The Boeing Company Q4 FY2025 earnings call

• In 2025, methodically increased commercial production, delivering 600 airplanes and winning over 1,100 commercial orders. Simplified over 5,100 work instructions. 737 production stabilized at 42 per month with improved on-time delivery. 787 program stabilized at rate eight with reduced average rework hours nearly 30%.
• Defense business had transformational win to build US Air Force sixth-generation fighter, MQ-25 completed inaugural engine run, T-7A Red Hawk delivered to US Air Force. Ratified new five-year labor agreement in Saint Louis. Completed acquisition of Spirit AeroSystems and $10 billion Jefferson sale.
• 737-10 received FAA approval for final phase of certification flight testing; 777-9 continued certification flight tests but identified potential durability issue on engine, not expected to impact 2027 delivery. KC-46 tanker had revised cost estimates but seeing encouraging operational performance trends

BCA (Commercial Airplanes): Delivered 160 airplanes in the quarter and 600 for the year, the highest annual total since 2018. Revenue was $11.4 billion with an operating margin of negative 5.6%. Booked 336 net orders in the quarter and 1,173 net orders for the year, with backlog ending at a record-setting $567 billion. BDS (Defense, Space & Security): Delivered 37 aircraft in the quarter, revenue grew 37% to $7.4 billion with an operating margin of negative 6.8%. Booked $15 billion in orders during the quarter, backlog grew to a record $85 billion. BGS (Global Services): Revenue was up 2% to $5.2 billion in the quarter. Adjusted revenue grew 6% with an adjusted operating margin of 18.6%, and ended the year with a record backlog of $30 billion

• Expect positive free cash flow of $1 billion to $3 billion in 2026, aligned with previous expectations. Contemplates unfavorable impact of roughly $1 billion in 2026 associated with incorporating Spirit. 777X first delivery planned for 2027 with net cash burn expected to improve over time. 737 and 787 programs expect improvement in margins over time with production stability and continuous improvement in on-time delivery. BDS business expected to return to historical performance levels as execution improves and transitions to new contracts. BGS expected to continue strong financial results

• Potential durability issue on 777X engine needing resolution with GE. Revised cost estimates for KC-46 tanker program. Geopolitical volatility and potential return of tariff risk affecting commercial aerospace. Long-term shift in Europe to more local procurement impacting defense business

Q: Could you clarify the quantum of excess advances in customer considerations and the duration by which they normalize?

A: The total overall quantum goes from low single-digit to high single-digit. Excess advances over time will burn down quicker than considerations. Considerations will take a bit longer to burn down related to 737 and 787 programs, predicated on production rates and delivery plans Q: Revisiting the $10 billion free cash flow number, can we expect it to be higher than $10 billion in the future?

A: We believe $10 billion is very attainable, and the potential of cash flow supports being above 10 but first need to achieve the $10 billion mark Q: What are the hardest breaks to get to in production ramps and how to ensure no Spirit-related issues like in 2018?

A: Rate ramp from 47 to 52 on 737 is tougher. For 737 MAX, rate from 38 to 42 went well, KPIs good. For 787, moving to rate 10 is in plan. Acquisition of Spirit helps guide ramp and manage risk, with plan in place to address Spirit's work Q: How do BCA margins look in the near term and longer term?

A: BCA margins are depressed now but expected to improve over time with backlog, Spirit's performance improvement, productivity, synergies, higher quality/delivery performance, and potential pricing boost in out years Q: What are the expectations for 2026 delivery expectations for MAX and 787 programs and cadence?

A: 737 deliveries expected around 500 aircraft, 787 around 90 to 100 aircraft. Production rollouts to improve with fewer carryover aircraft from inventory Q: Talk about defense, KC-46 tanker, and PAC-3 investments?

A: KC-46 had revised cost estimates but seeing operational performance trends, plan to deliver 19 in 2026. Follow-on tanker contracts to be priced in fall, laser-focused on cost base. Invested ahead of contract on F-47, invested in PAC-3 capital, likely to get multiyear PAC-3 contracts Q: Can the commercial aerospace industry become more profitable?

A: Need to get a handle on risks, manage risks in contracts, improve performance. New airplane program provides opportunity to participate in value chain, need to understand and manage risks Q: Worries about tariff risk and Europe local procurement?

A: Not overly worried, but need to watch trade barriers. Administration has been supportive, outcomes so far have been good. Watching Europe procurement shift impact Q: Total of free cash bridge pieces and BCA cash in 2026?

A: Aggregate of pieces is in $6 to $7 billion range. BCA cash expected to improve with margins increasing over time