I guess we're ready to go here. I'm Doug Harned, Bernstein's Global Aerospace and Defense Analyst. And I'm thrilled to have with us again Kelly Ortberg, Chairman and CEO of Boeing.

Good to be here, Doug. You doing well?

I am. It's good to have you here. Nothing's boring these days.

Time has flown since we were here last year.

No, I know. A lot has happened. I mean, maybe to start, we could start right there, is if you look over the last year and what you've been able to do with the company in terms of the progress you've made and some of the challenges you may be looking at right now, maybe you could give us an overview.

Yeah, so look, I feel really good about where we are. Looking back in the last year, we've accomplished a whole heck of a lot. Production in our commercial business is ramping up, continuing to ramp up. But, you know, we've had some really good success. As you know, we finished last year with over 1,000 new orders, so the market is super strong for all of our commercial products. So really pleased there. We've done really nice work on our defense portfolio and realigning that portfolio with our customers around successful programs, particularly focused on some of our problem development programs and getting those back in shape. And so I feel really good about what Steve Parker and his team are doing there. And again, we finished with record backlog in our defense portfolio. And our services business has continued to do what it does, keep our airplanes flying and our customers supported with a really good margin performance there, which has been important given the status of the rest of the company. So really good progress. The one area I guess I'd highlight where I haven't met my goals was getting the certifications complete on the new commercial airplanes. And I'm sure we'll talk a little bit about that. But getting through the 737-7-10 certifications and the 777-9 are big goals here for us yet to go in the year. You know, then we're always managing the day in, day out things, whether it's supply chain challenges, things pop up, we manage them. I think that'll be ongoing. Labor agreements, we've got our SPIA labor agreement with our engineers in Puget Sound coming up at the end of the summer. So those are all things that are ahead of us that we've just got to continue to work. I'm really pleased at the culture work across the company. we did a lot of a lot of focus on training our people rolled out new values and behaviors aligned our goals and objectives to a single one Boeing set of goals and objectives so everybody's focused on success of the company and I'm seeing major major turnaround with that and it's not just me I'm hearing it from the employees I'm hearing it from the customers our Our commercial customers are saying these are the best airplanes they've received from Boeing. So that's a great accolade. The team's really doing a good job.

You mentioned the orders you've had, and your backlog is huge right now. Can you give us a sense of how far out that backlog extends? If a customer wants to come in and place a significant order today for 737, 787, what time frame are you looking at?

Well, it's well into the next decade. So it somewhat is a little bit different, Doug, depending on the customer. If it's a customer who has options, firm's options, then we give them a window and we'll protect the slots, if you will, production slots for firm options. But if it's a new customer coming in for new demand, they're going to be in the 2030s before they're going to be able to get either a 787 or a 737 airplane.

And I put that in the context of we just, you know, you just came back from this trip to China with the president and, you know, you got an order for 200 airplanes. A lot of us were expecting a 500 airplane order. But does, you know, when you look at China, And does that matter in terms of when we'll see deliveries actually occur?

Yeah, you know, the China trip was super successful. My primary objective was to reopen that market to our narrow-body airplanes. As you know, we hadn't had an order in nearly a decade. And we accomplished that, which is a major, major accomplishment. And I think people focus a little bit too much on the initial quantity. This is opening the market. They need well over 500 aircraft a year to support their GDP growth. And so there's a great market opportunity for us. And the initial order of the initial commitment of 200 will turn into an order later on in the year. The way the process works is once the government decides a batch of narrow-body aircraft, they then allocate them to the Chinese airlines. and then we go work with the airlines to actually get a firm order and that's you'll see us book those orders on an individual airline by airline basis so look I never had a plan to go to China and return with a packet full of 500 orders haven't said that 200 is a huge number of airplanes so it's a good start and I'm very confident that keeping that market open that's an initial tranche of aircraft, and there will be more to come.

Now, with the large backlog you have of being sold out for a long time, we're currently in this situation with very high fuel prices. That's putting a lot of pressure on many airlines around the world. Our assumption would be, as we saw during the global financial crisis, you're going to have some movement in slots. Some airlines could find it difficult to take deliveries at certain times. How do you approach that process of managing your skyline with some airlines who may have a more difficult time in the past?

Yeah, so just to be clear, so far, just like I said in the earnings call, we have not seen anybody request a movement or a delay of the deliveries. Now, I think everybody, because of the high fuel prices, will want to take the more fuel-efficient new airplanes. If they have to park an airplane, it's probably an older inefficient until they get cash-strapped, and then they get to a point where I can't take the airplanes. We'll work with the customer if that happens. We've done that before. I've had more customers call me saying, if you have that situation, I'll take the airplanes. Then I have had customers saying, I want to give up any slots. Generally, Doug, if it's a 737, as long as we have about 12 months of advance notice, we can refire that to a different airline, probably 18 months from a 787 perspective or even a larger wide body that's a little longer. So we just have to get in front of that and talk to the customers, make sure we know in advance that if they're thinking about it, we try to get ahead of that so it doesn't become an issue where we've got an airplane and we can't make it delivery.

Now, on the 737, so you've gotten production up to 42. I think you're still looking at 47 rate in the summer. Can you take us through how that process is going and maybe update us on your expectations for 47?

Yeah, so we went to 42 last fall, and the good news is we've continued to roll out at 42 a month, and all of our key performance indicators have been very positive. They've stayed green through that. So that production ramp has gone very, very well. We just recently had our capstone review with the FAA New News here. we've passed the capstone review for rate 47 so we are now in the process of running the line at the 47 a month rate it'll probably take us you know a few months of stabilization there but I'll say when we went from 38 to 42 that stabilization didn't take too long my guess is we continue to go up and rate it may take a little bit longer but we're off and rolling now for the 47 a month rate, and we should be there in the next couple months.

How you think about that is you start working at 47, you'll have blanks on the line, and then you start to fill that in as the rate gets stabilized.

What we do is, before we go to the capstone review with the FAA, we want to make sure that we're ready to actually go to that rate. What we do is we actually bump the rate up to 47 a month before we go actually to the capstone review and then we put some blanks as you point out in the production system so that if we go to 47 and one of our commodities is gets too many jobs behind schedule we use that blank month to catch them up and then we go figure out what what is it we needed to do to get to 47 and we try to get that all done before we actually make the rate increase so we're highly confident that we pulse the system to make sure we're ready we're ready to go to that rate and when you look at the 737 the what we've

heard from some suppliers is that that the inventories that you had built up during the periods of low production rates that those have been worked through pretty far from at least that's anecdotally where do you stand on kind of bringing down the inventory levels.

Yeah, so it is a little bit of a commodity by commodity answer, but I would tell you we're still at high inventory levels, higher than we want for sustained production. And I think we won't get to that more balance or equilibrium until we're at 52 a month, right? Oh, okay. So 47, we're still going to benefit by high levels of inventory. and at 52 we'll see that balance out that's why i've said that the rate increase at 52 you know we'll have to watch that because i think that's more going to be more of a strain than going to 47 because of the inventory the other thing i'll point out is that rate 52 we're bringing on a fourth production line for the 737 in our everett facility which is north of our Renton facility. That production line is in place. We'll be firing an airplane through that to qualify the production system. It is a lift and stick of the Renton production line, and we're hiring people. We're going to flow them through Renton and then move them up to up to the Everett line. We need the Everett line active to move 52 and beyond. Not for 47, but while we're at 47, stabilizing at 47, we'll be bringing the north, we call it the north line, the north line on at low rate production.

Now, at one time, I mean, for a very short amount of time, you were at 57 a month back in the pre-grounding period. And now it's all being done in the Renton facility. Can you talk about what's changed? I think it has to do some with the FAA processes, but can you still do 57 in Renton?

No, we don't think we can sustainably with our current safety and quality processes, we don't think we can sustainably do that in Renton and that's why we brought the additional line on. It'll give us obviously the capacity of an additional line. It also gives us flexibility. If we have one line that has a problem, we can use the other lines to help offset what the problem line is dealing with. I wasn't there back when we were doing that. I would just say that we are ensuring that this is a stable production, not an unstable production. We're not going to push airplanes down the production line and end up with traveled work and you know some of the challenges we've had in the plat in the past and so that's why we've invested in the north line to make sure we've got sufficient capacity here now it's not just a 52 you know we'd like to get to someday to 63 a month rate and so we're looking forward to that the market will support those higher rates we just got to get ourselves and our supply chain in a position to do that.

So when you look at going to 52, what's the time frame you're thinking about now, assuming that 47 happens this summer, July, August?

Yeah, you know, historically I've said no earlier than six months, and if you look at the, maybe the 42 to 47, it's probably close to that six months, I didn't look at it exactly, but it'll be close to that. I think it'll be a little longer um i actually don't know we're going to move when the system is ready and when the supply chain is ready knowing that we're going to stabilize this inventory a little bit i just think we should you know assume it might take us a little bit longer um but we'll see uh we'll see how everybody performs each rate is a new rate to deal with and and uh you know we'll get we'll get good feedback once we get to 47 if that's going smoothly like it did at 42 then you know we'll move at 50 to move to the next 52 as soon as we can now are there certain parts of the supply chain that are you know more of a concern for you to make sure they come through smoothly not for 737 not really not right now I think for 47 a month and 52 a month there's no particular commodity that I'd point out to you and say, ooh, we need that one to double or we're going to be in trouble. Part of that's our inventory. You know, we always are dealing with day-in, day-out supply chain challenges, and, you know, we address those, burn them down, and keep going. But there's nothing I'd point out to you that I'm overly concerned about with these next rate increases.

Now, if I go back to the previous time when Boeing went from 47 to 52. One of the big problems was at Spirit. Spirit did a great job going 42 to 47, but things sort of broke down for a while there. Now that you have ownership of Spirit, how have you looked at that kind of a challenge?

Yeah, well, first of all, they've made great progress in streamlining their production process and building a higher quality with less defects so they're not repairing and doing a lot of rework which is allowing them to flow fuselages better i was just in uh at a big event in wichita about a week ago we announced a one billion dollar investment over the next three years which is in our plan but we announced it publicly where we're going to invest in the facilities as well as people and training uh to make sure that our our team in Wichita is ready for the next production right so look we now that we've now that we own them they're under our control we know there's pockets of either capital equipment or training that have not been invested in to the level they need to be particularly focusing on our safety and quality plan that we've worked with the FAA put in place in in Renton we really want to replicate that and get that solidified down in uh in our wichita facility so yeah i think you know i do think that that having control of it we can make sure that we're making the investments uh needed to make the rate uh increases i will say that spirit is one of those the former spirit is one of those areas where we have a lot of inventory on 737 fuselages. So, again, for these next rate increases, the Wichita performance is not a big concern right now.

That's good, but I look back when they, on the same footprint, they went from 28 to 47, which is pretty amazing. Now, there have been changes there over that time, But my assumption would be if they have to go up to a 63 level eventually, you're probably looking at some expansion of those facilities. Is that correct?

Yeah, I would say across, you know, I've been talking about 47 and 52. I think across the supply chain to go to 63, we've got work to do. I think many commodities, we've got work to do yet to get to that. But we're not there right now. We've got to get through these near-term rate increases. We are doing the advanced planning to make sure that everybody's doing the advanced planning around these future rates. I think the whole world's watching to make sure we make 47 and 52.

And when you get back up to those rates, let's say 52, given the process changes that have happened, and the fact that you're going to be using the north line. How do you think about margins for those programs compared to where they were the previous time around?

Well, certainly margins will be improving as we go forward at the higher rates. Now, there's a lot of dynamics in that. And I think Jay has laid these out in the earnings call. We have headwinds associated with late penalties with current deliveries that will burn off over the next couple of years. We have larger, more dash 10s in the mix going forward. Those are higher-priced airplanes. We have generally higher pricing or improved pricing that will help us. But the north line initially will be at low rate. So the north line will actually be a drag on us initially here. Once we get it up to the same rate performance as Renton, then it will be a contributor to the margins. So, yeah, whether we get back to the exact level of margin on the program, we'll see, but there definitely will be improving the margin here over the next three years on the 737 program.

And do you still think of that north line as focusing more on the MAX 10?

Yeah, so the north line, because it's in Everett, and if you've been to Everett, it's a huge facility, we can we can actually do do a dash 10s nose to tail in the facility in Renton we actually have to space the dash 8s and dash 7s and dash 10s because it's not long enough to actually fill the factory with all dash 10s so we do think that that provides us the ability to you know get to a point where we can do primarily dash 10s having said that we've put the facility in place to do everything except for dash sevens so we won't do a 737-7 in the north line but it'll be capable of doing every other one because we want the flexibility like I said before if we have issues with one or another we can we can use these multiple lines to help us reduce risk so I know a lot of people really want their dash tens delivered now yeah so how how does the certification process look at this stage yeah the the 737 dash 10 and dash 7 cert programs we're clearly getting to the final stages so there's clearly light at the end of the tunnel here and we're gonna get these certification programs done we're roughly 80% a little better than 80% done with the certification flight test program so that certification flights are done scored for both for for both the dash 7 and the dash 10 and we have authority from the FAA for the entire test regime now flight test regime so we don't need any more TIA approvals from the FAA so So it's just a matter of getting through that flight test program, and we're clicking them off as we speak. So I got a note from our team that we were flying three 777s and two 737s simultaneously for certification score. So we're really banging this down, and it'll get to the end of the year where we'll get the certification so we can really support next year's deliveries. You know we're building dash 10s, so we need to get that cert done so that we can start those deliveries.

So when you look at this, is there a major difference? What I'm trying to think through here is, I mean, the inlet design was a big issue here to get this through, the anti-icing. But is the testing you're doing now primarily that, or is it broader?

No, the engine. Yeah, good question. So the engine anti-ice, while it was being done as a part of the certification program, it'll actually be cut into the Dash 8 program first. And so we're through all the testing of the engine anti-ice, and that's all kind of behind us. So we feel really good about that. And then the remainder are just, I'll just say, just the normal, these are the things you do at the end of the flight test program. we've we've dry run everything you know we're pretty confident that we're not going to see any hiccups here and the remaining regime of flight testing and there's no no added complexity in the max 10 I mean you have a different landing gear you have I mean there's some different aspects to know there's there's the dash 10 work is much higher than the dash 7 work but we're doing and those concurrently. We'll probably get type cert for the Dash 7 before we get type cert for the Dash 10, but it kind of doesn't matter. They'll be in pretty close proximity. But there's no question the Dash 10 cert work is a bigger package than the Dash 7, yeah.

So on the 787, you know, you're eight a month, you want to be a 10 a month production by the end of the year. Can you talk about what has to happen to get there?

Yeah, the 787, we've done a pretty good job as we've moved to rate 8, rolling at rate 8, but we've got some instability still that we're still working through. I'd point out that the, and we've talked about this, the seeding configurations have been very complex in getting the certifications done on the seeds. have actually, they've not impacted production as much as they've impacted deliveries. And you've seen our deliveries a little bit lumpier than what I'd like to see because we've got airplanes done, ready to be shipped, that we don't have the cert paperwork on this.

So these are sitting in Charleston?

We have airplanes sitting for customers, completely done, waiting for seat certifications. So we're working to get that process done, but every every new type airline new type goes through the new certification process and we just have quite a few of those yet to go through here this year so I think from a delivery perspective we'll be fighting seats throughout the year just getting through the seat certification we're working with the FAA and EASA and the seat manufacturers to to try to improve that but we got a lot of work yet to do on that so that that's an important stability item for us to go to 10 a month rate and then we've fallen behind in delivery on engines here in the first quarter so we've got a recovery plan that we're working with with GE on and so we'll need to see the engine recovery plan come to fruition before we can get to rate 10, and that'll be late in the year.

And on the seats, so how many airplanes can you have parked out? In other words, if you have a mismatch between production and deliveries, when do you hit the wall there where you can't?

So we can fly the airplanes to other locations, and we have. So it's not just storage location at our Charleston facility.

So you'll continue to produce. You won't slow down because the seat delay.

For us to slow down would cost us way more than pushing through. And quite frankly, in some of these cases, we thought we were going to have the seat design done a lot earlier than what we've been able to accomplish. So we've just got to get that stabilized. But I don't think we're going to do anything to slow production down, but we may not go to the rate 10 as early as we could have had we not had the challenges.

And the problem here, I guess, is more about the certification than it is about supply chain overload or something like that.

It's typically not supply of seats. The seats are in the airplane. They're built. The airplanes are built. we just don't have the paperwork allowing us to make the delivery and and this isn't every airplane this is when an airline has selected a new configuration that they're rolling out typically they have doors these are very complex it's typically the it's the you know the business class configuration that are just more complex than we've had before and the certification has taken more time than we we thought or they thought so well you have I mean you have some max tens that like also like United has a fairly exotic interior and that you could you run into some yeah well delays there too yeah so we're we're taking our lessons learned and applying it across it's not just max tens but it's also beyond triple seven X in in a big way because they'll be have a bigger cabin so we've done some things like um pushed back some of our new entries seat entries we're also putting constraints on the system to make sure that we're not we're not flowing an airplane into the production line uh with an uncertified seat configuration so we're becoming more disciplined which i think will help us and we're going to apply that uh particularly on the the on the on the max 10 line because you're right some of those seats are pretty close to the same kind of challenges here and on can you just I don't know if it's anything new here on triple seven X in the timeline so triple seven X we continue the flight test program that'll go through the end of the year so we'll be done with the max well before we're done with the triple seven flight test program our flight test organization is common so it's the same team who supports all the airplanes so once we get done with the dash 7 and the dash 10 flight test program we will be able to apply more resources to the triple 7-9 but you should expect that that will you know hopefully be done with our flight test program by the end of the year with the exception of ETOPS ETOPS is the final test that you go through with the twin-engine aircraft, wide-body aircraft. And ETOPS is going to extend into next year. But, you know, we're building the airplanes and getting ready to start the deliveries next year.

But you can deliver before, you can't operate it fully, but you can deliver before ETOPS, right?

Yeah, but the, you know, it depends. It depends on what the mission is. It depends on the customer. I would say for the most part, the customers are going to want our ETOPS testing done. um then um when will the freighter follow so we just built you've probably seen that in the press we've just built our first uh 8f uh freighter um and that'll be about two years behind the packs version um switching over to to bds so um if you look at kind of the historical programs here and you know, KC-46, the T-7.

I mean, you've had a lot of issues on these, some from just the contract structures. Where do you stand on getting past all of the cash impacts from these charges that you've had to take?

Yeah, so, you know, the cash impacts, depending on the contract, some of these contracts have firm fixed price production options. So let me use the KC-46 as an example. That's been a loss program. It's been a challenging program for us. We have one more lot of the existing firm fixed price KC-46 production. That will happen at the end of this year. Then the follow-on quantity will all be repriced. So in that case, we have no ability to improve margins with the existing contract. We just need to manage the risk so there's no further non-recurring write-downs. And then where we improve the margin is in the new option opportunity. T7 is a similar program where we've got a significant amount of the production under contract. So that'll take a while to turn that to profitability. MQ25, we just have LRIP under contract. So production will be a new contract option. So I would just say, in general, the road to profitability on those programs is get them behind us and go to the next phase, either another contract option, in some cases just be done. VC-25B, the president's airplanes, we just, you know, we'll celebrate the day we hand the keys to the president, and that's done. And so we don't know where the $1.5 trillion budget is actually going to end up. however there's more money in there for t7s for mq25s presumably those will be under new contracts they're going to be some of some of that will be existing just funding for existing contracts some of it will be new contract and it really is a contract by contract uh case but there's no question the budget is bigger than we expected it was going to be last year irrespective of where it finally settles i'm pretty confident that it's going to be a pretty robust budget the other thing is our programs are really really well protected in that budget so i feel really good things like f15 ex additional quantities there wedge tail you know wedge tails We've got the E-7 variant back into the budget environment. So, look, we've got good opportunities. I do think that, as I sat here last year, I think the outlook for growth in our military business is stronger this year than what I would have said it was last year.

And F-47 is a huge part of that, right?

Big part. We're off to a really good start. the programs you know well staffed our customer is super pleased and we're gonna keep them that way and so we're really focused on doing things differently and and having a successful development program as you know that's a you know the contracting type is appropriate for yeah for the work we're doing you know one of the things that we've done that the team has done a really good job is is focusing on making sure that we underwrite all these new contracts with the right the right baseline whether that's contract type or the right pricing structure we've got a lot more discipline in fact we've walked away from some jobs that we historically would have taken on and said we can we can probably get this done and we we've looked at and said there's too much risk for the for the fixed price contract type so we're not going to do it having said that we've got a record backlog in our in our defense businesses last year so we're able to still win and and be disciplined in the market and what one of the things that's really key as we return that defense business to this high single digit profitability is we don't enter into new loser contracts, and so we're really focused on making sure the team's disciplined around that.

And on the F-47, I don't know how much you can say about it, but is there a way to describe what that growth path would look like? You know what? I can't really say. That's what I expected. Unfortunately.

But one thing it does do, which maybe you can say, is I've spent a fair amount of time in the St. Louis facility this does build a base there that i would expect should be good both for your cost structure and for new work yeah i mean it uh it sets the future of our st louis operation for decades to come as you know we're investing heavily in new facilities to support the production of the airplane and and potential future opportunities as well but having not been the prime for uh either the prior generation fighters still having the f-15 but the f-18s essentially are wrapping up production this was super important for us uh to secure that that that uh what i call a transformational win for us can you talk about um space um starliner clearly has had challenges um but what are you looking at now in terms of opportunities maybe with golden dome yeah so when when i think of space i kind of break it into two there's there's there's human space exploration this is the nasa works our liner falls in that category and then there's national security space where we're doing evolved strategic satcom satellites a lot of classified work our x-plane space plane is in that category that business is um many aspects of that business have application to the Golden Dome but broadly have good support good budget support and it's good business we're performing well on that side where we've struggled have been again where we've signed up to fixed price contracts on this space exploration so the Starliner is a good a good example of that we have with the Starliner we have two launches NASA's just determined that but they're probably gonna push the second launch out of the year. So we'll only have one more launch this year and then one next year on that program. And so we're working with NASA to fix the deficiencies that came out of the prior program, get the aircraft certified, and then we'll see where the NASA, the NASA budget is an interesting one. We'll see where that budget lands going forward. It's a little bit up and down.

I mean, on Golden Dome, and we've struggled a little bit with getting a tight definition on what the actual programs will be in there, and I know Congress has had some questions as well. I mean, for you, are there some well-defined things, or still you're working through what the opportunity set would be?

I think we're still working through, as the customer is still working through, a little bit of the architecture and the opportunity set I think there's some areas where we know what our contribution will be and then there's areas where it's still you know still some trade studies being there but from from a Boeing perspective I think you should look at Golden Dome probably as more of a capability of our assets as opposed to a program we're going to go win a big, specific Golden Dome program.

So I think back several years ago when BDS was a really good, reliable source of free cash flow. That clearly disappeared for a while.

When you look at 2027, do you think, can we expect positive cash coming out of BDS at that point? yeah yeah but not not to the level it should be so i think we'll get to where we're generating you know some cash flow um but as we just talked about we've got to get through these um you know these programs that we're uh we're underwater on get those behind us there's no reason this business doesn't deserve to to perform at a high single digit margin business and return back to those classic cash flow rates that we've seen we've seen in the past and we have a nice mix of domestic and international and international generally has you know more upfront payments in higher cash better cash terms than than the DOD contracts or DOW contracts so so you know we just have to again I think we have to get these programs and challenge programs executed and behind us and and you'll see better performance out of that business.

Can you update us on what that mix is in the backlog of U.S. versus international?

I don't think I know exactly what the backlog is. I'd have to follow up with you. I don't want to quote a number that's not right.

The last one I remember was pretty sizable. I mean, pretty significant percentage. So if we go over to BGS, this business has performed really well for quite a while 17% plus margins which always seem to be higher than what you guys are guiding to now we're in this situation with two things going on with the war in Iran one is an increased op tempo which I would think could add to your performance on the defense side and then risk potentially in the commercial aftermarket how do you look at that yeah so um so the the risk to the let's start with the commercial aftermarket

the risk to the commercial aftermarket will first be on the transactional you know the in and out kind of business we're looking at it on a weekly basis we have seen some of that transactional business decline from carriers in the middle east but in fact we've seen higher level of transactional business in elsewhere which is totally offset so from a main perspective we haven't seen any impact right now in our business now we don't have a lot of flight hour service business other companies probably do and that's going to be impacted just by the number of flight hours and flight hours are coming down in the region so but we don't have a lot of that so it's not really material to us so so far i'm just i don't see any uh any significant or material impact we are seeing uptick uh from the dla from the from the in and out business associated with op tempo and defense and i think that'll continue both both just in parts uh but but our platforms are very much in the fight the op tempo is very high and so there's either going to be replacement replenishment we're working the you know the big pack three production contract to replace all the Patriot seekers that have been shot but even our aircraft platforms that have been either damaged or used in excessive amounts so we'll see some maintenance cycles which will you know over the next that won't all happen at once but over the next year so we're expecting to see some some upside I think back to the commercial depends on how long this lasts yeah if this lasts the longer it lasts obviously the more strains gonna be on the system and the only thing I could say is we're monitoring it weekly to see what's going on we're talking to the customers Well, and I didn't mention, but I guess when we were back on,

this would go into BDS, but you've also got, so the JDAM, Small Diameter Bomb, that.

Yeah, our weapons business is, the demand is through the roof. So that's another area where we're going to quickly be talking about how many can we build, not how many can we get under order. So, you know, we're working on expanding our production there. I was just at the Pentagon meeting with the Department of War yesterday on things like ramping up production. And it's important all the way up to POTUS. We've met with him on, the CEOs have all met with POTUS on the need to ramp up our capability in the weapons market.

So this year, you're guiding to $1 to $3 billion in free cash flow. and what will determine where you end up in that range how many airplanes we deliver probably will be the in the end that'll be determining the determining factor so you know we'll see there's some risk and opportunity around airplane deliveries we'll just see how we do here well and one of the things I know you had said previously that the assumption of pre-delivery payment from China on an order would be included in that cash flow. Is that material one way or another?

First of all, we do have some PDPs from China. I don't think if, for example, the China orders wouldn't happen by the end of the year, we probably would fill that with other PDPs. Those slots would go to someone else. So I don't see the China situation really having a major impact on where we end up on cash flow. It's not going to swing us over or under, I don't think.

Now, you and Jay have talked about heading toward a goal of at least $10 billion in free cash flow. Is there any sense you can give us on timing and the trajectory for that now?

Well, you know, I don't have anything new. I think Jay did a good job at during our earnings call of kind of laying out the the puts and takes associated with that and in general we've got a we've got to get through these headwinds that we've got where we've got consideration on the in the price of the airplanes because we're late those will abate as we you know ramp up in production so we've got the dash 10 coming in which is a higher priced airplanes so the mix helps us well better price better pricing in general will help us we've got headwinds associated with supply chain costs that we're managing so all those in a bucket you know we're expecting to see kind of a continued cadence towards that 10 billion and beyond cash flow but we're not going to put a specific timeline yet on that we've just got to focus on these on these activities that will yield improved cash flow?

Well, going into 27, at least, I mean, you should have some work down on that, the cash flow penalties on the 777X, I would assume, because that's like $2 billion or so this year, I think. So is your question... Yeah, does that... What's the trajectory, I guess, on the 777X cash out?

So 777X cash out is big this year. We'll be big next year. And then you'll start to see that kind of turn in the 28 time frame.

So, you know, you've been on a pretty positive trajectory here for the last 18 months or so.

But I have to say that many investors I talk to still have concerns of the problems of the past. and you know how can you give us more confidence that those risks are much lower today and you can look forward at these progressions and rate and that looks very you know what I've what I've told the team and the only way Doug I see to do that is execute execute execute execute and build confidence back we've done a lot of work on the culture in the company to restore trust and we're getting very good feedback from all of our stakeholders about how Boeing's showing up, more transparent, working collaboratively with the customers, delivering on commitments. That's also allowing us to be an environment where we can find win-wins with the customers and work through some of these challenged programs. But look, the development programs, until they're done, they're not done and so we just I just need to keep focusing the team on every day execute every day is an opportunity to meet our commitments and you know I would just say so far it's working I feel confident that we've got the right team we're focused on the right things yeah we'll have a risk that that we'll have to deal with along the way but we're getting in front of those now and managing them and burning them down and and and i think that'll lead to uh great success the thing that the boeing company has is a huge backlog i mean we don't have to think about what airplanes do we want to build tomorrow we know what airplanes we want to build this is a execution story so just focus on execution any milestones you'd highlight we should be looking for over the next well the cert programs are big those are big for me personally so getting through the certification the max certification watching the production ramp back from up here to 47 and you know how does that look and then probably the other one to watch is the north line how are we doing on the north line is that maturing the way we want because that'll be an important decision point for when we do the rate 52 so those are the I'll say the near-term proof points that you can look to the the government looks like they're gonna make a decision on the FAXX program yet this year and so you know we're in the fray there so if if we were successful there that would be another yeah a big milestone for us so we'll see how that all how that all plays out okay well great well Kelly Thank you very much. Good seeing you, Doug.