Boeing Company Morgan Stanley's 14th Annual Laguna Conference

Welcome Good morning. Jay Malave, CFO of Boeing.

Very excited to have our next panel. Before we start, we will do the standard disclosures. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley representative. Jay, you have yours? I do.

Thank you, Christine. Today's discussion includes forward-looking statements that are subject to risks and uncertainties, including the ones described in our SEC filings. Relevant disclosures are included in the materials accompanying the event webcast, which can be accessed on the Events and Presentation section of our investor relations website.

Okay. Okay, great. Wonderful. Kelly and Jay, welcome again, and lovely to see you at Laguna this year.

I guess, it has been a big year for Boeing.

Yeah in the past year since we were here.

You now have the 737 MAX 7 certification. You have had successful production rate increases in several aircraft programs. I guess when you look back in the past year, can you share with us what you think have been the most successful accomplishments for Boeing, and also what has been the biggest challenge in this past year?

Yeah. It has been a big year for us. A lot of accomplishments. You mentioned the ramping up of production. That has been paramount in importance, and the team has done a really nice job of doing that on our commercial business. They have not just done it to get to the delivery output, but we have sustained all of our key metrics. We have done a lot of work on our culture across the company, restoring trust. We have seen the FAA give us redelegation of authority this past year, which is a really, really good sign on how we are reinventing our relationship with the FAA. Probably maybe the most underappreciated is the amount of really good work that is being done in our defense portfolio, and dealing with not only our challenging fixed price contracts, but really setting the stage for future growth in that portfolio.

Stephen Parker and his team have really done a nice job. I think, and I said this at the beginning of the year, the one area probably, at least the last part of last year that I did not feel like we had made as much progress on, was the certification programs. As you mentioned, we are now having the 737-7 cert done. The -10 is coming very shortly. We really are knocking down these major milestones on certification as well.

Congratulations on that. Yeah. Diving deeper on production rates, let's look at the 737 MAX 7.

It's been successful to get to 47 per month, so also congratulations on that. You've noted that you have plans to increase the production rate again to 52 per month after you see stabilization. Can you walk through what specific KPIs you're looking at now, and how long you want to be at those metrics before being comfortable to officially going to 52 per month? When you think about production rates beyond 52 per month, what are the key gating items for production?

Yeah. Well, first of all, you're right in that we're now driving at 47 a month, but we are not stable yet at 47 a month. That's been our task here, to get stable. I'd say that's probably taken us a little bit longer than what I had anticipated, maybe when we talked at the earnings call. The supply chain is in really good shape, including CFM on the engines for our rate ramps on 737. The area we're constrained right now is in our wings production. We actually produce all the wings in Renton for the MAX line, and we just have not seen the flow improvements that we expected in the timeframe, so it's taken us a little bit longer. Having said that, we've got plans in place to go address that and move to the next rate.

I think we're in pretty good shape from a supply chain to actually move to the next rate once we get some of these flow enablers behind us, and that'll happen next year.

Great. You touch on the supply chain, Kelly. It sounds like you're more optimistic on the supply chain. When you look at further rate increases when you get to the 52 or beyond, can you talk about additional bottlenecks that you're monitoring for the supply chain there? How do you balance the health of the supply chain, how much physical inventory you have, versus potentially freeing up inventory to improve working capital?