			$38,668			$11,807		$15,751

Revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 decreased by ~~$14,138~~$9,953 million compared with the same period in ~~2018. Commercial Airplanes (~~2019 due to lower revenues across all four of our segments. Revenues for each of our segments have been adversely impacted by COVID-19. BCA) revenues decreased by ~~$16,175~~$8,706 million due to lower deliveries driven by the impacts of the COVID-19 pandemic and the 737 MAX grounding, offset by lower ~~deliveries and a revenue reduction of $5,610 million that was recorded in the second quarter of 2019~~charges related to estimated potential concessions and other considerations to ~~customers for disruptions and associated delivery delays related to the~~ 737 MAX ~~grounding. Defense, Space & Security (~~customers. BDS) revenues~~increased~~ decreased by ~~$747~~$536 million primarily due to ~~higher~~the unfavorable impact of cumulative contract catch-up adjustments for the KC-46A Tanker program. BGS revenues ~~from satellites, weapons, derivative aircraft, and early warning aircraft, partially offset~~decreased by ~~lower revenue for fighters and C-17. Global Services (BGS) revenues increased by $1,672~~$1,046 million primarily due to ~~the acquisition of KLX, Inc. in the fourth quarter of 2018 and international government~~lower commercial services revenue. driven by impacts of the COVID-19 pandemic. The changes in Unallocated items, eliminations and other primarily reflect the timing of eliminations for intercompany aircraft ~~deliveries.~~deliveries, as well as reserves related to cost accounting litigation recorded in 2019. We expect the impacts of the COVID-19 pandemic to continue to significantly impact revenues in future quarters until the commercial airline industry recovers.

Revenues for the three months ended ~~September~~June 30, ~~2019~~2020 decreased by ~~$5,166~~$3,944 million compared with the same period in ~~2018.~~2019. BCA revenues decreased by ~~$5,822~~$3,089 million ~~primarily~~ due to lower ~~deliveries resulting from~~wide-body and narrow-body

deliveries. Revenues in both periods were adversely impacted by the 737 MAX grounding. ~~BDS revenuesincreased by $105 million primarily due to~~ ~~higher revenues from satellites, weapons, and T-7A Red Hawk,~~This decrease was partially offset by lower ~~revenues for the F-15 program~~.charges related to estimated potential concessions and other considerations to 737 MAX customers. BGS revenues ~~increased~~decreased by ~~$557~~$1,055 million ~~primarily~~ due to ~~the acquisition of KLX, Inc. in the fourth quarter of 2018 and international government~~lower commercial services revenue. driven by impacts of the COVID-19 pandemic. The changes in Unallocated items, eliminations and other primarily reflect reserves related to cost accounting litigation recorded in 2019.

Loss/Earnings From Operations

The following table summarizes ~~Earnings~~(Loss)/earnings from operations:


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Commercial Airplanes		($3,813	)		$5,230			($40	)		$2,033			($4,830	)		($3,773	)		($2,762	)		($4,946	)
Defense, Space & Security	2,577			886			755			(247		)	409			1,827			600			975
Global Services	2,013			1,799			673			548			36			1,340			(672		)	687
Boeing Capital	86			71			29			27			17			57			(7		)	37
Segment operating profit	863			7,986			1,417			2,361
Segment operating loss													(4,368		)	(549		)	(2,841		)	(3,247		)
Pension FAS/CAS service cost adjustment	823			780			274			260			513			549			258			275
Postretirement FAS/CAS service cost adjustment	270			239			90			77			189			180			97			90
Unallocated Items, Eliminations and Other	(1,727		)	(1,193		)	(522		)	(471		)
Earnings from operations (GAAP)		$229			$7,812			$1,259			$2,227
Unallocated items, eliminations and other													(651		)	(1,210		)	(478		)	(498		)
Loss from operations (GAAP)														($4,317	)		($1,030	)		($2,964	)		($3,380	)
FAS/CAS service cost adjustment *	(1,093		)	(1,019		)	(364		)	(337		)	(702		)	(729		)	(355		)	(365		)
Core operating (loss)/earnings (Non-GAAP) **		($864	)		$6,793			$895			$1,890
Core operating loss (Non-GAAP) **														($5,019	)		($1,759	)		($3,319	)		($3,745	)


*	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 ~~(loss)/earnings~~loss is a Non-GAAP measure that excludes the FAS/CAS service cost adjustment. See page 53.

~~Earnings~~Loss from operations for the ~~nine~~six months ended ~~September~~June 30, ~~2019 decreased~~2020 increased by ~~$7,583~~$3,287 million compared with the same period in ~~2018,~~2019 primarily driven by our BCA, BDS and BGS segments. Earnings/loss from operations for each of our segments were adversely impacted by COVID-19. BCA loss from operations of $4,830 million for the six months ended June 30, 2020 primarily reflects the continued absence of MAX deliveries, lower wide-body margins and deliveries resulting from COVID-19, abnormal production costs, severance costs and 737NG frame fitting component repair costs. BCA loss from operations of $3,773 million for the six months ended June 30, 2019 primarily reflects the absence of 737 MAX deliveries and charges of $5,610 million for estimated 737 MAX customer considerations. BDS earnings decreased by $1,418 million, primarily due to ~~lower earnings at BCA and~~charges of $978 million on KC-46A Tanker, a ~~customer financing impairment~~$168 million charge in the first quarter of ~~$250 million that was recorded~~2020 on VC-25B, as well as gains on property sales in ~~Unallocated Items, Eliminations and Other. The decrease was partially offset by higher earnings at~~2019. For discussion regarding BDS ~~and BGS. BCA~~Fixed-Price Development Contracts see Note 10 to our Condensed Consolidated Financial Statements. BGS earnings from operations decreased by ~~$9,043 million primarily~~ ~~due to the earnings charge for the 737 MAX grounding of $5,610 million and lower 737 deliveries, partially offset by higher 787 margins. BDS earnings from operations increased by $1,691~~$1,304 million primarily due to lower ~~charges on development programs. During the third quarter~~commercial services revenue, and $923 million of ~~2018, upon contract award, we recorded~~ charges ~~of $400 million associated with anticipated losses on the T-7A Red Hawk and $291 million on the MQ-25.~~ ~~During the nine months ended September 30, 2018, BDS recorded reach-forward losses of $674 million~~ related to asset impairments and severance costs as a result of the ~~KC-46A Tanker program. BGS~~COVID-19 market environment. We expect the impacts of the COVID-19 pandemic to continue to reduce earnings ~~from operations increased by $214 million primarily due to~~ ~~higher revenues~~.in future quarters until the commercial airline industry recovers.

~~Earnings~~Loss from operations for the three months ended ~~September~~June 30, ~~2019~~2020 decreased by ~~$968~~$416 million compared with the same period in ~~2018,~~2019 primarily due to lower ~~earnings~~losses at BCA, partially offset by ~~higher~~decreases in earnings from operations at BDS and BGS. ~~BCA's earnings~~BCA loss from operations decreased ~~$2,073 million primarily due~~ ~~to lower 737 deliveries, partially offset by higher 787 margins~~. BDS earnings from operations increased by $1,002 million, compared with the same period in 2018 primarily due to charges on the T-7A Red Hawk, MQ-25, and KC-46A Tanker programs recorded in the third quarter of 2018. BGS earnings from operations increased by $125$2,184 million, primarily due to ~~higher revenues~~lower charges related to estimated potential concessions and ~~improved performance~~other considerations to 737 MAX customers, partially offset by the continued absence of 737 MAX deliveries, lower wide-body margins and ~~mix.~~deliveries resulting from COVID-19, abnormal production costs, and severance costs. BDS earnings decreased $375 million primarily due to a gain on property sale in 2019 and a charge on the KC-46A Tanker program in 2020. BGS

earnings decreased $1,359 million primarily due to lower commercial services revenue, and $923 million of charges related to asset impairments and severance costs as a result of the COVID-19 market environment.

Core operating ~~earnings~~loss for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019~~2020 increased by $3,260 million and decreased by ~~$7,657 million and $995~~$426 million compared with the same periods in ~~2018~~2019 primarily due to ~~lower~~losses and earnings from operations at BCA, ~~partially offset by higher earnings at~~ BDS and ~~BGS.~~BGS as described above.

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)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Share-based plans		($57	)		($60	)		($21	)		($24	)		($43	)		($36	)		($25	)		($22	)
Deferred compensation	(154		)	(112		)	(25		)	(56		)	73			(129		)	(120		)	(27		)
Amortization of previously capitalized interest	(68		)	(67		)	(23		)	(19		)	(50		)	(45		)	(27		)	(21		)
Research and development expense, net	(270		)	(69		)	(97		)	(50		)	(116		)	(183		)	(62		)	(105		)
Customer financing impairment	(250		)													(250		)
Litigation	(109		)	(148		)										(109		)				(109		)
Eliminations and other unallocated items	(819		)	(737		)	(356		)	(322		)	(515		)	(458		)	(244		)	(214		)
Unallocated items, eliminations and other		($1,727	)		($1,193	)		($522	)		($471	)		($651	)		($1,210	)		($478	)		($498	)

~~The deferred~~Deferred compensation expense decreased by $202 million and increased by ~~$42~~$93 million for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019~~2020 compared with the same ~~period~~periods in ~~2018~~2019 primarily driven by changes in our stock price and broad market conditions.

Research and development expense ~~increased~~decreased by ~~$201~~$67 million and ~~$47~~$43 million for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019~~2020 compared with the same periods in ~~2018~~2019 primarily due to ~~enterprise investments in new products and technologies.~~decreased spending by Boeing NeXt on product development.

During the first quarter of 2019, we recorded a $250 million charge related to the impairment of lease incentives with one customer that ~~is currently experiencing~~experienced liquidity issues.

During the second quarter of 2019, we recorded a charge of $109 million related to ongoing litigation associated with recoverable costs on U.S. government contracts. ~~In the second quarter of 2018, we recorded a charge of $148 million related to the outcome of the Spirit litigation.~~

A portion of service cost is recognized in Earnings from operations in the period incurred and the remainder is included in inventory at the end of the reporting period and recorded in Earnings from operations in subsequent periods.

Net periodic pension benefit costs included in ~~Earnings~~Loss from operations were as follows:


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
Pension Plans	2019			2018			2019			2018			2020			2019			2020			2019
Allocated to business segments		($1,057	)		($1,017	)		($350	)		($339	)		($514	)		($707	)		($259	)		($355	)
Pension FAS/CAS service cost adjustment	823			780			274			260			513			549			258			275
Net periodic benefit cost included in Earnings from operations		($234	)		($237	)		($76	)		($79	)
Net periodic benefit cost included in Loss from operations														($1	)		($158	)		($1	)		($80	)

The pension FAS/CAS service cost adjustment recognized in ~~earnings~~earnings/loss in ~~2019~~2020 is largely consistent with the same periods in the prior year. The decrease in net periodic benefit costs included in ~~Earnings~~Loss from operations

in ~~2019 is largely consistent with~~2020 was primarily due to lower service costs reflecting the ~~same periods in the prior year.~~transition of employees to defined contribution retirement savings plans.

For discussion related to Postretirement Plans, see Note 1413 to our Condensed Consolidated Financial Statements.

Other Earnings Items

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2019
2018
2019
2018
Earnings from operations
$229

$7,812

$1,259

$2,227
Other income 334
63
121
12
Interest and debt expense (480 ) (317 ) (203 ) (106 )
Earnings from operations 83
7,558
1,177
2,133
Income tax benefit/(expense) 291
(522 ) (10 ) 230
Net earnings from continuing operations
$374

$7,036

$1,167

$2,363



(Dollars in millions)	Six months ended June 30						Three months ended June 30
	2020			2019			2020			2019
Loss from operations		($4,317	)		($1,030	)		($2,964	)		($3,380	)
Other income, net	206			213			94			107
Interest and debt expense	(815		)	(277		)	(553		)	(154		)
Loss before income taxes	(4,926		)	(1,094		)	(3,423		)	(3,427		)
Income tax benefit	1,890			301			1,028			485
Net loss from continuing operations	(3,036		)	(793		)	(2,395		)	(2,942		)
Less: Net loss attributable to noncontrolling interest	(32		)				(19		)
Net loss attributable to Boeing Shareholders		($3,004	)		($793	)		($2,376	)		($2,942	)

Other income, net ~~increased~~decreased by ~~$271~~$7 million and ~~$109~~$13 million during the ~~nine~~six and three months ended ~~September~~June 30, ~~2019,~~2020, primarily due to higher foreign exchange losses and lower non-operating pension income, partially offset by lower non-operating postretirement expense. Non-operating ~~pension~~postretirement expense was ~~a benefit of $280~~$27 million and ~~$93~~$14 million during the ~~nine~~six and three months ended ~~September~~June 30, ~~2019~~2020 compared with ~~$98~~$53 million and ~~$50~~$26 million during the same periods in 2018. The benefits in 2019 reflect lower amortization of actuarial losses driven by higher discount rates. This is partially offset by higher interest costs and lower expected returns, as a result of the lower value of plan assets at December 31, 2018 compared to 2017.2019.

Higher ~~interest~~Interest and debt expense for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019~~2020 is a result of higher debt balances.

For discussion related to Income Taxes, see Note 4 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)	Nine months ended September 30									Three months ended September 30									Six months ended June 30									Three months ended June 30
	2019			2018			Change			2019			2018			Change			2020			2019			Change			2020			2019			Change
Cost of sales		$53,385			$59,400			($6,015	)		$16,930			$21,040			($4,110	)		$29,746			$36,455			($6,709	)		$12,978			$17,810			($4,832	)
Cost of sales as a % of Revenues	91.0		%	81.6		%	9.4		%	84.7		%	83.7		%	1.0		%	103.6		%	94.3		%	9.3		%	109.9		%	113.1		%	(3.2		)%

Cost of sales for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019~~2020 decreased by ~~$6,015~~$6,709 million, or ~~10%~~18% and by ~~$4,110~~$4,832 million, or ~~20%~~27% compared with the same periods in ~~2018,~~2019, primarily due to lower revenue, partially offset by COVID-19 related charges at BCA, BDS, and ~~lower reach-forward losses.~~BGS and abnormal production costs related to 737

MAX in 2020. Cost of sales as a percentage of Revenues increased during the six months ended June 30, 2020 compared with the same period in 2019 ~~resulting from the reduction in revenue~~ due to the impacts of the 737 MAX ~~grounding.~~

grounding and COVID-19. Cost of sales as a percentage of Revenues decreased during the three months ended June 30, 2020 compared with the same period in 2019 primarily due to the second quarter 2019 charge for the 737 MAX grounding, partially offset by the second quarter 2020 impacts of the 737 MAX grounding and COVID-19.

Research and Development The following table summarizes our Research and development expense:


(Dollars in millions)	Nine months ended September 30				Three months ended September 30				Six months ended June 30				Three months ended June 30
	2019		2018		2019		2018		2020		2019		2020		2019
Commercial Airplanes		$1,529		$1,616		$467		$517		$786		$1,062		$361		$498
Defense, Space & Security	569		613		185		211		330		374		167		190
Global Services	102		119		29		48		65		73		35		33
Other	270		69		97		50		116		183		62		105
Total		$2,470		$2,417		$778		$826		$1,297		$1,692		$625		$826

Research and development expense increased by $53 million during the nine months ended September 30, 2019 compared to the prior period in 2018, primarily due to enterprise and BCA investments in product development, partially offset by lower 777X and 737 MAX spending. Research and development expense decreased by ~~$48~~$395 million and $201 million during the six and three months ended ~~September~~June 30, ~~2019~~2020 compared to the ~~prior period~~same periods in ~~2018,~~2019, primarily due to lower spending on 777X and ~~737 MAX, partially offset by higher enterprise and BCA investments in~~ product development.

Backlog


(Dollars in millions)	September 30 2019		December 31 2018		June 30 2020		December 31 2019
Commercial Airplanes		$387,397		$408,140		$325,674		$376,593
Defense, Space & Security	61,740		61,277		64,286		63,691
Global Services	21,088		21,064		18,168		22,902
Unallocated items, eliminations and other					522		217
Total Backlog		$470,225		$490,481		$408,650		$463,403

Contractual backlog		$444,711		$462,070		$385,389		$436,473
Unobligated backlog	25,514		28,411		23,261		26,930
Total Backlog		$470,225		$490,481		$408,650		$463,403

Contractual backlog of unfilled orders excludes purchase options, announced orders for which definitive contracts have not been executed, and unobligated U.S. and non-U.S. government contract funding. The decrease during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was primarily due to ~~BCA~~aircraft order cancellations, a reduction for orders that in our assessment no longer meet the accounting requirements of ASC 606 for inclusion in backlog, changes in projected price escalation and deliveries in excess of new orders. We are experiencing fewer new 737 MAX orders than we were receiving prior to the grounding. If 737 MAX aircraft remain grounded for an extended period of time, we may experience additional reductions to backlog and/or significant order cancellations. Additionally, we may experience fewer new orders and increased cancellations across all of our commercial airplane programs as a ~~reduction in backlog related to orders from a customer experiencing liquidity issues, partially offset by BDS current year contract awards in excess~~result of ~~revenue recognized~~the COVID-19 pandemic and associated impacts on ~~contracts awarded in prior years.~~demand.

Unobligated backlog includes U.S. and non-U.S. government definitive contracts for which funding has not been authorized. The decrease during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was primarily due to reclassifications to contractual backlog related to BGS and BDS contracts.

~~Export-Import Bank of the United States~~ Many of our non-U.S. customers finance purchases through the Export-Import Bank of the United States. Following the expiration of the bank’s charter on June 30, 2015, the bank’s charter was reauthorized in December 2015. However, from the time of that reauthorization until May 8, 2019, when the U.S. Senate confirmed members sufficient to constitute a quorum of the bank’s board of directors, the bank was not able to approve any transaction totaling more than $10 million. The bank is authorized through November 21, 2019.

If the bank's charter is not reauthorized on a timely basis, or if the bank’s future funding authority is insufficient to meet our customers’ needs, we may fund additional commitments and/or enter into new financing arrangements with customers. Certain of our non-U.S. customers also may seek to delay purchases if they cannot obtain financing at reasonable costs, and there may be further impacts with respect to future sales campaigns involving non-U.S. customers.

Additional Considerations

Global TradeThe global economy is currently experiencing significant adverse impacts due to the COVID-19 pandemic, including a decline in overall trade. There is a great deal of uncertainty regarding the duration, scale, and localization of these impacts to the global economy and governments are enacting a wide range

of responses to mitigate the unfolding economic impacts. We are closely monitoring the current impact and potential future economic consequences of COVID-19 to the global economy, the aerospace sector, and our Company. These adverse economic impacts have resulted in fewer orders than previously anticipated for our commercial aircraft.

In addition, we continually monitor the global trade environment for changes in tariffs, trade agreements, sanctions or other potential geopolitical economic developments that may impact the Company.

Beginning in June 2018, the U.S. Government ~~began imposing~~has imposed tariffs on steel and aluminum imports. In response to these tariffs, several major U.S. trading partners have imposed, or announced their intention to impose, tariffs on U.S. goods. In May 2019, the U.S. Government, Mexico and Canada reached an agreement to end the steel and aluminum tariffs between these countries. Implementation of the U.S./Mexico/Canada Free Trade Agreement (USMCA) will also result in lower tariffs. We continue to monitor ~~this agreement and~~ the potential for any extra costs that may result from the remaining global tariffs.

~~In July~~Since 2018, the U.S. and China ~~began imposing~~imposed tariffs on approximately $34 billion of each other's exports. Certain aircraft parts and components that Boeing procures are subject to these tariffs. Subsequently, the U.S. imposed tariffs on an additional $216 billion in Chinese goods, and China imposed tariffs on an additional $76 billion worth of U.S goods. The U.S. and China Phase I agreement in January 2020 is a positive development for overall trade with China. Negotiations to resolve remaining trade issues continue. Recently, the ~~trade dispute~~U.S.-China relationship has become more strained. We are ~~currently ongoing.~~

~~The continued global trade tension has resulted in market uncertainties and fewer orders than anticipated~~closely monitoring developments for ~~our commercial aircraft. In~~potential adverse impacts to the third quarter of 2019, we decided to reduce the production rate on the 787 program for approximately two years beginning in late 2020. We continue to monitor the potential for additional disruption and adverse revenue and/or cost impacts that may result from global trade tension including, the potential imposition of further tariffs, or other future geopolitical economic developments.Company.

The U.S. Government continues to impose and/or consider imposing sanctions on certain businesses and individuals in Russia. Although our operations or sales in Russia have not been impacted to date, we continue to monitor additional sanctions that may be imposed by the U.S. Government and any responses from Russia that could affect our supply chain, business partners or customers.

Segment Results of Operations and Financial Condition

Commercial Airplanes

Business Environment and Trends

~~Airline Industry Environment~~See Overview to Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the impacts of COVID-19 on the airline industry environment.

Our updated 20-year forecast, published in June 2019, projects a long-term average growth rate of 4.6% per year for passenger traffic and 4.2% for cargo traffic. Based on long-term global economic growth projections of 2.7% average annual GDP growth, we project a $6.8 trillion market for 44,040 new airplanes over the next 20 years.

Results of Operations


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Revenues		$24,793			$40,968			$8,249			$14,071			$7,838			$16,544			$1,633			$4,722
(Loss)/Earnings from operations		($3,813	)		$5,230			($40	)		$2,033
Loss from operations														($4,830	)		($3,773	)		($2,762	)		($4,946	)
Operating margins	(15.4		)%	12.8		%	(0.5		)%	14.4		%	(61.6		)%	(22.8		)%	(169.1		)%	(104.7		)%

Revenues

Revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 decreased by ~~$16,175~~$8,706 million compared with the same period in ~~2018~~2019 due to lower deliveries driven by the impacts of COVID-19 and the 737 MAX grounding. This was offset by lower ~~deliveries and a revenue reduction of $5,610 million that was recorded in the second quarter of 2019~~charges related to estimated potential concessions and other considerations to ~~customers for disruptions and associated delivery delays related to the~~ 737 MAX ~~grounding~~.customers of $521 million in 2020 as compared with $5,610 million for the same period in 2019.

Revenues for the three months ended ~~September~~June 30, ~~2019~~2020 decreased by ~~$5,822~~$3,089 million compared with the same period in ~~2018 driven by lower deliveries~~2019 due to lower wide-body and narrow-body deliveries. Revenues in both periods were adversely impacted by the 737 MAX grounding. This revenue decrease from lower deliveries was partially offset by lower charges related to estimated potential concessions and other considerations to 737 MAX customers of $551 million in the second quarter of 2020 compared to $5,610 million in the second quarter of 2019.

The 737 MAX grounding will continue to have a significant impact on future revenues until deliveries ~~resume.~~

resume, and COVID-19 will continue to have a significant impact on future revenues until the commercial airline industry recovers.

Commercial airplane deliveries, including intercompany deliveries, were as follows:

737
* 747
767
* 777
† 787
Total
Deliveries during the first nine months of 2019 118
(15) 5

32
(18) 33
(1) 113
301
Deliveries during the first nine months of 2018 407
(14) 5

13
37
106
568
Deliveries during the third quarter of 2019 5
(5) 1

10
(4) 11
35
62
Deliveries during the third quarter of 2018 138
(4) 2

4
12
34
190
Cumulative deliveries as of 9/30/2019 7,430
1,553
1,165
1,615
894

Cumulative deliveries as of 12/31/2018 7,312
1,548
1,133
1,582
781



	737	*	747	767	*	777	†	787	Total
Deliveries during the first six months of 2020	9	(7)	1	14	(6)	10		36	70
Deliveries during the first six months of 2019	113	(10)	4	22	(14)	22	(1)	78	239
Deliveries during the second quarter of 2020	4	(4)	1	4	(1)	4		7	20
Deliveries during the second quarter of 2019	24	(6)	2	10	(6)	12		42	90
Cumulative deliveries as of 6/30/2020	7,448		1,556	1,190		1,637		975
Cumulative deliveries as of 12/31/2019	7,439		1,555	1,176		1,627		939

* Intercompany deliveries identified by ~~parentheses~~parentheses.

† Aircraft accounted for as revenues by BCA and as operating leases in consolidation identified by parentheses.

~~Loss/Earnings~~Loss From Operations

~~Loss~~The loss from operations for the ~~nine~~six months ended ~~September~~June 30, ~~2019 was $3,813~~2020 of $4,830 million increased $1,057 million compared with ~~earnings from operations of $5,230 million in~~ the same period in ~~2018. This decrease~~2019. The 2020 loss reflects the continued absence of ~~$9,043 million is primarily~~ ~~due to the earnings charge for the~~ 737 MAX ~~grounding~~deliveries, lower wide-body deliveries and margins resulting from COVID-19, $1,509 million of abnormal production costs related to 737 MAX, $521 million of 737 MAX customer considerations, $270 million of abnormal production costs from the temporary suspension of operations in response to COVID-19, $336 million related to 737NG frame fitting component repair costs, and $468 million of severance costs. Lower 787 margins reflecting a reduction in the accounting quantity in the first quarter of 2020 and lower production rates also contributed to lower earnings. The 2019 loss primarily reflects the absence of 737 MAX deliveries in the second quarter of 2019 and charges of $5,610 million ~~and lower~~for estimated 737 ~~deliveries, partially offset by higher 787 margins~~.MAX customer considerations.

~~Loss~~The loss from operations of $2,762 million for the three months ended ~~September~~June 30, ~~2019 was $40~~2020 is $2,184 million lower compared with ~~earnings from operations of $2,033 million in~~ the same period in ~~2018. This decrease~~2019. The losses in both periods reflect the continued absence of ~~$2,073~~MAX deliveries. The 2019 loss was also driven by charges of $5,610 million ~~is primarily~~for estimated 737 MAX customer considerations. The 2020 loss was driven by lower wide-body deliveries and lower program margins due to ~~lower~~COVID-19 impacts, $712 million of abnormal production costs related to 737 ~~deliveries, partially offset by higher 787 margins~~. MAX, $551 million of charges for 737 MAX customer considerations, $468 million of severance costs and $133 million of abnormal production costs from the temporary suspension of operations in response to COVID-19.

The 737 MAX grounding and COVID-19 will continue to ~~adversely~~have a significant adverse impact on future earnings and margins until 737 MAX and wide-body deliveries ~~resume.~~return to historic levels.

Backlog

Our total backlog represents the estimated transaction prices on unsatisfied and partially satisfied performance obligations to our customers where we believe it is probable that we will collect the consideration due and where no contingencies remain before we and the customer are required to perform. Backlog does not include prospective orders where customer controlled contingencies remain, such as the customer receiving approval from its board of directors, shareholders or government or completing financing arrangements. All such contingencies must be satisfied or have expired prior to recording a new firm order even if satisfying such conditions is highly certain. Backlog excludes options and ~~BCC~~ Boeing Capital (BCC)

orders. A number of our customers may have contractual remedies, ~~that may be implicated by program delays.~~including rights to reject individual airplane deliveries if the actual delivery date is significantly later than the contractual delivery date. We address customer claims and requests for other contractual relief as they arise. The value of orders in backlog is adjusted as changes to price and schedule are agreed to with customers and is reported in accordance with the requirements of Topic 606.

BCA total backlog decreased from ~~$408,140~~$376,593 million as of December 31, ~~2018~~2019 to ~~$387,397~~$325,674 million at ~~September~~June 30, ~~2019 primarily due to~~2020 reflecting aircraft order cancellations, a reduction for orders that in our assessment no longer meet the accounting requirements of ASC 606 for inclusion in backlog, changes in projected price escalation and deliveries in excess of new orders. Aircraft order cancellations during the six months ended June 30, 2020 totaled $19,755 million and primarily relate to 737 MAX aircraft. The ASC 606 adjustments totaled $23,906 million and primarily relate to 737 MAX aircraft. The ASC 606 adjustments include aircraft orders where a customer controlled contingency now exists, as well as orders where we can no longer assert that the customer is committed to perform or that it is probable that the customer will pay the full amount of consideration when it is due. If 737 MAX aircraft remain grounded for an extended period of time, we may experience additional reductions to backlog and/or significant order cancellations. Additionally, we may continue to experience fewer new orders and increased cancellations across all of our commercial airplane programs as a ~~reduction in backlog related to orders from a customer experiencing liquidity issues. While~~result the ~~737 MAX grounding has not resulted in significant order cancellations, we are experiencing fewer new 737 MAX orders than we were receiving prior to the grounding.~~COVID-19 pandemic.

Accounting Quantity

The following table provides details of the accounting quantities and firm orders by program. Cumulative firm orders represent the cumulative number of commercial jet aircraft deliveries plus undelivered firm orders.


	Program									Program
As of 9/30/2019	737		747*	767	777	†	777X	787	†
As of 6/30/2020										737	747*	767	777	777X	787	†
Program accounting quantities	10,400		1,574	1,195	1,690		**	1,600		10,000	1,574	1,207	1,690	**	1,500
Undelivered units under firm orders	4,406		19	105	85	(1)	344	529	(31)	3,595	12	89	46	309	501	(27)
Cumulative firm orders	11,836		1,572	1,270	1,700		344	1,423		11,043	1,568	1,279	1,683	309	1,476

As of 12/31/2018	737	†	747	767	777	†	777X	787	†
As of 12/31/2019										737	747	767	777	777X	787	†
Program accounting quantities	10,400		1,574	1,195	1,680		**	1,600		10,400	1,574	1,195	1,690	**	1,600
Undelivered units under firm orders	4,708	(75)	24	111	100	(2)	326	604	(30)	4,398	17	94	68	309	520	(29)
Cumulative firm orders	12,020		1,572	1,244	1,682		326	1,385		11,837	1,572	1,270	1,695	309	1,459


†	Aircraft ordered by BCC are identified in ~~parentheses~~parentheses.


*	At ~~September~~June 30, ~~2019,~~2020, the 747 accounting quantity includes one already completed aircraft that has not been sold and is being remarketed.


**	The accounting quantity for the 777X will be determined in the year of first airplane delivery.

Program Highlights

737 Program We reduced the program accounting quantity from 10,400 at December 31, 2019 to 10,000 at March 31, 2020. This reflects a slower than previously planned production rate ramp-up caused by commercial airline industry uncertainty due to the impact of COVID-19. See ~~the~~further discussion of the 737 MAX Grounding and ~~737NG Structure (Pickle Fork)~~COVID-19 Impacts and Product Warranties in Note ~~11 and 19~~10 to our Condensed Consolidated Financial Statements.

747 Program We are currently producing at a rate of 0.5 aircraft per month. We ~~continue to evaluate the viability of the 747 program. We believe that a decision to end~~will complete production of the 747 ~~at the end~~in 2022. We believe that ending production of the ~~current accounting quantity would~~747 will not have a material impact on our financial position, results of operations or cash flows.

767 Program The accounting quantity for the 767 program increased by 12 units during the second quarter of 2020 due to the program's normal progress of obtaining additional orders and delivering airplanes. The 767 assembly line includes the commercial program and a ~~767~~ derivative to support the KC-46A tanker program. We are currently producing at a rate of ~~2.5~~3 aircraft per ~~month and plan to increase to 3 per month in 2020.~~month.

777 Program The accounting quantity for the 777 program increased by 10 units during the three months ended June 30, 2019 due to the program’s normal progress of obtaining additional orders and delivering airplanes. In 2013, we launched the 777X, which features a new composite wing, new engines and folding wing-tips. We have experienced issues in engine design and development on the ~~777X and have delayed~~777X. The first flight ~~to early~~of the 777X was completed on January 25, 2020, ~~with~~and first delivery is now targeted for ~~early 2021.~~2022. The 777 and 777X programs have a combined production rate of approximately 5 per ~~month. We plan~~month gradually reducing to ~~produce more 777 models and fewer 777X models~~2 per month in ~~the near term than previously planned.~~2021. We expect to deliver at an average rate of 3approximately 2.5 per month in 2020. ~~The~~

Market uncertainties driven primarily by the impacts of COVID-19 are resulting in lower planned production rates and creating significant pressure on the 777X ~~will~~program's revenue and cost estimates. Based on our assessment of the probable range of initial accounting quantities, the 777X does not have a ~~separate~~reach-forward loss at June 30, 2020. The level of profitability on the 777X program ~~accounting quantity, which~~ will be ~~determined~~subject to a number of factors. These factors include continued market uncertainty, the impacts of COVID-19 on our productivity as well as impacts on our supply chain and customers, production rate adjustments for other commercial aircraft programs, and potential risks associated with the testing program and the timing of aircraft certification. One or more of these factors could result in a reach-forward loss on the ~~year of first airplane delivery.~~777X program in future periods.

787 ProgramAt

During the ~~end of the first~~second quarter of ~~2019,~~2020, we ~~increased~~experienced significant reductions in deliveries due to the impacts of COVID-19 on our customers as well as travel restrictions and the temporary suspension of production operations in the Puget Sound area and South Carolina. Pre-COVID-19, we were producing at a rate ~~from 12~~of 14 per month and had planned to 14 per month. We delivered the first 787-10 in March 2018. Continued global trade tension has resulted in market uncertainties and fewer orders than anticipated. During the third quarter of 2019, we decided to reduceadjust the 787 production rate to 12 per month ~~for approximately two years beginning~~ in late 2020 and to 10 per month in early 2021. Due to the impacts of COVID-19 on customer demand, we are currently producing at a rate of 10 per month and plan to reduce to 6 per month in 2021. As a result of the planned production rate changes, we reduced the accounting quantity for the 787 program by 100 units during the first quarter of 2020. The 787 program has near breakeven gross margins due to the reductions in the production rates and the reduction in the program accounting quantity. If we are required to further reduce production rates or experience other factors that could result in lower margins, the program could record a reach-forward loss in future periods.

Additional Considerations

The development and ongoing production of commercial aircraft is extremely complex, involving extensive coordination and integration with suppliers and highly-skilled labor from employees and other partners. Meeting or exceeding our performance and reliability standards, as well as those of customers and regulators, can be costly and technologically challenging. In addition, the introduction of new aircraft and derivatives, such as the 777X, involves increased risks associated with meeting development, production and certification schedules. As a result, our ability to deliver aircraft on time, satisfy performance and reliability standards and achieve or maintain, as applicable, program profitability is subject to significant risks. Factors that could result in lower margins (or a material charge if an airplane program has or is determined to have reach-forward losses) include the following: changes to the program accounting quantity, customer and model mix, production costs and rates, changes to price escalation factors due to changes in the inflation rate or other economic indicators, performance or reliability issues involving completed aircraft, capital expenditures and other costs associated with increasing or adding new production capacity, learning curve, additional change incorporation, achieving anticipated cost reductions, flight test and certification schedules, costs, schedule and demand for new airplanes and derivatives and status of customer claims, supplier claims or assertions and other contractual negotiations. While we believe the cost and revenue estimates incorporated in the consolidated financial statements are appropriate, the technical complexity of our airplane programs creates financial risk as additional completion costs may become necessary or scheduled delivery dates could be extended, which could trigger termination provisions, order cancellations or other financially significant exposure.

Defense, Space & Security

Business Environment and Trends

United States Government Defense Environment Overview

The Bipartisan Budget Act ~~(BBA)~~ of 2019 raised the Budget Control Act limits on federal discretionary defense and non-defense spending for fiscal years 2020 and 2021 (FY20 and FY21), reducing budget uncertainty and the risk of sequestration. ~~Although overall funding levels have been agreed to, the timeliness of~~The consolidated appropriations acts for FY20, ~~funding~~enacted in December 2019, provided FY20 appropriations for government departments and agencies, including the United States Department of Defense ~~(DoD)~~(U.S. DoD), the National Aeronautics and Space Administration (NASA) and the Federal Aviation ~~Administration (FAA), remains a risk.~~ Administration. In February 2020, the U.S. administration submitted its request for $740.5 billion in base national defense spending for FY21, congruent with the amended spending limit.

Results of Operations


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Revenues		$20,265			$19,518			$7,042			$6,937			$12,630			$13,166			$6,588			$6,579
Earnings from operations		$2,577			$886			$755			($247	)		$409			$1,827			$600			$975
Operating margins	12.7		%	4.5		%	10.7		%	(3.6		)%	3.2		%	13.9		%	9.1		%	14.8		%

Since our operating cycle is long-term and involves many different types of development and production contracts with varying delivery and milestone schedules, the operating results of a particular period may not be indicative of future operating results. In addition, depending on the customer and their funding sources, our orders might be structured as annual follow on contracts, or as one large multi-year order or long-term award. As a result, period-to-period comparisons of backlog are not necessarily indicative of future workloads. The following discussions of comparative results among periods should be viewed in this context.

Deliveries of units for new-build production aircraft, including remanufactures and modifications, were as follows:


	Nine months ended September 30		Three months ended September 30		Six months ended June 30		Three months ended June 30
	2019	2018	2019	2018	2020	2019	2020	2019
F/A-18 Models	16	10	6	5	9	10	4	3
F-15 Models	7	8	2	3	3	5	3	1
C-17 Globemaster III	1		1
CH-47 Chinook (New)	13	11	6	2	15	7	6
CH-47 Chinook (Renewed)	16	14	7	6	1	9		5
AH-64 Apache (New)	27		17		11	10	9	4
AH-64 Apache (Remanufactured)	56	12	21	6	32	35	18	13
P-8 Models	14	10	6	2	6	8	3	5
KC-46 Tanker	21		9		6	12	1	5
C-40A	2		2
Total	173	65	77	24	83	96	44	36

Revenues

BDS revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2019 increased~~2020 decreased by ~~$747~~$536 million compared with the same period in ~~2018,~~2019, primarily due to ~~higher revenues from satellites, weapons, derivative aircraft, and early warning aircraft, partially offset by lower revenue for fighters and C-17. The favorable~~the unfavorable impact of cumulative contract catch-up adjustments ~~to revenue~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020, which was ~~$230~~$445 million higher than the comparable period in the prior ~~year, reflecting decreased unfavorable adjustments on the~~year. The decrease was also driven by lower volume in KC-46A ~~Tanker.~~Tanker and P-8 commercial derivative programs due to COVID-19 disruptions, which were largely offset by higher volume in fighter and surveillance aircraft.

BDS revenues for the three months ended ~~September~~June 30, ~~2019~~2020 increased by ~~$105~~$9 million compared with the same period in ~~2018, primarily due to~~ ~~higher revenues~~2019. Lower volume from ~~satellites, weapons,~~COVID-19 disruption in KC-46A Tanker and ~~T-7A Red Hawk, partially~~P-8 commercial derivative programs was more than offset by ~~lower revenues for~~higher F/A-18 and Space Launch System volume and the ~~F-15 program. Net unfavorable~~impact from cumulative contract catch-up adjustments to ~~revenue for the three months ended September 30, 2019 was $70 million lower compared with the same period in 2018, reflecting decreased unfavorable adjustments on the KC-46A Tanker.~~

~~Earnings From Operations~~

~~BDS~~ ~~earnings from operations for the nine and three months ended September 30, 2019 increased by $1,691 million and $1,002 million compared with the same periods in 2018, primarily due to~~ lower charges on development programs. During the third quarter of 2018, upon contract award, we recorded charges of $400 million associated with anticipated losses on the T-7A Red Hawk and $291 million on the MQ-25. ~~During the nine and three months ended September 30, 2018, BDS recorded reach-forward losses of $674 million and $176 million related to the KC-46A Tanker program.~~

revenue. The ~~favorable impact of~~ cumulative contract catch-up adjustments for the ~~nine~~three months ended ~~September~~June 30, ~~2019~~2020 was ~~$495~~$85 million ~~higher~~more favorable than the comparable period in the prior year reflecting ~~decreased~~less unfavorable adjustments oncompared to the ~~KC-46A Tanker. Net unfavorable cumulative contract catch-up adjustments were lower by $160 million~~prior period.

Earnings From Operations

BDS earnings from operations for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 decreased by $1,418 million compared with the same period in ~~2018, reflecting decreased~~2019, primarily due to the unfavorable impact of cumulative contract catch-up adjustments for the six months ended June 30, 2020 which were $860 million higher than the prior year primarily due to charges of $978 million on KC-46A Tanker, a $168 million charge in the first quarter of 2020 on VC-25B, as well as gains on property sales in 2019. The KC-46A ~~Tanker.~~Tanker reach-forward loss in the first quarter of 2020 reflects $551 million of costs associated with the agreement signed in April 2020 with the U.S. Air Force to develop and integrate a new Remote Vision System, and the remaining costs reflect productivity inefficiencies and COVID-19 related factory disruption. The reach-forward loss on VC-25B was associated with engineering inefficiencies from the COVID-19 environment. We believe these inefficiencies will result in staffing challenges, schedule inefficiencies, and higher costs in the upcoming phases of the program.

BDS earnings from operations ~~include~~for the three months ended June 30, 2020 decreased by $375 million compared with the same period in 2019, due to a gain on property sale in 2019, an increase to the reach-forward loss on KC-46A Tanker of $151 million in 2020 primarily driven by additional fixed cost allocation resulting from lower commercial airplane production volume due to COVID-19, and revenue mix changes. These were partially offset by $84 million of favorable cumulative contract catch-up adjustments for the three months ended June 30, 2020 compared to the prior period due to improved performance.

BDS earnings from operations includes equity earnings of ~~$125~~$35 million and ~~$60~~equity loss of $2 million for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$139~~$65 million and ~~$48~~$12 million for the same periods in ~~2018 primarily reflecting~~2019. The year over year variance reflect lower earnings onfrom our ~~ULA~~United Launch Alliance joint venture.

Backlog

Total backlog ~~increased from $61,277~~of $64,286 million at June 30, 2020 was largely unchanged from December 31, 2018 to $61,740 million at September 30, 2019 primarily due to current year contract awards including F/A-18 fighters, P-8A Poseidon, KC-46A Tanker, and E-7 Airborne Early Warning & Control, partially offset by revenue recognized on contracts awarded in prior years.2019.

Additional Considerations

Our BDS business includes a variety of development programs which have complex design and technical challenges. Many of these programs have cost-type contracting arrangements. In these cases, the associated financial risks are primarily in reduced fees, lower profit rates or program cancellation if cost, schedule or technical performance issues arise. Examples of these programs include Ground-based Midcourse Defense, Proprietary and Space Launch System programs.

Some of our development programs are contracted on a fixed-price basis and BDS customers are increasingly seeking ~~fixed priced~~fixed-price proposals for new programs. Examples of significant fixed-price development programs include Commercial Crew, ~~USAF~~ KC-46A Tanker, MQ-25, T-7A Red Hawk, ~~(formerly T-X Trainer),~~ VC-25B ~~Presidential Aircraft, MQ-25,~~ and commercial and military ~~satellites~~.satellites. New programs could also have risk for reach-forward loss upon contract award and during the

period of contract performance. In the third quarter of 2018, we were awarded contracts to develop the T-7A Red Hawk aircraft with complementary devices and the MQ-25. We recorded orders of $1,618 million and recognized losses of $691 million associated with these contracts. Many development programs have highly complex designs. As technical or quality issues arise during development, we may experience schedule delays and cost impacts, which could increase our estimated cost to perform the work or reduce our estimated price, either of which could result in a material charge or otherwise adversely affect our financial condition. These programs are ongoing, and while we believe the cost and fee estimates incorporated in the financial statements are appropriate, the technical complexity of these programs creates financial risk as additional completion costs may become necessary or scheduled delivery dates could be extended, which could trigger termination provisions, the loss of satellite in-orbit incentive payments, or other financially significant exposure. These programs have risk for reach-forward losses if our estimated costs exceed our estimated contract revenues.

~~KC-46A Tanker~~ ~~In 2011, we were awarded a contract from the~~ ~~U.S. Air Force~~ (~~USAF) to design, develop, manufacture and deliver four next generation aerial refueling tankers. The~~ ~~KC-46A Tanker~~ is a derivative of our 767 commercial aircraft. This Engineering, Manufacturing and Development (EMD) contract is a fixed-price incentive fee contract valued at $4.9 billion and involves highly complex designs and systems integration. In 2015, we began work on low rate initial production (LRIP) aircraft for the USAF. In 2016, following our achievement of key flight testing milestones, the ~~USAF~~ ~~authorized two LRIP lots for 7 and 12 aircraft valued~~

at $2.8 billion and in 2017, the USAF authorized an additional LRIP lot for 15 aircraft valued at $2.1 billion. On September 10, 2018, the USAF authorized an additional LRIP lot for 18 aircraft valued at $2.9 billion. ~~On September 27, 2019, the USAF authorized an additional LRIP lot for 15 aircraft valued at $2.6 billion.~~ The contract contains production options for both LRIP aircraft and full rate production aircraft. If all options under the contract are exercised, we expect to deliver 179 aircraft for a total expected contract value of approximately $30 billion.

During 2018, we recorded additional reach-forward losses of $736 million primarily reflecting higher estimated costs associated with certification, flight testing and change incorporation on aircraft, as well as higher than expected effort to meet customer requirements in order to support delivery of the initial aircraft.

~~As with any development program, this program remains subject to additional reach-forward losses if we experience further production, technical or quality issues.~~

~~United Launch Alliance~~ ~~See the discussion of Indemnifications to~~ ~~ULA~~ ~~and Financing Commitments in Notes 5, 11 and 12 of our Condensed Consolidated Financial Statements.~~

~~Sea Launch~~ ~~See the discussion of the Sea Launch receivables in Note 9 to our Condensed Consolidated Financial Statements.~~

~~Commercial Crew~~ ~~See the discussion of Fixed-Price Development Contracts in Note 11 to our Condensed Consolidated Financial Statements.~~

~~T-7A Red Hawk~~ In September 2018, we were selected by the U.S. Air Force to build the next generation training capability, known as T-7A Red Hawk (formerly T-X Trainer). The program includes aircraft and simulators as well as support and ground equipment. The contract is structured as an indefinite delivery/indefinite quantity (IDIQ) fixed-price contract with a minimum of 206 aircraft and a maximum of 475 aircraft. The EMD contract is a fixed-price contract valued at $813 million and includes five aircraft and seven simulators, with a period of performance that runs through 2022. The production and support contracts are structured as options that begin with authorization from fiscal year 2022 to 2034. In connection with winning this competition, we recorded a reach-forward loss of $400 million associated with anticipated losses on the options for 346 aircraft that we believe are probable of being exercised. We believe that our investment in this contract positions us for additional market opportunities for both trainer and light attack aircraft.

~~MQ-25~~ In August 2018, we were awarded an EMD contract to build the MQ-25 for the U.S. Navy. The EMD contract is a fixed-price contract that includes development and delivery of four aircraft and test articles at a contract price of $805 million. In connection with winning this competition, we recognized a reach-forward loss of $291 million. The period of performance runs from 2018 through 2024. The MQ-25 is the U.S. Navy’s first operational carrier-based unmanned aircraft, and we believe that our investment in this contract positions us for long-term leadership in autonomy and artificial intelligence technologies along with additional market opportunities.

Global Services

Results of Operations


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Revenues		$13,820			$12,148			$4,658			$4,101			$8,116			$9,162			$3,488			$4,543
Earnings from operations		$2,013			$1,799			$673			$548
Earnings/(loss) from operations														$36			$1,340			($672	)		$687
Operating margins	14.6		%	14.8		%	14.4		%	13.4		%	0.4		%	14.6		%	(19.3		)%	15.1		%

Revenues

BGS revenues for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019increased~~2020 decreased by ~~$1,672~~$1,046 million and ~~$557~~$1,055 million compared with the same periods in ~~2018~~2019 primarily due to lower commercial services revenue driven by impacts of the ~~acquisition of KLX, Inc.~~COVID-19 pandemic. These were partially offset by growth in ~~the fourth quarter of 2018 and international~~ government services ~~revenue. Net~~revenue. The favorable ~~cumulative contract catch-up adjustments to revenue were lower by $50 million for the nine months ended September 30, 2019 compared with the same period in 2018. The unfavorable~~ impact of cumulative contract catch-up adjustments ~~to revenue was higher by $74 million~~ for the six and three months ended ~~September~~June 30, ~~2019 compared with~~2020 were $74 million lower and $10 million lower than the ~~same period~~comparable periods in ~~2018.~~the prior year. We expect the impacts of the COVID-19 pandemic to continue to reduce BGS commercial revenues in future quarters until the commercial airline industry environment recovers.

~~Earnings~~Earnings/Loss From Operations

BGS earnings from operations of $36 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019 increased by $214~~2020 was $1,304 million ~~compared with~~lower than the same period in ~~2018 primarily due to~~ ~~higher revenues. BGS earnings~~2019. Loss from operations for the three months ended ~~September~~June 30, ~~2019 increased by $125~~2020 was $672 million ~~primarily due to~~ ~~higher revenues and improved performance and mix.~~ ~~Net favorable cumulative contract catch-up adjustments were lower by $27~~compared with earnings from operations of $687 million ~~and lower by $31 million for~~in the ~~nine and three months ended September 30, 2019~~same period in 2019. The decreases compared with the same periods in ~~2018.~~2019 reflect earnings due to lower commercial services revenue, as well as earnings charges in the second quarter of 2020. Second quarter earnings charges included $370 million for higher expected credit losses primarily driven by customer liquidity issues, $237 million of inventory write-downs and $153 million of related impairments of distribution rights primarily driven by airlines' decisions to retire certain aircraft, $99 million of contract termination and facility impairments charges and $64 million for severance costs. These charges reflect the significant impacts of COVID-19 on commercial airline customers’ liquidity and demand for certain products as customers' fleet plans evolve to adapt to the sharp reduction in demand for air travel. While the operating losses incurred in the second quarter of 2020 are not necessarily indicative of future quarters, we expect the impacts of the COVID-19 pandemic to continue to reduce future earnings until the commercial airline industry environment recovers.

The favorable impact of cumulative contract catch-up adjustments for the six and three months ended June 30, 2020 were $64 million lower and $22 million lower than the comparable periods in the prior year.

Backlog

BGS ~~total~~ backlog ~~increased~~decreased from ~~$21,064~~$22,902 million as of December 31, ~~2018~~2019 to ~~$21,088~~$18,168 million at ~~September~~June 30, ~~2019.~~2020, primarily due to a reduction for commercial orders that in our assessment no longer meet the accounting requirements of ASC 606 for inclusion in backlog.

Boeing Capital

Results of Operations


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Revenues		$207			$214			$66			$77			$134			$141			$69			$75
Earnings from operations		$86			$71			$29			$27
Earnings/(loss) from operations														$17			$57			($7	)		$37
Operating margins	42		%	33		%	44		%	35		%	13		%	40		%	(10		)%	49		%

Revenues

~~Boeing Capital (~~BCC) segment revenues consist principally of lease income from equipment under operating lease, interest income from financing receivables and notes, and other income. BCC’s revenues for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019~~2020 decreased compared with the same periods in ~~2018~~2019 primarily due to lower ~~gains on the sale of assets.~~interest income.

Earnings From Operations

BCC’s earnings from operations are presented net of interest expense, provision for (recovery of) losses, asset impairment expense, depreciation on leased equipment and other operating expenses. ~~Earnings~~Earnings/loss from

operations for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019 increased~~2020 decreased compared with the same periods in ~~2018~~2019 primarily due to lower ~~operating expenses.~~interest income and higher asset impairment expense along with higher provision expense.

Financial Position

The following table presents selected financial data for ~~BCC:~~BCC:


(Dollars in millions)	September 30 2019		December 31 2018		June 30 2020		December 31 2019
Customer financing and investment portfolio, net		$2,226		$2,790		$2,099		$2,251
Other assets, primarily cash and short-term investments	523		717		642		535
Total assets		$2,749		$3,507		$2,741		$2,786

Other liabilities, primarily deferred income taxes		$448		$523		$390		$432
Debt, including intercompany loans	1,891		2,487		1,942		1,960
Equity	410		497		409		394
Total liabilities and equity		$2,749		$3,507		$2,741		$2,786

Debt-to-equity ratio	4.6-to-1		5.0-to-1		4.7-to-1		5.0-to-1

BCC’s customer financing and investment portfolio at ~~September~~June 30, ~~2019~~2020 decreasedfrom December 31, ~~2018~~2019 primarily due to ~~$585~~$171 million of note payoffs and portfolio run-off, ~~and $250 million related to the impairment of lease incentives,~~ partially offset by new volume.

BCC enters into certain transactions with Boeing, reflected in Unallocated items, eliminations and other, in the form of intercompany guarantees and other subsidies that mitigate the effects of certain credit quality or asset impairment issues on the BCC segment. ~~The $250 million impairment of lease incentives did not result in an earnings charge in the BCC segment because of an intercompany guarantee.~~

Aircraft subject to leases with a carrying value of approximately ~~$101~~$65 million are scheduled to be returned off lease in the next 12 months. We are seeking to remarket these aircraft or have the leases extended.

Liquidity and Capital Resources

Cash Flow Summary


(Dollars in millions)	Nine months ended September 30						Six months ended June 30
	2019			2018			2020			2019
Net earnings		$374			$7,036
Net loss								($3,036	)		($793	)
Non-cash items	2,052			1,823			2,230			1,335
Changes in working capital	(2,652		)	3,516			(8,776		)	1,656
Net cash (used)/provided by operating activities	(226		)	12,375			(9,582		)	2,198
Net cash used by investing activities	(2,047		)	(2,197		)	(12,686		)	(853		)
Net cash provided/(used) by financing activities	4,336			(10,866		)
Net cash provided by financing activities							32,742			96
Effect of exchange rate changes on cash and cash equivalents	(27		)	(37		)	(11		)	(2		)
Net increase/(decrease) in cash & cash equivalents, including restricted	2,036			(725		)
Net increase in cash & cash equivalents, including restricted							10,463			1,439
Cash & cash equivalents, including restricted, at beginning of year	7,813			8,887			9,571			7,813
Cash & cash equivalents, including restricted, at end of period		$9,849			$8,162			$20,034			$9,252

Operating Activities Net cash used by operating activities was ~~$0.2~~$9.6 billion during the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared with cash provided of ~~$12.4~~$2.2 billion during the same period in ~~2018.~~2019 primarily driven by changes in working capital. The ~~decrease~~changes in ~~operating cash flows compared with~~working capital in 2020 are primarily driven by increases in commercial airplane inventory largely reflecting lower deliveries of wide-body aircraft and the ~~same period in 2018 primarily reflects the impacts of~~

~~the~~continued 737 MAX ~~grounding that is resulting~~grounding. The changes in ~~higher inventory, the lack of delivery payments and~~working capital in 2020 also reflect lower ~~advances and progress payments. The reduction~~accounts payable in ~~net earnings from operations for the nine months ended September 30, 2019 compared with the same period in 2018, is primarily~~2020 due to reductions in commercial purchases from suppliers. Compensation payments to 737 MAX customers totaled $1.2 billion during the ~~$5.6 billion charge in~~first half of 2020. In the second quarter of 2019 we recorded an earnings charge and recognized a liability of $5.6 billion for ~~estimated potential concessions~~customer considerations but did not make any compensation payments. The impacts of the COVID-19 pandemic and ~~other considerations to~~the 737 MAX ~~customers, which did not affect~~grounding are expected to continue to have a significant negative impact on our operating cash flows ~~and lower 737 deliveries. Cash used~~during 2020.

Payables to suppliers who elected to participate in supply chain financing programs declined by ~~Inventory was $9.6~~$1.3 billion ~~during~~for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020 and increased by $1.8 billion for the same period in the prior year. Supply chain financing is not material to our overall liquidity. The decline for the six months ended June 30, 2020 was primarily due to reductions in commercial purchases from suppliers and not due to any changes in the ~~suspension~~availability of 737 MAX deliveries, which resulted in higher commercial airplane program inventory as we continue to produce 737 MAX aircraft at a rate of 42 per month. Cash provided by Advances and progress billings was $2.4 billion and $3.5 billion duringsupply chain financing. The increase for the ~~nine~~six months ended ~~September~~June 30, 2019 reflects a combination of higher purchases, an extension of payment terms with certain suppliers and ~~2018 reflecting the suspension~~increased utilization of ~~737 MAX deliveries and lower 737 MAX orders. Net cash provided by operating activities in future quarters is expected to be adversely impacted by the 737 MAX grounding.~~our supply chain financing programs.

Investing Activities Cash used by investing activities was ~~$2.0~~$12.7 billion during the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared with ~~$2.2~~$0.9 billion during the same period in ~~2018,~~2019, primarily due to ~~lower~~$12.3 billion of higher net contributions to ~~investments and higher proceeds from property sales in 2019, partially offset by higher cash paid for acquisitions and capital expenditures in 2019.~~investments. In the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, capital expenditures totaled ~~$1.4~~$0.8 billion and ~~$1.2~~$0.9 billion. We now expect capital expenditures in ~~2019~~2020 to be ~~consistent with 2018.~~lower than 2019.

Financing Activities Cash provided by financing activities was ~~$4.3~~$32.7 billion during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared with cash used of ~~$10.9~~$0.1 billion during the same period in ~~2018,~~2019, primarily reflecting higher net borrowings and lower share ~~repurchases, partially offset by higher dividend payments in 2019.~~repurchases. During the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, new borrowings net of repayments ~~increased by $10.6~~were $34 billion compared with ~~an increase of $0.7~~$5.2 billion in the same period in ~~2018.~~

~~At September 30,~~ 2019, ~~the recorded balance of debt was $24.7~~primarily due to $25 billion of ~~which $4.4~~fixed rate senior notes issued in the second quarter of 2020 and $13.8 billion of new borrowings under a two-year delayed draw term loan agreement entered into in the first quarter of 2020. For further discussion see Liquidity Matters in Note 1 to our Condensed Consolidated Financial Statements.

As of June 30, 2020, the total debt balance was $61.4 billion up from $27.3 billion at December 31, 2019. At June 30, 2020, $2.9 billion of debt was classified as short-term. Debt, including intercompany loans, attributable to BCC totaled $1.9 billion, of which $0.7 billion was classified as short-term.

During the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 we ~~repurchased 6.9 million~~did not repurchase any shares ~~totaling $2.7 billion~~ through our open market share repurchase ~~program. In addition, 0.6 million shares were transferred~~program compared to ~~us from employees for tax withholdings. Share~~share repurchases ~~during~~of $2.7 billion in the ~~nine months ended September 30, 2018 totaled $8.4 billion. At September 30, 2019, the amount available under the share repurchase plan, announced on December 17, 2018, totaled $17.3 billion~~. same period in 2019. Share repurchases under this plan ~~are currently suspended.~~had been suspended since April 2019. In March 2020, the Board of Directors terminated its prior authorization to repurchase shares of the Company's outstanding common stock.

During the six months ended June 30, 2020 we paid dividends of $1.2 billion compared with $2.3 billion in the same period in 2019. In March 2020, the Company announced that our dividend will be suspended until further notice.

Capital Resources ~~We have substantial borrowing capacity. Any future borrowings may affect~~The impacts of the COVID-19 pandemic and 737 MAX grounding are having a significant negative impact on our ~~credit ratings~~liquidity and ~~are subject~~ongoing operations and creating significant uncertainty. For further discussion see Liquidity Matters in Note 1 to various debt covenants as described below. We have a commercial paper program that serves as a source of short-term liquidity. At September 30, 2019 and December 31, 2018 commercial paper borrowings totaled $2,990 million and $1,895 million. our Condensed Consolidated Financial Statements.

Currently, we have ~~$6.6~~$9.6 billion of unused borrowing capacity on revolving credit line agreements. We anticipate that these credit lines will primarily serve as backup liquidity to support our general corporate borrowing needs.

Any future borrowings may affect our credit ratings and are subject to various debt covenants. At June 30, 2020, we were in compliance with the covenants for our debt and credit facilities. The most restrictive covenants include a limitation on mortgage debt and sale and leaseback transactions as a percentage of consolidated net tangible assets (as defined in the credit agreements), and a limitation on consolidated debt as a percentage of total capital (as defined). When considering debt covenants, we continue to have substantial borrowing capacity.

Financing commitments totaled ~~$15.6~~$12.8 billion and ~~$19.5~~$13.4 billion at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019. The decrease primarily relates to financing commitment expirations. We anticipate that we will not be required to fund a significant portion of our financing commitments as we continue to work with third party financiers to provide alternative financing to customers. Historically, we have not been required to fund significant amounts of outstanding commitments. However, there can be no assurances that we will not be required to fund greater amounts than historically required. ~~In addition, many of~~

For discussion regarding Embraer see Note 18 to our non-U.S. customers have financed purchases through the Export-Import Bank of the United States. Following the expiration of the bank’s charter on June 30, 2015, the bank’s charter was reauthorized in December 2015. However, from the time of that reauthorization until May 8, 2019, when the U.S. Senate confirmed members sufficient to constitute a quorum of the bank’s board of directors, the bank was not able to approve any transaction totaling more than $10 million. The bank is authorized through November 21, 2019. If the bank's charter is not reauthorized on a timely basis, or if the bank’s future funding authority is insufficient to meet our customers’ needs, we may fund additional commitments and/or enter into new financing arrangements with customers. Certain of our non-U.S. customers also may seek to delay purchases if they cannot obtain financing at

~~reasonable costs, and there may be further impacts with respect to future sales campaigns involving non-U.S. customers.~~

In the event we require additional funding to support strategic business opportunities, our commercial aircraft financing commitments, unfavorable resolution of litigation or other loss contingencies, or other business requirements, including impacts related to the 737 MAX grounding, we expect to meet increased funding requirements by issuing commercial paper or term debt. We believe our ability to access external capital resources should be sufficient to satisfy existing short-term and long-term commitments and plans, and also to provide adequate financial flexibility to take advantage of potential strategic business opportunities should they arise within the next year. However, there can be no assurance of the cost or availability of future borrowings, if any, under our commercial paper program or in the debt markets.

At September 30, 2019, we were in compliance with the covenants for our debt and credit facilities. The most restrictive covenants include a limitation on mortgage debt and sale and leaseback transactions as a percentage of consolidated net tangible assets (as defined in the credit agreements), and a limitation on consolidated debt as a percentage of total capital (as defined). When considering debt covenants, we continue to have substantial borrowing capacity.Condensed Consolidated Financial Statements.

Off-Balance Sheet Arrangements

We are a party to certain off-balance sheet arrangements including certain guarantees. For discussion of these arrangements, see Note 1211 to our Condensed Consolidated Financial Statements.

Contingent Obligations

We have significant contingent obligations that arise in the ordinary course of business, which include the following:

Legal Various legal proceedings, claims and investigations are pending against us. Legal contingencies are discussed in Note 1918 to our Condensed Consolidated Financial Statements.

Environmental Remediation We are involved with various environmental remediation activities and have recorded a liability of ~~$582~~$560 million at ~~September~~June 30, ~~2019.~~2020. For additional information, see Note 1110 to our Condensed Consolidated Financial Statements.

Non-GAAP Measures

Core Operating Earnings, Core Operating Margin and Core Earnings Per Share

Our unaudited condensed consolidated interim financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP) which we supplement with certain non-GAAP financial information. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Core operating earnings, ~~and~~ core operating margin and core earnings per share exclude the FAS/CAS service cost adjustment. 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 earnings per share excludes both the FAS/CAS service cost adjustment and non-operating pension and postretirement expenses. Non-operating pension and postretirement expenses represent the components of net periodic benefit costs other than service cost. Pension costs, comprising service and prior service costs computed in accordance with GAAP are allocated to BCA and certain BGS businesses supporting commercial customers. Pension costs allocated to BDS and BGS businesses supporting government customers are computed in accordance with U.S. Government Cost Accounting Standards (CAS), which employ different actuarial assumptions and accounting conventions than GAAP. CAS costs are allocable to government contracts. Other postretirement benefit costs are allocated to all business segments based on CAS, which is generally based on benefits paid.

The Pension FAS/CAS service cost ~~adjustment~~adjustments recognized in ~~earnings was a benefit~~Loss from operations were benefits of ~~$823~~$513 million and ~~$274~~$258 million for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019,~~2020, compared with ~~a benefit~~benefits of ~~$780~~$549 million and ~~$260~~$275 million during the same periods in ~~2018.~~2019. The non-operating pension ~~expense~~expenses included in Other income, net ~~was a benefit~~were benefits of ~~$280~~$171 million and ~~$93~~$84 million for the ~~nine~~six and three months ended ~~September~~June 30, ~~2019~~2020, compared with ~~$98~~benefits of $187 million and ~~$50~~$94 million for the same periods in ~~2018.~~2019. The benefits in ~~2019~~2020 reflect ~~lower~~expected returns in excess of interest cost and amortization of actuarial losses driven by higher discount rates. This is partially offset by higher interest costs and lower expected returns, as a result of the lower value of plan assets at December 31, 2018 compared to 2017.losses.

For further discussion of pension and other postretirement costs see the Management’s Discussion and Analysis on page 3940 of this Form 10-Q and on page 4548 of our ~~2018~~2019 Annual Report on Form 10-K. Management uses core operating earnings, core operating margin and core earnings per share for purposes of evaluating and forecasting underlying business performance. Management believes these core earnings measures provide investors additional insights into operational performance as unallocated pension and other postretirement benefit ~~cost,~~costs primarily represent costs driven by market factors and costs not allocable to U.S. government contracts.

Reconciliation of GAAP Measures to Non-GAAP Measures

The table below reconciles the non-GAAP financial measures of core operating ~~earnings,~~loss, core operating margin and core ~~earnings~~loss per share with the most directly comparable GAAP financial measures of ~~earnings~~loss from operations, operating margins and diluted ~~earnings~~loss per share.


(Dollars in millions, except per share data)	Nine months ended September 30						Three months ended September 30						Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
Revenues		$58,648			$72,786			$19,980			$25,146			$28,715			$38,668			$11,807			$15,751
Earnings from operations, as reported		$229			$7,812			$1,259			$2,227
Loss from operations, as reported														($4,317	)		($1,030	)		($2,964	)		($3,380	)
Operating margins	0.4		%	10.7		%	6.3		%	8.9		%	(15.0		)%	(2.7		)%	(25.1		)%	(21.5		)%

Pension FAS/CAS service cost adjustment⁽¹⁾		($823	)		($780	)		($274	)		($260	)		($513	)		($549	)		($258	)		($275	)
Postretirement FAS/CAS service cost adjustment⁽¹⁾		($270	)		($239	)		($90	)		($77	)	(189		)	(180		)	(97		)	(90		)
FAS/CAS service cost adjustment⁽¹⁾		($1,093	)		($1,019	)		($364	)		($337	)		($702	)		($729	)		($355	)		($365	)
Core operating (loss)/earnings (non-GAAP)		($864	)		$6,793			$895			$1,890
Core operating loss (non-GAAP)														($5,019	)		($1,759	)		($3,319	)		($3,745	)
Core operating margins (non-GAAP)	(1.5		)%	9.3		%	4.5		%	7.5		%	(17.5		)%	(4.5		)%	(28.1		)%	(23.8		)%

Diluted earnings per share, as reported		$0.66			$11.95			$2.05			$4.07
Diluted loss per share, as reported														($5.31	)		($1.40	)		($4.20	)		($5.21	)
Pension FAS/CAS service cost adjustment⁽¹⁾	(1.45		)	(1.32		)	(0.48		)	(0.45		)	(0.91		)	(0.97		)	(0.46		)	(0.49		)
Postretirement FAS/CAS service cost adjustment⁽¹⁾	(0.47		)	(0.41		)	(0.16		)	(0.13		)	(0.33		)	(0.32		)	(0.17		)	(0.16		)
Non-operating pension expense⁽²⁾	(0.49		)	(0.17		)	(0.17		)	(0.09		)	(0.30		)	(0.32		)	(0.14		)	(0.17		)
Non-operating postretirement expense ⁽²⁾	0.14			0.13			0.05			0.05			0.05			0.09			0.02			0.05
Provision for deferred income taxes on adjustments ⁽³⁾	0.48			0.37			0.16			0.13			0.31			0.32			0.16			0.16
Core (loss)/earnings per share (non-GAAP)		($1.13	)		$10.55			$1.45			$3.58
Core loss per share (non-GAAP)														($6.49	)		($2.60	)		($4.79	)		($5.82	)

Weighted average diluted shares (in millions)	570.4			588.9			569.2			580.8			566.1			566.6			566.4			565.3


⁽¹⁾	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. This adjustment is excluded from Core operating ~~earnings~~loss (non-GAAP).


⁽²⁾	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 and are excluded from Core ~~earnings~~loss per share (non-GAAP).

⁽³⁾ The income tax impact is calculated using the U.S. corporate statutory tax rate.

~~Critical Accounting Policies and Estimates~~

~~737 MAX Grounding~~

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. Further, we are fully cooperating with all ongoing governmental and regulatory investigations and inquiries relating to the accidents and the 737 MAX. We cannot reasonably estimate a range of loss, if any, not covered by available insurance that may result given the ongoing status of these lawsuits, investigations, and inquiries. We have also experienced claims and/or assertions from customers in connection with the grounding.

In the preparation of our financial statements, we have made assumptions regarding outcomes of accident investigations, timing and conditions of return to service, timing of future 737 production rate increases, supplier readiness to support production rate changes, timing and sequence of future customer deliveries as well as outcomes of negotiations with customers impacted by the grounding. While these assumptions reflect our best estimate at this time, they are highly uncertain and significantly affect the estimates inherent in our financial statements.

The 737 MAX grounding also affects projected revenues and costs associated with the 737 program accounting quantity. As a result of the grounding, we have reduced the 737 production rate from 52 per month to 42 per month and continue to evaluate further reductions in production rate, including a temporary shutdown in 737 production. Prior to the grounding, we had planned to increase the production rate to 57 per month in 2019. The FAA and other non-U.S. civil aviation authorities will determine the timing and conditions of the 737 MAX’s return to service. At September 30, 2019, we have assumed that regulatory approval of 737 MAX return to service begins in the fourth quarter of 2019. We have further assumed a gradual increase in the production rate from 42 per month to 57 per month by late 2020, and that deliveries of 737 MAX airplanes produced during the grounding and included within inventory will be delivered over several quarters with the majority of them delivering in the first year. The resulting impacts increased estimated costs to produce aircraft included in the current accounting quantity by $3,636 million and $872 million in the nine and three months ended September 30, 2019. These increases in the costs to produce aircraft in the current accounting quantity will reduce 737 program and overall BCA segment operating margins in future quarters after deliveries resume. If the timing and conditions surrounding a return to service differ from our assumptions, it could have a material effect on our financial statements.

We recorded an earnings charge of $5,610 million, net of insurance recoveries of $500 million, in the second quarter in connection with an estimate of potential concessions and other considerations to customers for disruptions related to the 737 MAX grounding and associated delivery delays. This charge represents our current best estimate of future concessions and other considerations we expect to provide to customers. This estimate relies on the exercise of judgment by management and is significantly impacted by the assumptions described above, as well as the status of negotiations with our customers. Any delays in return to service, further disruptions to our production system, supplier claims or assertions, or changes to estimated concessions and other considerations we expect to provide to customers could have a material adverse effect on our financial position, results of operations, and/or cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have financial instruments that are subject to interest rate risk, principally fixed- and floating-rate debt obligations, and customer financing assets and liabilities. The investors in our fixed-rate debt obligations do not generally have the right to demand we pay off these obligations prior to maturity. Therefore, exposure to interest rate risk is not believed to be material for our fixed-rate debt. In the first quarter of 2020, we entered into a $13.8 billion two-year delayed draw floating-rate term loan credit agreement. An increase or decrease of 100 basis points in interest rates on this floating-rate debt would increase or decrease our pre-tax earnings by $138 million over the next 12 months. Historically, we have not experienced material gains or losses on our customer financing assets and liabilities due to interest rate changes.

There have been no significant changes to our ~~market~~foreign currency exchange rate or commodity price risk since December 31, ~~2018.~~2019.

Item 4. Controls and Procedures

(a)Evaluation of Disclosure Controls and Procedures.

Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of ~~September~~June 30, ~~2019~~2020 and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b)Changes in Internal Control Over Financial Reporting.

There were no changes that occurred during the ~~third~~second quarter of ~~2019~~2020 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

Currently, we are involved in a number of legal proceedings. For a discussion of contingencies related to legal proceedings, see Note 1918 to our Condensed Consolidated Financial Statements, which is hereby incorporated by reference.

Item 1A. Risk Factors

Certain risks described below update the risk factors in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

We face significant risks related to the spread of the novel coronavirus (“COVID-19”) and the recent developments surrounding the global pandemic have had, and will continue to have, significant effects on our business, financial condition, results of operations, and cash flows. We also face significant risks related to the global economic downturn and severe reduction in commercial air traffic caused by the pandemic. These risks include materially reduced demand for our products and services, increased instability in our supply chain, and challenges to the ongoing viability of some of our customers. We may face similar risks in connection with any future public health crises, including any resurgence in the spread of COVID-19.

The ~~737 MAX fleet is currently grounded,~~COVID-19 pandemic has subjected our business, operations, financial performance, cash flows and ~~we are subject~~financial condition to a number of risks, including, but not limited to those discussed below.

Operations-related risks: As a result of the COVID-19 pandemic, we are facing increased operational challenges from the need to protect employee health and ~~uncertainties related to~~safety. These challenges have included, and may in the ~~timing~~future include production site shutdowns, and ~~conditions surrounding~~workplace disruptions and restrictions on the ~~aircraft’s return to service, including potential future reductions to~~movement of people, raw materials and goods, both at our own facilities and at our customers and suppliers.

For example, during the ~~production rate and/or additional delivery delays,~~second quarter, we temporarily suspended operations in Puget Sound, South Carolina, and Philadelphia, as well as ~~risks associated~~at several other key production sites. We had not previously experienced a complete suspension of our operations at these production sites. While we have resumed operations at each of our key production sites we cannot predict where further production disruptions will be required or what the ongoing impact of COVID-19-related operating restrictions will be. For example, we continue to experience additional operating costs due to social distancing requirements and other factors related to COVID-19 restrictions. We cannot predict the impact that future production disruptions may have on our business, operations, financial performance and financial condition. We consult regularly with ~~assumptions~~relevant federal, state, and ~~estimates made~~municipal health authorities regarding the COVID-19 pandemic, and we may be required to impose additional operational restrictions and/or suspend operations at key production sites based on their recommendations and/or workplace disruptions caused by COVID-19.

Many of our suppliers also were required to suspend operations during the second quarter, and they may experience additional disruptions in the coming months. Any such disruptions could have severe adverse impacts on our production costs delivery schedule and/or ability to meet customer commitments.

Any prolonged suspension of operations or delayed recovery in our operations, and/or any similar delay with respect to resumption of operations by one or more of our key suppliers, or the failure of any of our key suppliers, would result in further challenges to our business, leading to a further material adverse effect on our business, financial condition, results of operations, and cash flows.

Liquidity risks:The COVID-19 pandemic has also had a significant impact on our liquidity and overall debt levels. During the six months ended June 30, 2020, net cash used by operating activities was $9.6 billion. At June 30, 2020, cash and short-term investments totaled $32.4 billion. Our debt balance totaled $61.4 billion at June 30, 2020, up from $27.3 billion at December 31, 2019. We expect negative operating cash flows in future quarters until deliveries resume and ramp up, and if the pace and scope of the recovery are worse than we currently contemplate, we may need to obtain additional financing in order to fund our operations and obligations. If we were to need to obtain additional financing, uncertainty related to COVID-19

and its impact on us and the aerospace industry could limit our access to credit markets and we may have difficulty obtaining financing on terms acceptable to us or at all. In addition, certain of our customers may also be unable to make timely payments to us. Factors that could limit our access to additional liquidity include disruptions in the global capital markets and/or additional declines in our financial ~~statements regarding~~performance, outlook or credit ratings. The occurrence of any or all of these events would be expected to adversely affect our ability to fund our operations and contractual commitments. In addition, downgrades in our credit ratings could adversely affect our cost of funds and related margins, liquidity, competitive position and access to capital markets, and a significant downgrade could have an adverse impact on our businesses.

Customer-related risks: Commercial air traffic has fallen dramatically due to the ~~737 program.~~

~~On March 13, 2019,~~COVID-19 pandemic. While this trend has impacted passenger traffic most severely, near-term cargo traffic has also fallen significantly due to the ~~Federal Aviation Administration (FAA) issued an order~~global economic downturn and the reduction in cargo capacity on passenger airplanes. Most airlines have significantly reduced their capacity, and many could implement further reductions in the near future. Many airlines are also implementing significant reductions in staffing. These capacity changes are causing, and are expected to ~~suspend operations~~continue to cause, negative impacts to our customers’ revenue, earnings, and cash flow, and in some cases may threaten the future viability of ~~all~~some of our customers, potentially causing defaults within our customer financing portfolio, which was $2.2 billion as of June 30, 2020 and/or requiring us to remarket aircraft that have already been produced and/or are currently in backlog. If 737 MAX aircraft ~~in the U.S.~~remain grounded for an extended period of time, we may experience additional reductions to backlog and/or significant order cancellations. Additionally, we may experience fewer new orders and by U.S. aircraft operators following two fatal 737 MAX accidents. Non-U.S. civil aviation authorities have issued directives to the same effect. We are working closely with the relevant government authorities to support both accident investigations and are fully cooperating with other U.S. government investigations related to the accidents. Multiple legal actions have also been filed against usincreased cancellations across all of our commercial airplane programs as a result of the ~~accidents. While production continues~~COVID-19 pandemic and associated impacts on demand. Our customers may also lack sufficient liquidity to purchase new aircraft due to impacts from the ~~737 MAX, deliveries have been suspended until clearance is granted by~~pandemic. We are also observing a significant increase in the ~~appropriate regulatory authorities. The grounding has reduced revenues, operating margins,~~number of requests for payment deferrals, contract modifications, lease restructurings and ~~cash flows,~~similar actions, and ~~will continue~~these trends may lead to do so until deliveries resume and production rates increase. In connection with the effort to return the 737 MAX to service, we have developed software updates for the 737 MAX, together with an associated pilot training and supplementary education program. We continue to work with the FAA and non-U.S. civil aviation authorities to complete remaining steps toward certification and readiness for return to service, including addressing their questions on the software updates and how pilots will interact with the airplane controls and displays in different flight scenarios. The FAAadditional charges, impairments and other ~~civil aviation authorities worldwide will determine the timing and conditions of return to service~~adverse financial impacts in ~~each relevant jurisdiction. Any unanticipated delays in certification and/or return to service or other liabilities associated with the accidents or grounding could have a material adverse effect on~~ our ~~financial position, results of operations, and/or cash flows.~~

~~On April 5, 2019, we announced plans to reduce the 737 production rate from 52 aircraft per month to 42 per month effective April 15, 2019.~~business over time. In addition, to ~~being unable~~the extent that customers have valid rights to ~~deliver completed~~cancel undelivered aircraft, until the required certifications are obtained, impacts related to the reduced production rate have increased costs to produce aircraft included in the current accounting quantity and will result in reduced 737 program and overall BCA segment operating margins when deliveries resume. If we are unable to return the 737 MAX aircraft to service in one or more jurisdictions or begin deliveries to customers in a timely manner, we would incur additional costs and/or further reduce the 737 production rate. In addition, unanticipated delays in certification and/or return to service of the 737 MAX in one or more jurisdictions could result in significant additional disruption to the 737 production system, including further reductions in the production rate and/or a temporary shutdown in 737 production, delaying efforts to restore and/or implement previously planned increases in the 737 production rate. Cash flows could also be negatively impacted through a combination of delayed payments from customers and higher costs and inventory levels. In addition, we have experienced claims and assertions from customers in connection with the grounding, and we recorded an earnings charge of $5,610, net of insurance recoveries of $500, in the second quarter in connection with an estimate of potential concessions and other considerations to customers for disruptions related to the grounding and associated delivery delays. Any such delays in return to service, further disruptions to our production system, supplier claims or assertions, or changes to estimated concessions or other considerations we expect to provide to customers could have a material adverse effect on our financial position, results of operations, and/or cash flows. The FAA and other civil aviation authorities worldwide will determine the timing and conditions of return to service in each relevant jurisdiction. However, we have assumed that regulatory approval of 737 MAX return to service

begins in the fourth quarter of 2019. This assumption reflects our best estimate at this time based on factors such as the estimated duration of the certification process. In the event of unanticipated additional training requirements in one or more jurisdictions, delays in the certification process, and/or delays in return to service, we may be required to ~~take actions with longer-term impact, such as further production rate changes, employment reductions and/or the expenditure of significant resources to support~~refund pre-delivery payments, putting additional constraints on our ~~supply chain and/or customers.~~liquidity.

As with our other commercial aircraft programs, we have made significant estimates with respect to the 737 program regarding the number of units to be produced, the period during which those units are likely to be produced, and the units’ expected sales prices, production costs, program tooling and other non-recurring costs, and routine warranty costs. In addition to the ~~estimated timing~~near-term impact, there is risk that the industry implements longer-term strategies involving reduced capacity, shifting route patterns, and mitigation strategies related to impacts from COVID-19 and the risk of future public health crises. In addition, airlines may experience reduced demand due to reluctance by the flying public to travel due to travel restrictions and/or social distancing requirements.

As a result, there is significant uncertainty with respect to when commercial air traffic levels will begin to recover, and whether and at what point capacity will return to ~~service, we~~and/or exceed pre-COVID-19 levels. The COVID-19 pandemic also has increased, and its aftermath is also expected to continue to increase, uncertainty with respect to global trade volumes, putting significant negative pressure on cargo traffic. Any of these factors would have ~~made assumptions regarding outcomes of accident investigations, timing of future 737 production rate increases, timing~~a significant impact on the demand for both single-aisle and ~~sequence of future deliveries,~~wide-body commercial aircraft, as well as ~~outcomes~~for the services we provide to commercial airlines. In addition, a lengthy period of ~~negotiations with customers. Any changes in these estimates and/or assumptions with respect to the 737 program could have a material impact~~reduced industry-wide demand for commercial aircraft would put additional pressure on our suppliers, resulting in increased procurement costs and/or additional supply chain disruption. To the extent that the COVID-19 pandemic or its aftermath further impacts demand for our products and services or impairs the viability of some of our customers and/or suppliers, our financial ~~position,~~condition, results of operations, ~~and/~~and cash flows could be adversely affected, and those impacts could be material.

Other risks: The magnitude and duration of the global COVID-19 pandemic is uncertain. As the pandemic continues to adversely affect our business and operating and financial results, it also is expected to have the effect of heightening many of the other risks described in the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2019. Further, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently known to us or ~~cash flows. For additional information, see~~that we currently do not expect to present significant risks to our ~~discussion under “Management’s Discussion and Analysis-Critical Accounting Policies and Estimates-737 MAX Grounding” on page 54.~~operations or financial results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information about purchases we made during the quarter ended ~~September~~June 30, ~~2019~~2020 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act:

(Dollars in millions, except per share data)
(a) (b) (c) (d)

Total Number
of Shares
Purchased⁽¹⁾

Average
Price
Paid per
Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

Approximate Dollar
Value of Shares That
May Yet be Purchased
Under the Plans or
Programs⁽²⁾

7/1/2019 thru 7/31/2019 2,431

$342.59

$17,349
8/1/2019 thru 8/31/2019 5,814
348.78

17,349
9/1/2019 thru 9/30/2019 1,288
357.89

17,349
Total 9,533

$348.43



(Dollars in millions, except per share data)
	(a)	(b)		(c)	(d)
	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs⁽²⁾
4/1/2020 thru 4/30/2020	5,381		$138.98
5/1/2020 thru 5/31/2020	4,201	140.49
6/1/2020 thru 6/30/2020	1,761	165.29
Total	11,343		$143.62


⁽¹⁾	~~We purchased 9,533~~A total of 9,175 shares were transferred to us from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock units during the period. We did not purchase any shares of our common stock in the open market pursuant to our repurchase ~~program or~~program. We purchased 2,168 shares in swap transactions.


⁽²⁾	On ~~December 17, 2018, we announced a new~~March 21, 2020, the Board of Directors terminated its prior authorization to repurchase ~~plan for up to $20 billion~~shares of the Company's outstanding common ~~stock, replacing the plan previously authorized in 2017.~~stock. Share repurchases under this plan ~~are currently suspended.~~had been suspended since April 2019.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits



1010.1*	~~Summary~~Employment Agreement between Boeing Canada Operations LTD and Susan Doniz

10.2*	Form of ~~Nonemployee Director Compensation~~International Notice of Terms of Supplemental Restricted Stock Units

15	Letter from Independent Registered Public Accounting Firm regarding unaudited interim financial information

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	The cover page for the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, has been formatted in Inline XBRL.

* Management contract or compensatory plan

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		THE BOEING COMPANY
		(Registrant)




~~October 23, 2019~~July 29, 2020		/s/ Robert E. Verbeck
(Date)		Robert E. Verbeck –
		Senior Vice President ~~Finance~~ and ~~Corporate~~ Controller

5960



	September 30 2019		December 31 2018
717 Aircraft ($184 and $204 accounted for as operating leases)		$778		$918
747-8 Aircraft ($130 and $132 accounted for as operating leases)	474		477
737 Aircraft ($243 and $263 accounted for as operating leases)	266		290
757 Aircraft ($22 and $24 accounted for as operating leases)	186		200
MD-80 Aircraft (accounted for as sales-type finance leases)	184		204
777 Aircraft ($126 and $60 accounted for as operating leases)	131		68
747-400 Aircraft ($33 and $45 accounted for as operating leases)	95		116



	Sales-type/finance leases			Operating leases
Year 1		$179			$118
Year 2	134			93
Year 3	97			83
Year 4	109			61
Year 5	121			46
Thereafter	140			57
Total lease receipts	780			458
Less imputed interest	(167		)
Estimated unguaranteed residual values	403
Total		$1,016			$458



	737	*	747	767	*	777	†	787	Total
Deliveries during the first nine months of 2019	118	(15)	5	32	(18)	33	(1)	113	301
Deliveries during the first nine months of 2018	407	(14)	5	13		37		106	568
Deliveries during the third quarter of 2019	5	(5)	1	10	(4)	11		35	62
Deliveries during the third quarter of 2018	138	(4)	2	4		12		34	190
Cumulative deliveries as of 9/30/2019	7,430		1,553	1,165		1,615		894
Cumulative deliveries as of 12/31/2018	7,312		1,548	1,133		1,582		781