BABoeing

The disclosure in the second paragraph covering the merger consideration is difficult to follow. Consider providing an illustrative example(s), perhaps in tabular format, of the number of Boeing shares that will be issued for one share of Spirit based on the variations described.

Rest of the question

Discussing quotients, greater or less than prices, volume-weighted average prices, and number of trading days, while technically necessary, obscures the ability of a reader to understand what exactly they are receiving in the merger. Please revise. Questions and Answers Q: What happens if the Merger is not completed?, page 7 Please revise the Q&A to disclose which of the most material conditions of the Merger are able to be waived. Further, please revise the risk factor "Boeing and Spirit may waive one or more of the conditions to the Closing without resoliciting stockholder approval of 2. the Merger Agreement Proposal and may terminate the Merger Agreement even if it has been adopted by Spirit Stockholders" on page 37 to describe what kinds of conditions could be waived and the negative effects it could have. The Merger Background of the Merger, page 65 3. We note that David Calhoun, your former President and Chief Executive Officer and who participated in the Merger negotiations between Boeing and Spirit, was succeeded by Robert Ortberg in August 2024. We also note your disclosures on pages 80 and 86 that the Boeing Board considered Patrick Shanahan, Spirit’s President and Chief Executive Officer, as a candidate for the role of your President and Chief Executive Officer. Please revise to elaborate on this succession process, including when and how Robert Ortberg was elected over Patrick Shanahan and any potential or actual conflicts when negotiating the Merger. Further, please revise the “Executive Officers of the Registrant” section to briefly discuss the specific experience, qualifications, attributes or skills that led to the conclusion that Robert Ortberg should serve as your director. Refer to Item 401(e) of Regulation S-K. 4. We note your disclosures in this section that the Spirit Board considered and discussed Spirit’s potential divestiture to Airbus Group of certain facilities and operations that support Airbus programs, including the potential impact thereof on a potential strategic transaction with Boeing. We also note that it is a closing condition that Spirit complete the divestiture of the Spirit Airbus Business. Please revise to elaborate on why the Spirit Board and Boeing Board considered this divestiture to be material to the Merger. Recommendation of the Spirit Board and Its Reasons for the Merger, page 91 5. We note your disclosure here that the Spirit Board considered “Spirit’s standalone strategic plan and related financial projections.” We also note your disclosure on page 69 regarding certain financial information “reflecting Spirit’s view as to its financial outlook and prospects” that were prepared in February 2024. Please revise to clarify whether these referenced financial projections are materially the same as the projections included in the registration statement on pages 96 through 99, and clearly use defined terms. If the projections are materially different, please explain these differences, what changes were made and why. Spirit Unaudited Forecasted Financial Information, page 96 6. We note your disclosures in paragraphs 1 and 2 of page 97 that certain important factors may adversely affect your projections. Please expand the discussion of your material assumptions underlying the projections, quantifying where applicable. Additionally, please revise to provide detailed quantitative disclosure describing the basis for your projected net revenues and the factors or contingencies that would affect such growth ultimately materializing. 7. We note that your financial projections present five years of forecasts. Please revise to discuss the basis of the projections and if the forecasts reflect more than assumptions about growth rates. Information About Boeing Security Ownership of Certain Beneficial Owners and Management, page 271 8. Please add a table that reflects the ownership of Boeing after the transaction. General 9. Please furnish the information required by Item 9 of Form S-4.

The Boeing Company, a Delaware corporation (the “Company”), hereby requests acceleration of the effective date of its Registration Statement on Form S-3 (File No. 333-282628), filed by the Company with the United States Securities and Exchange Commission on October 15, 2024 (the “Registration Statement”), to 4:00 p.m., Eastern time, on Tuesday, October 22, 2024, or as soon thereafter as practicable. Read in the reply ↗

We note multiple disclosures in your document including your Business Environment and Trends section, that you have been experiencing supply chain disruptions and inflationary pressures. We also note your disclosure that these factors have reduced overall productivity and adversely impacted your financial position, results of operations and cash flows.

Rest of the question

In future filings, please expand your results of operations disclosures to quantify, if possible, the specific impacts supply chain disruption and inflation have had on your cost structure, including the impact on your revenue, profits, and/or liquidity. Accounting Quantity, page 31

Our supply chain is integral to our operations. Late or non-conforming supplier deliveries drive higher manufacturing costs and delay deliveries to our customers. Inefficiencies in our own manufacturing process may also result in similar cost increases and delays. Therefore, it is difficult to quantify impacts solely attributable to supply chain disruption.

Rest of the answer

In future filings, beginning with our Form 10-Q for the second quarter of 2024, we will include disclosures in the Results of Operations Section of our Management’s Discussion and Analysis to the extent supply chain disruption is having a material impact on our financial position, results of operations, and cash flows, including any material impacts on revenue, profit and/or liquidity, and to the extent we are able to quantify such impacts. In future filings, we will also disclose when

Mr. Kevin Sterzel & Ms. Claire Erlanger supply chain disruption is having a material quantifiable impact on individual programs and/or contracts.

Inflation primarily impacts our supply chain and labor costs. We are subject to cost inflation risk when we have to contract new work with our suppliers or renew existing agreements with suppliers and/or our represented employees. Those cost inflation risks are most likely to have a material impact on our current results of operations and/or liquidity when the costs are associated with fixed-price contracts that are in a loss or have near-breakeven margins. Otherwise, inflationary supply chain and labor costs affect our results of operations over the duration of affected contracts through lower program and/or contract margins. It is difficult to quantify cost increases that are solely attributable to inflation. In future filings, we will expand our disclosures in the Results of Operations Section of our Management’s Discussion and Analysis to include the impacts of inflation to the extent inflation is materially impacting our financial position, results of operations, and cash flows, including any material impacts on revenue, profit and/or liquidity, and to the extent we are able to quantify such impacts.

Read in the reply ↗

We note throughout your document, you discuss delivery and order cancellation risks associated with various commercial airplane programs, including your 777X, 737-7 and 737-10. We note your tabular presentation on page 32, which depicts undelivered units under firm orders by program.

Rest of the question

In future filings, please expand your presentation to provide additional breakdown of your 737 variants to allow investors to better understand the composition of your backlog.

In response to your comment, we expanded our presentation in the Commercial Airplanes section of Management’s Discussion and Analysis (page 36) in our Form 10-Q filed on April 24, 2024, to provide additional breakdown of the backlog associated with the 737-7, 737-8, 737-9 and 737-10 variants. We will continue to provide such expanded disclosure in future filings. Read in the reply ↗

We note your substantial Goodwill balance as of year end, including the balances reflected in your Commercial Airplanes and Defense, Space & Security segments. We further note these segments have sustained significant operating losses in either all, or two of the three most recent years presented in your filing.

Rest of the question

In future filings beginning with your next quarterly report, please revise the notes to the financial statements and your Critical Accounting Estimates section in MD&A to disclose whether a qualitative or quantitative impairment test was performed for the respective reporting units. For any reporting unit requiring a quantitative impairment test, disclose the methods and significant assumptions used to test for impairment. Your disclosure should also state whether or not the fair value of your reporting units "substantially exceeds" the carrying value. To the extent any reporting unit fair values are not substantially in excess of fair values, disclose the identity of those reporting units and the amount or percentage by which the fair value exceeds their carrying value. Please refer to ASC 350-10-50 and Item 303(b)(3) of Regulation S-K and Section V of SEC Release No. 33-8350. Also, if any reporting units have zero or negative carrying amounts of net assets, please disclose the identity of those reporting units with allocated goodwill, the amount of goodwill allocated to each and in which reportable segment the reporting unit is included. See requirement in ASC 350-10-50-1A. As part of your response, please also provide us with the results of your 2023 impairment testing that include the aforementioned details.

We perform our annual goodwill impairment test as of April 1 each year. On April 1, 2023, we performed a qualitative test. The qualitative test was partly informed by quantitative valuations of each of our reporting units performed as of January 1, 2023, in connection with a reorganization of our Defense, Space & Security (“BDS”) reporting units.

Rest of the answer

As of both dates, we determined the fair value of each of our reporting units substantially exceeded their respective carrying values.

Our January 1, 2023, quantitative valuations estimated the fair value of each of our reporting units using discounted cash flows and market-based valuation methodologies (such as comparable public company trading values, where appropriate). Significant assumptions used in the valuations included our forecasts of future cash flows, discount rates derived from our market capitalization, and an estimated control premium.

We determined that the fair value of our reporting units substantially exceeded their carrying value. We did not believe that changes in estimates of the fair value of our reporting units, while subject to estimation uncertainty, were reasonably likely to result in a conclusion that goodwill was impaired. Therefore, we did not consider the estimation of the fair value of our reporting units used in our goodwill impairment testing to be a critical accounting estimate.

On April 1, 2023, our BDS reportable segment had goodwill of $3.2 billion. One of our BDS reporting units had a negative carrying amount of net assets on April 1, 2023, and a positive carrying amount of net assets on December 31, 2023. The negative carrying amount of net assets at April 1, 2023, was largely attributable to forward loss recognition on certain contracts within the reporting unit’s portfolio as well as the timing of receipts and payments. The reporting unit’s fair value substantially exceeded the carrying amount of its net assets at April 1, 2023, and we determined disclosure of the reporting unit with a negative carrying amount of net assets and its goodwill balance was not material as of April 1, 2023.

In future filings, beginning with our Form 10-Q for the second quarter of 2024, we will expand our notes to the financial statements to include a description of the type or types of goodwill impairment test performed as part of our April 1 annual goodwill impairment test (i.e., qualitative or quantitative) and indicate whether the fair values of our reporting units substantially exceed their respective carrying values. For any reporting unit where the fair value does not substantially exceed the carrying value of the reporting unit, we will disclose the identity of the reporting unit and the percentage by which the fair value exceeds the carrying value.

If we determine for any reporting unit that it is more likely than not goodwill is impaired and a quantitative impairment test is required, we will disclose the methods and significant assumptions used in performing that quantitative test. We will also continuously assess, as is our practice, whether our estimate of reporting unit fair values is a critical accounting estimate in the period and will provide disclosure in Management’s Discussion and Analysis accordingly.

Lastly, in future filings we will disclose the identity of any reporting units with zero or negative carrying values, the amount of goodwill allocated to such reporting unit, and the reportable segment in which the reporting unit is included.

*****

If you would like to speak with us about any of these matters, please do not hesitate to call me at (630) 248-6275.

Read in the reply ↗

We note you provide disclosure of Operating cash flow in your table of Selected Financial Data. Please expand your disclosure in future filings to include disclosure of Investing and Financing cash flows in order to provide investors with a more balance presentation. Refer to Section 202.03 of the SEC’s Codification of Financial Reporting Policies for guidance.

In response to your comment, we will include disclosure of Investing and Financing cash flows in the table of Selected Financial Data in future filings.

Ms. Jean Yu & Mr. Kevin Stertzel

Backlog, page 28

We note from various news sources that you have experienced significant commercial aircraft order cancellations in fiscal year 2020. We further note your response to our prior comment number two in your letter dated October 18, 2019.

Rest of the answer

As it appears order cancellations are now at significant levels, please be sure to include robust quantified and narrative disclosure of the expected impacts to your backlog, results of operations and cash flows in your future filings.

Response

We believe that our order, delivery and production rate disclosures along with our backlog disclosures provide significant insight for investors and other users of our financial statements regarding expected impacts to our backlog, results of operations and cash flows.

Our backlog excludes all canceled orders and represents the estimated transaction price on unsatisfied and partially satisfied performance obligations with customers where (i) it is probable that we will collect the consideration due and (ii) no contingencies remain before we and the customer are required to perform. Each quarter, we assess backlog in accordance with ASC 606 to determine whether we believe it is probable we will collect the consideration due and whether any new customer-controlled contingencies exist. Any amounts that we deem to be either uncollectible or subject to a customer-controlled contingency in connection with such an assessment are removed from backlog. For example, our 2019 Annual Report on Form 10-K noted that a number of our customers had contractual remedies, including rights to reject individual airplane deliveries if the actual delivery date is significantly later than the original contractual delivery date. We further noted that, if we determine that a customer has a right to reject an individual delivery, we remove that unit from backlog as we would consider that to be a customer-controlled contingency.

Our prior Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q disclose the number of undelivered units under firm orders that are included in backlog, grouped by program, at each reporting date. This presentation enables a reader to track orders for each of our major airplane programs over time.

The following is an excerpt from our first quarter 2020 Form 10-Q showing this information.

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

As of 3/31/2020

737

747*

767

777

†

777X

787

Program accounting quantities

10,000

1,574

1,195

1,690

**

1,500

Undelivered units under firm orders

4,079

309

515

(28)

Cumulative firm orders

11,523

1,568

1,272

1,680

1,483

As of 12/31/2019

747

10,400

1,600

4,398

520

(29)

11,837

1,572

1,270

1,695

1,459

† Aircraft ordered by BCC are identified in parentheses

* At March 31, 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.

We also disclosed in our most recent Quarterly Report on Form 10-Q that the reduction in the number of orders included in our backlog compared to the prior quarter was caused by a combination of aircraft order cancellations and orders from customers deemed to be experiencing liquidity issues. Cancellations may result from a mutual agreement with a customer or from a customer or Boeing exercising a contractual right to cancel. Customer orders typically include deliveries made over several years, and new orders or order cancellations or removals do not necessarily result in near-term financial impacts.

Each quarter we assess future production plans on each of our commercial airplane programs. These assessments include evaluations of required delivery dates for existing purchase contracts, requests from customers to accelerate or defer deliveries, customers’ credit worthiness estimates of future demand, and our capacity constraints.

We disclose current and planned production rates and deliveries for our major commercial aircraft programs. We believe that these disclosures provide investors with additional visibility into expected future impacts on operating results and cash flows. In our first quarter 2020 Form 10-Q, we disclosed that we planned to adjust production rates across several of our commercial airplane programs as a result of the projected impacts of COVID-19 on the commercial airplane industry. For example, we disclosed that we planned to reduce production rates for our 787 from 14 per month to 10 per month in 2020 and gradually reduce to 7 per month by 2022. We provided similar disclosures for all of our commercial airplane programs. We believe that these disclosures enable readers to compare our current performance with expected future performance for each of our commercial airplane programs. Our production decisions are informed by our best estimates of future delivery profiles, industry demand, and customer activity, and we believe that by providing information to readers regarding current and planned production rates and deliveries, we are providing the most meaningful information regarding estimated future impacts to our results of operations and cash flows.

In response to your comment, future filings will include, where applicable, explanations for significant changes in backlog. For example, when we record significant backlog reductions, we will explain the extent to which such reductions are due to order cancellations, ASC 606 assessments and/or deliveries made during the relevant period. In addition, we will continue to disclose current and planned production rates and deliveries to provide investors with additional insight into our expected results of operations and cash flows.

Management's Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies & Estimates 737 MAX Grounding, page 45

We note your disclosure regarding the 737 MAX grounding and your recognition of a $7.4 billion liability for potential concessions and other considerations to customers for disruptions related to the grounding. In future filings, please provide enhanced disclosures to better clarify the nature and amounts of the various concessions you are providing. It appears your concessions may be in the form of cash, in-kind consideration and other forms of concessions. Please consider providing a tabular presentation of the concessions by type, so that investors can better understand the expected impacts to your cash flows and operating results.

Response

Our 2019 Annual Report on Form 10-K and first quarter Quarterly Report on Form 10-Q included the following tabular summaries of the amounts and types of considerations we are providing to customers.

The following table summarizes changes in the 737 MAX customer concessions and other considerations liability during 2019.

2019

Beginning balance – January 1

Initial liability recorded in the second quarter of 2019

$6,110

Reductions for payments made

(1,237

)

Reductions for concessions and other in-kind considerations

(133

Changes in estimates

2,649

Ending balance – December 31

$7,389

The following table summarizes changes in the 737 MAX customer concessions and other considerations liability during 2020.

2020

(671

(2

(30

Ending balance – March 31

$6,686

As set forth in the above tables, most of the considerations provided to 737 MAX customers in 2019 were in the form of cash. To date, the in-kind considerations we have agreed to provide to 737 MAX customers have not been material. Of the remaining $6.7 billion, we have reached agreements with customers to pay approximately $1 billion in cash expected to be paid in 2020 and approximately $1 billion in reduced 737 MAX delivery payments. With respect to the remaining $4.7 billion, the types of considerations we may provide in the future will depend on the outcomes of negotiations with individual customers and the timing and conditions surrounding 737 MAX return to service. The tables also show how changes in estimates impacted operating results. This liability represents our best estimate of future concessions and other considerations to customers, and is necessarily based on a series of assumptions. The ultimate timing and conditions surrounding 737 MAX return to service, and the adverse impact COVID-19 is having on our airline customers create additional uncertainty regarding whether the concessions or other considerations resulting from negotiations with any particular customers is likely to consist primarily of cash payments, reduced 737 MAX delivery payments or in-kind consideration. Future filings will continue to include tabular disclosure of the nature and types of considerations provided in respect of the liability, as well as any changes in estimates. In response to your comment, we will also provide a narrative description similar to the above to disclose in future filings the expected impacts to cash flows and operating results to the extent such amounts are material.

Form 10-Q for the quarter ended March 31, 2020

Liquidity, page 37

4. We note from your liquidity footnote in note 1 to the financial statements at March 31, 2020 trade payables included $4.5 billion payable to suppliers who have elected to participate in supply chain financing programs. To the extent the supply chain finance arrangements are material to your current liquidity and/or are reasonably likely to affect liquidity in the future, please provide the following information, where relevant:

The impact these arrangements have on your operating cash flows in all periods presented;

•

The intraperiod variability in accounts payable balances attributed to the programs;

The material and relevant terms of the arrangements, including the risks along with general benefits;

Any guarantees provided by subsidiaries and/or the parent;

Any plans to further extend terms to suppliers;

Any factors that may limit your ability to continue using similar arrangements to further improve operating cash flows; and

Trends and uncertainties related to the extension of payment terms under the arrangements.

Response

In our first quarter 2020 Quarterly Report on Form 10-Q, we provided additional disclosures regarding our liquidity because of the significant negative liquidity impacts we experienced, and expected to continue to experience, related to the COVID-19 pandemic and the continued 737 MAX grounding. Cash required to fund operating activities during the first quarter of 2020 exceeded $4 billion. As such, we provided readers of our financial statements with additional insights into our sources of liquidity at March 31, 2020, as well as details regarding the risks related to our ability to access additional liquidity in future quarters. We do not consider supply chain financing programs to be material to our overall liquidity. As disclosed in our first quarter 2020 Quarterly Report on Form 10-Q, our debt balance totaled $38.9 billion at March 31, 2020, up from $27.3 billion at December 31, 2019. Subsequent to our most recent Quarterly Report on Form 10-Q, we issued $25 billion of debt securities, as disclosed on a Current Report on Form 8-K dated May 4, 2020. At March 31, 2020 and December 31, 2019, we had $9.6 billion of unused borrowing capacity on revolving credit agreements, which also represents a potential significant source of liquidity. Supply chain programs did not have a material impact on our liquidity in the first quarter of 2020. The reduction in payables to suppliers who elected to participate in supply chain financing programs was $0.7 billion in the first quarter of 2020, which is immaterial to our overall liquidity. Furthermore, this decline was primarily due to suspensions of production on certain programs and associated reductions in purchases from suppliers and not due to any changes in the availability of supply chain financing. While we disclosed in our first quarter 2020 Form 10-Q that “access to supply chain financing could be curtailed if our credit ratings are further downgraded,” we do not believe that changes in the availability of supply chain financing will have a significant impact on our liquidity.

We have concluded that supply chain finance arrangements have not historically been material to our liquidity and are not reasonably likely to materially impact our liquidity in future periods. In response to your comment, we will disclose in future filings the amounts included in accounts payable attributable to supply chain programs as well as the impact on operating cash flows in each period. This will provide users of our financial statements with information to help them understand how our supply chain financing programs affect our balance sheet and cash flow statement. In addition, we will continue to provide updates regarding our liquidity in future periodic filings.

*****

If you would like to speak with us about any of these matters, please do not hesitate to call me at (312) 544-2500 or in my absence, Michael Cleary, Vice President Accounting and Financial Reporting at (312) 544-2115.

Read in the reply ↗

We note from various news sources that you have experienced significant commercial aircraft order cancellations in fiscal year 2020. We further note your response to our prior comment number two in your letter dated October 18, 2019.

Rest of the question

As it appears order cancellations are now at significant levels, please be sure to include robust quantified and narrative disclosure of the expected impacts to your backlog, results of operations and cash flows in your future filings.

No numbered answer found in the reply. Read the reply ↗

We note your disclosure regarding the 737 MAX grounding and your recognition of a $7.4 billion liability for potential concessions and other considerations to customers for disruptions related to the grounding. In future filings, please provide enhanced disclosures to better clarify the nature and amounts of the various concessions you are providing.

Rest of the question

It appears your concessions may be in the form of cash, in-kind consideration and other forms of concessions. Please consider providing a tabular presentation of the concessions by type, so that investors can better understand the expected impacts to your cash flows and operating results.

No numbered answer found in the reply. Read the reply ↗

We note from your liquidity footnote in note 1 to the financial statements at March 31, 2020 trade payables included $4.5 billion payable to suppliers who have elected to participate in supply chain financing programs.

Rest of the question

To the extent the supply chain finance arrangements are material to your current liquidity and/or are reasonably likely to affect liquidity in the future, please provide the following information, where relevant: • The impact these arrangements have on your operating cash flows in all periods presented; • The intraperiod variability in accounts payable balances attributed to the programs; • The material and relevant terms of the arrangements, including the risks along with general benefits; • Any guarantees provided by subsidiaries and/or the parent; • Any plans to further extend terms to suppliers; • Any factors that may limit your ability to continue using similar arrangements to further improve operating cash flows; and • Trends and uncertainties related to the extension of payment terms under the arrangements.

No numbered answer found in the reply. Read the reply ↗

Please revise your comparative discussion of year-to-year changes in income statement categories to quantify each change identified. For example, your discussion of 2018 revenues versus 2017 states, "Revenues in 2018 increased by $7,122 million or 8% compared with 2017 due to higher revenues at BCA, BDS, and BGS.

Rest of the question

BCA revenues increased by $2,701 million due to higher 737 and 787 deliveries and favorable 737 and 787 model mix, which more than offset lower 777 and 747 deliveries." In that regard, please revise either in narrative or tabular form to provide more insights such as the changes in both total revenue and related quantities by model number in your entire discussion and analysis . This revision also applies to your future Forms 10-Q.

Ms. Amy Geddes & Mr. Andrew Mew

Our Form 10-K includes extensive disclosures regarding our Commercial Airplanes business. Examples of such disclosures in the MD&A section of our 2018 Form 10-K include number of airplane orders for each commercial airplane program (page 28), number of deliveries for each commercial airplane program (page 26), and current and future planned production rates for each airplane program (pages 28 and 29). We update all of this information each quarter in our Forms 10-Q.

Rest of the answer

We also publicly disclose orders and deliveries by month, and on quarter-end months this information is published before we release earnings and file our Forms 10-Q and 10-K. In addition, the notes to our financial statements disclose commercial airplane revenue by region (i.e., customer location). Our Commercial Airplanes business serves customers in different regions of the globe, each of which is subject to different economic and industry factors. As previously shared with the Staff in a letter dated September 14, 2018, we believe that the Company’s presentation of Commercial Airplanes revenue by region most appropriately depicts how economic and industry factors affect the nature, amount, timing, and uncertainty of revenue and operating earnings in that segment. In our periodic reports, we also provide commentary around the overall airline environment, industry competitiveness and macro-economic trends that could impact our business.

Our Commercial Airplanes business is highly integrated, and aircraft are sold to the same customer base, involve similar technologies, and share common production facilities and sales forces. As such, we primarily measure performance at the overall segment level and believe that is the most relevant basis of evaluation for investors. In addition, several of our commercial aircraft programs include several “minor” models (e.g., the 787 program includes 787-8s, 787-9s, and 787-10s), each of which can perform different missions for customers and be subject to different pricing. Even within certain minor models, customers can choose a wide variety of features, each of which affects the revenue for purchased aircraft. Finally, even identical aircraft can be subject to different pricing terms and/or varying escalation adjustments, depending on the customer. Because of these factors, revenue by aircraft within one particular program can vary greatly. As a result, we believe that investors can evaluate particular programs through a combination of overall segment revenue (both on an aggregate basis and by region), order and delivery activity, planned future production rates, and size of each program’s accounting quantity, together with narrative disclosures in our MD&A regarding particular programs’ impact on overall segment performance and additional operational or financial considerations affecting a program.

In addition, we believe that our order, delivery and production rate disclosures provide significant insight for investors and other users of our financial statements. For example, when comparing 2018 performance with 2017, we disclose in our Form 10-K that overall deliveries increased by 51 units, 17 units and 9 units for the 737, 767 and 787 programs, respectively, and that deliveries for the 777 and 747 programs declined by 26 units and 8 units, respectively. We believe these disclosures enable investors to understand how volume affects the results of our business. Further, investors have visibility into future trends through our disclosure of orders and planned changes to production rates, an example of which is our disclosure in the 2018 Form 10-K of a planned production rate increase from 12 to 14 aircraft per month on the 787 program. In summary, we believe that the combination of order, delivery and production rate disclosures, together with our disclosures of segment revenue and operating earnings and discussion of economic and other factors impacting the industry or particular programs, when taken as a whole, provide investors significant insight into known trends and uncertainties as well the drivers of period over period performance.

Read in the reply ↗

We note from your disclosure here that, while you have suspended deliveries of the 737 MAX during the grounding, you have continued production at a reduced rate. You have disclosed here that the resulting impacts, which were reflected in the first quarter, increased costs to produce aircraft included in the current accounting quantity by $1,748 and reduced 737 program and overall BCA segment margins.

Rest of the question

We also note your disclosure on page 16 that the grounding has reduced revenues, operating earnings and cash flows during the first quarter of 2019 and will continue to adversely affect results until deliveries resume and production rates increase, you are unable at this time to reasonably estimate potential additional financial impacts or a range of loss, beyond the $5.6 billion charge to earnings because any such estimate would depend on many factors, including the ongoing status of the accident investigations and the timing and conditions surrounding a return to service. Please explain to us in detail or revise to quantify the additional impact to revenues, operating earnings, and cash flows during the income statement periods presented especially resulting from non-delivery at this stage.

to the Staff’s comment, we will clarify in future filings those impacts related to the 737 MAX grounding that are material to the Company, as well as those impacts which we expect to become material in the event that return to service, and therefore our ability to resume aircraft deliveries, is delayed beyond our current assumption. Read in the reply ↗

Please revise your discussion of your reduced production rate to include factors which may limit your ability to continue production of the 737 MAX. Specifically address how your storage capacity may limit the number of aircraft you can manufacture.

We do not expect that storage capacity would limit our ability to continue 737 MAX production. We are currently using available storage space in several locations in the State of Washington as well as San Antonio, Texas. We have additional available capacity, and we believe that we have access to adequate alternative sources of storage space if return to service is delayed beyond our current assumption.

Rest of the answer

As discussed in Note 11 of our Form 10-Q for the quarter ended June 30, 2019, the timing and conditions of 737 MAX return to service is the principal factor that could cause us to reduce our production rates or temporarily cease 737 MAX 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 cease 737 MAX production. In response to the Staff’s comment, we will include this additional detail in future filings.

Read in the reply ↗

We note the table on page 43 appears to indicate revised cumulative firm orders of 11.840, a decrease of 180 aircraft from prior year end. Please tell us whether any portion of this decrease is related to cancellations in response to the grounding of the 737 MAX.

Rest of the question

If so, please clarify by disclosing the number of cancellations due to grounding and the corresponding impact to lost revenues and earnings in aggregate and by fiscal year.

As disclosed on page 42 in our Form 10-Q for the quarter ended June 30, 2019, backlog decreased primarily due to deliveries in excess of new orders and a reduction related to orders from a customer experiencing liquidity issues. The reduction in cumulative firm orders from the prior year end to June 30, 2019 was primarily due to the removal of orders from the customer experiencing liquidity issues. The 737 MAX grounding resulted in an insignificant number of cancellations and reductions to cumulative firm orders during the first half of 2019.

Rest of the answer

Due primarily to the size of 737 backlog and management’s ability to mitigate potential impacts by shifting planned customer delivery dates, management does not expect 737 MAX order cancellations due to the grounding to have a material impact to revenues or earnings. In response to the Staff’s comment, we will disclose in future filings any material cancellations or corresponding impacts attributable to the 737 MAX grounding and associated delivery delays, should they occur.

Read in the reply ↗

We note from news media reports on June 8, 2019 that Flyadeal, Saudi Arabian Airlines Corp.'s budget airline, has cancelled their full order of $5.9 billion dollars of 30 737 MAX's with an option for 20 more in favor of Airbus. We did not note a press release furnished on Form 8-K related to this significant order cancellation related specifically to the issues with the 737 MAX.

Rest of the question

Please tell us how you determined that a current report on Form 8-K is not considered necessary in this situation.

The order described in the Staff’s comment was a non-binding arrangement and never the subject of a binding agreement. As a result, the arrangement did not satisfy the criteria of a contract with a customer as defined in ASC 606-10-25-1. Therefore, neither the backlog nor cumulative firm order data in our Form 10-K for the year ended December 31, 2018 and the Form 10-Q for the quarter ended March 31, 2019 included this arrangement.

Rest of the answer

In addition, neither the arrangement nor its failure to become a binding agreement impacted the revenue or cost estimates used for purposes of program accounting with respect to the 737 program. As a result, the cancellation described in the Staff’s comment had no impact on our financial statements and did not otherwise satisfy any of the requirements for a Current Report on Form 8-K.

Read in the reply ↗

We note your disclosure in the last paragraph in this Note that you describe the $5.6 billion charge as representing "estimated potential concessions and other considerations to customers for disruptions related to the 737 MAX grounding and associated delivery delays." You state on page 16 that the charge was reflected as reduction of revenues, other current assets and accrued liabilities.

Rest of the question

In this regard, explain to us the facts and circumstances leading to the estimated customer concessions and other considerations' amount as well as how a portion of the charge was capitalized as "other current asset". Please tell us and disclose the breakout of the charge among reduction of revenues, other current asset and accrued liabilities.

As disclosed in the Form 10-Q for the quarter ended June 30, 2019, during the second quarter we recorded a net revenue reduction of $5.6 billion, a current asset of $0.5 billion, and a customer considerations liability of $6.1 billion.

The facts and circumstances that led to recording an estimate of customer concessions relate to management’s intention to offer compensation to customers. As a result of that decision, we recorded a liability in the second quarter measured at the probable amount of estimated consideration to be provided due to the 737 MAX grounding and associated impacts.

Rest of the answer

The liability represented potential concessions and other considerations to customers who were affected directly by the grounding of previously delivered aircraft as well as customers who are experiencing or are expected to experience delayed deliveries due to the grounding and the new production schedule.

The liability recorded for customer concessions and other considerations in the second quarter was based upon an estimate of customer disruption experienced due to delivered grounded aircraft as well as undelivered aircraft subject to expected delivery delays. The estimate considered available information regarding costs incurred by customers to mitigate disruption to their operations, the results of ongoing engagements with customers, and marketing data used to estimate lost profit, as well as our assumptions regarding timing and conditions of return to service and planned future 737 MAX production rates.

The “other current asset” addressed in the Staff’s comment related to an insurance receivable for grounding insurance, which was recorded in the income statement in the second quarter as an offset to the gross revenue reduction. A grounding insurance claim was filed with insurers in the second quarter of 2019 and was determined to be probable of collection. As the insurance proceeds were received in the third quarter, this receivable is no longer on our balance sheet.

*****

If you would like to speak with us about any of these matters, please do not hesitate to call me at (312) 544-2500 or Michael Cleary, Vice President Accounting and Financial Reporting at (312) 544-2115.

Read in the reply ↗