Boeing Company, The

Company Profile
Publication Date: 19 Jun 2009
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...4 Key Facts.............................5 Boeing Company............................................................................................................. The TABLE OF CONTENTS TABLE OF CONTENTS Company Overview..........................4 SWOT Analysis........Boeing Company................................. The © Datamonitor Page 3 .....................................................................................................

The © Datamonitor Page 4 . and launch systems and services. missile defense.200 people.950 million during FY2008.672 million in FY2008. The operating profit of the company was $3. It is headquartered in Chicago. a decrease of 8.0 (USD Mn) Financial Year End Employees New York Ticker December 162. Revenue / turnover 60. Illinois and employs about 162. The company recorded revenues of $60. satellites. human space flight. a decrease of 34. The net profit was $2. The decline in revenues was primarily due to lower revenues from commercial airplanes segment.Boeing Company.909 million during the financial year ended December 2008 (FY2008).2% compared to 2007. The company operates in the US and Europe. The Company Overview COMPANY OVERVIEW Boeing is engaged in the design. The 100 North Riverside Plaza Chicago Illinois 60606 1596 USA 1 312 544 2000 Phone Fax Web Address http://www. sale and support of commercial jetliners. a decrease of 32. development.909.3% compared to 2007. KEY FACTS Head Office Boeing Company.4% compared to 2007.200 BA Boeing Company.boeing. military aircraft.

missile defense. Boeing Company. human space flight and launch systems and services. human space flight. General Dynamics ($29. The company has customers in more than 90 countries around the world and is one of the largest US exporters in terms of sales. changes in the budgetary priorities of the US Government could directly affect the company's operating results. Boeing has greater scale in terms of revenues.Boeing Company.174 million). The company’s large scale of operation enhances its market penetration opportunities and gives it substantial bargaining power. However. sale and support of commercial jetliners. The company generated total revenues of $60. development.300 million). Strengths Large scale of operation Strong association with Federal Government Focus on R&D Strong order backlog Opportunities Inorganic growth Rising global defense spending Growing demand for commercial airplanes Weaknesses Weakening financial performance Legal proceedings Sluggish performance in key segments Threats Change in the US budgetary priorities Issues arising from fixed-price contract Forecasted global recession in 2009 Labor market woes in the US Strengths Large scale of operation Boeing is the global market leader in design. missile defense. and the second-largest defense contractor in the US. The company is one of two major manufacturers. In addition. manufacture. It has customers in more than 90 countries around the world and is one of the largest US exporters in terms of sales.909 million in FY2008. satellites. The SWOT Analysis SWOT ANALYSIS Boeing is engaged in the design. and launch systems and services. military aircraft. sale and support of commercial jetliners. Boeing is one of the leading producers of commercial aircraft and offer a broad spectrum of commercial jetliners designed to meet passenger and cargo requirements of both the US and non-US airlines. The © Datamonitor Page 5 . compared to other players in the market. which is significantly higher than that of its competitors such as Raytheon ($23. satellites. equipped to produce aircraft capable of carrying more than 100 passengers for the worldwide commercial airline industry. The company is one of leading producers of commercial aircraft. military aircraft. manufacturing. development.

3 billion in FY2008.7 million). In June 2009. R&D investments in the Global Tanker Aircraft program represent a significant opportunity to provide state-of-the-art refueling capabilities. and Lockheed Martin ($42. Focus on R&D Boeing has a strong focus on R&D activities.887 million). NASA and other defence customers. EO&T is an advanced research and development organization focused on innovative technologies. Its 'other' business segment principally includes the engineering. Navy and Air Force.2 million US Marine Corps contract to provide a solution for recovering disabled Mine Resistant Ambush Protected vehicles. development and related test activities for defense systems.Boeing Company. F-15E Eagle. modification and support services to the US Department of Defense (80% of IDS 2008 revenues). for future combat systems spin out production. In the same month. including both commercial and military. The company has received significant contracts from these customers. new and derivative jet aircrafts. The company also engineered and deployed various products for the Army. development. In FY2008.8 billion. It tests complex and mission critical hardware and software systems used by the Army. and weapons effectiveness. Other R&D efforts include upgrade and technology insertions.9 billion and $3. The company's total R&D expenses amounted to $3. and enhancing the capability and competitiveness of current product lines such as the F/A-18E/F Super Hornet.9 million contract from the US Navy in May 2009. AH-64 Apache. reliability. production. R&D costs also include bid and proposal efforts related to government products and services and costs incurred in excess of amounts estimated to be recoverable under cost-sharing R&D agreements. respectively. Boeing received A-10 sustainment and integration contract from the US Air Force. and NASA.927. design. The © Datamonitor Page 6 . R&D expenditures involve experimentation. advanced space and other company-sponsored product developments. The company played key roles in improving the performance. Boeing Company. CH-47 Chinook and C-17 Globemaster. Navy. improved processes and the creation of new products. among others. 2007 and 2006. supportability. The company deals with numerous US government agencies and entities. Northrop Grumman ($33. In June 2009. Most recently. $3. Boeing received a $48. operations and technology (EO&T) activities. and the Department of Homeland Security.731 million). with many of these customer relationships spanning more than three decades. for development and testing of a Distributed Targeting system for the F/A-18E/F Super Hornet strike fighter. The company’s large scale of operation enhances its market penetration opportunities and gives it substantial bargaining power. the company also received a $5. maintainability. Strong relationship with major customers enables the company to receive many new contracts and hence serves as a competitive advantage. the US government contracts accounted for 46% of total revenues of the company. The company’s IDS segment provides various research. The SWOT Analysis BAE Systems ($30. Strong association with Federal Government Boeing has a strong association with the US federal government. NASA. Boeing received a contract from the US Army.

environmental liabilities. Strong order backlog Boeing was successful in increasing new orders in its key segments. an increase of 9.3 billion in FY2008.4%. The SWOT Analysis The company is also investing in the communications market to enable connectivity between existing air/ground platforms. Boeing was named as a defendant in a lawsuit filed in the US District Court for the Southern District of Illinois. a decrease of 34. The company has also recorded increase in order from majority of its segments. FCS. and Raytheon (11. The © Datamonitor Page 7 . The company's strong focus on R&D enables it to gain an edge over its peers in a competitive marketplace by responding quickly to market dynamics. Similarly.2%). In addition. General Dynamics (12. and Transformational Satellite Communications System. Legal proceedings The company is involved in various lawsuits. Continuation of this trend could reduce availability of resources to pursue growth plans.2% over 2007. Boeing has recorded weak margins as compared to its competitors. and leverage innovative communication concepts.5% and 4. claims and legal proceedings.3% and 10. The company recorded operating profit of $3. Its operating margin and net profit margin in 2008 were 6. a decrease of 32. an increase of 9.672 million in FY2008. the integrated defense segment of the company recorded an order backlog of $45. Global Positioning System.6 billion in FY2008.1% over 2007.9 billion in FY2008. during the same period. The complaint alleges that fees and expenses incurred by Boeing Voluntary Investment Plan (the VIP Plan) were unreasonable and excessive. Of the total backlog. BAE Systems (10. which is considerably lower than its competitors.4%). product liability claims. increase communications availability and bandwidth through more robust space systems.5% and 8.2% and 7.2% compared to 2007. Lockheed Martin (12% and 7.4% compared to the previous year. Weaknesses Weakening financial performance Boeing has recorded declining efficiency in terms of profits and margins. employment matters. including commercial and contract disputes. Key programs in this area include Joint Tactical Radio System.6%).5%).950 million during FY2008. an increase of 8. The total order backlog of the company stood at $323. The strong order backlog assures stable revenue growth for the company and improves its market position. intellectual property disputes and other personal injury claims. The company’s weak financial performance implies poor cost management and decision making by the management. In 2006.4% compared to 2007. the commercial airplanes segment recorded a net backlog of $278. arising out of the conduct of the company’s business. respectively. not incurred solely for Boeing Company.Boeing Company. The net profit was $2.

7%. Europe by 4. the company received a formal dispute notice from New Skies alleging that BSSI breached the NSS-8 contract by failing to timely deliver a satellite in orbit and repudiating the replacement satellite option. Revenue from this segment reached $28. Boeing acquired Federated Software Group. and revenues from the Boeing capital corporation segment declined by 13. Sluggish performance in key segments Boeing has recorded sluggish operational performance in its key segment. and were undisclosed to participants. China by 15. gross negligence and willful misconduct in connection with the constructive total loss of Anik F1. Tapestry Solutions' data fusion. a San Diego-based company specializing in software systems and services. Commercial airplanes. Telesat and its insurers seek over $385 million in damages and $10 million in lost profits.7%. The © Datamonitor Page 8 .263 million.8%.9% of the total revenues in FY2008. the out come of the litigation was not concluded. the largest business segment of the company. Revenues from the US reached $37.7%. revenues from Boeing military aircraft segment declined by 1.This acquisition will accelerate the growth of the company's service and support business. Louis-based company whose engineering services and software systems help track and distribute equipment and personnel for the US Department of Defense. For instance.9%. The US. In FY2008. a St.3% compared to 2007. This acquisition will expand the company’s presence in the military supply-chain and logistics command-and-control markets.4%. By mid 2008. The SWOT Analysis the benefit of the VIP Plan and its participants. Further in December 2008. Opportunities Inorganic growth Boeing has been expanding its portfolio of products and strengthening its position in the industry by acquiring assets or organizations. logistics and knowledge management products and services will enhance the company’s global logistics support network. accounted for 61% of the total revenues in FY2008. In addition. A continued weak performance in the key divisions will affect the overall financial position of the company. the company’s largest geographical market. a decrease of 5. accounted for 45.Boeing Company. It could also adversely affect the image of Boeing. Further. revenue from Asia. The arbitration hearing in this matter has been scheduled for November 2010. other than China declined by 28. and Africa by 45. Further Telesat Canada (Telesat) and a group of its insurers served Boeing Satellite Systems International (BSSI) with an arbitration demand alleging breach of contract. Oceania by 6. Boeing Company. Boeing acquired Tapestry Solutions. a model 702 satellite manufactured by BSSI. Further.6% compared to 2007. in November 2008. Boeing has also recorded decline in revenue from few of its key markets. network and space systems segment declined by 1. Such legal proceedings could results in excessive expenditure for the company.132 million in FY2008.8%. a decrease of 15.2%.

Together these countries are forecast to grow their budgets by a combined total of $55 billion between 2007 and 2010. The © Datamonitor Page 9 . The company's commercial jet aircraft includes the 737 narrow-body model and the 747.8 trillion by 2027. two in South America (Brazil and Colombia). The SWOT Analysis In addition. By that year. The global defense spending was more than $1 trillion in 2007 and has been rising in recent years. the Middle East and Africa will represent a total of 13% of the market between 2006 and 2025. In addition to 2009 budget request.4 billion in 2008 for the DoD's base budget.600 new commercial airplanes to meet the increasing traffic. Growing demand for commercial airplanes The commercial airplane market is expected to grow to $2. This acquisition will expand the company’s presence in the cyber and intelligence markets. large defense budgets and good growth is forecasted in five countries: Russia. The US remains the largest market by far. South Korea. six in the Asia Pacific region (Japan. The largest market is projected to be the Asia-Pacific region.Boeing Company. Germany. especially in military aircrafts. 777 wide-body models. and 6% per year for cargo traffic based on projected average annual worldwide Boeing Company. Boeing's 20-year forecast reflects an average growth rate of 5% per year for passenger traffic. China.8% annually till 2027. Deliveries to airlines in Latin America. In June 2009. and Russia in the Commonwealth of Independent States. Rising global defense spending Global military expenditure and arms trade form the largest spending in the world in 2007. Its clients include the defense departments of several countries. a company that provides hardware and software to federal government. It is projected that the passenger traffic would grow at 4. with 36% of the $2. Outside the US. The US President has requested the Congress for $515 billion as the defense spending for FY2009. These acquisitions will help the company to reinforce its market position in various segments as well as expand its geographical coverage.8 trillion market (as a result of the demand among Asian carriers in that market for more twin-aisle airplanes). and Europe will make up 25%. the global commercial airplane fleet is expected to double as compared to the existing fleet size. naval systems and defense electronics and avionics. This acquisition will help the company to expand its presence in the growing intelligence market. Netherlands and Greece). France. China. Israel and Turkey). The US approved $481. North America will make up for 26% of the total market. Spain. yet the defense budget is expected to reach its peak in 2009 as growth is driven by the demands and consequences of the war in certain places around the world. the President has requested an initial $70 billion in supplemental funding to support war efforts in Iraq and Afghanistan. Italy. India and Saudi Arabia. a company that develops wireless surveillance products for government customers. India. The increasing global defense spending could provide the topline growth for Boeing in the short to medium term. 767. By 2010. three in the Middle East (Saudi Arabia. The company is one of the leading defense contractors. the company signed an agreement to acquire eXMeritus. South Korea. around 80% of the defense spending comes from just 20 countries: seven in Europe (the UK. requiring approximately 28. The company is one of the leading producers of commercial aircraft and commercial jetliners. Taiwan and Australia). Boeing acquired Digital Receiver Technology.

When making proposals for engagements on a fixed-price basis. The future levels of spending and authorizations for such programs may decrease. and factoring in increased utilization of the worldwide airplane fleet and requirements to replace older airplanes. In 2008. these spending levels may not be sustainable. remain constant or shift to programs in areas where the company does not currently provide services.400 new airplanes. From time to time. could directly affect the company's operating results. Any increased or unexpected costs or unanticipated delays in connection with the performance of fixed-price contracts. Boeing relies on its estimates of costs and timing for completing the projects.Boeing Company. intelligence and homeland security would adversely affect the company's future revenues and limit its growth prospects. or the DoD. unexpected costs and unanticipated delays have caused to incur losses on fixed-price contracts.2 trillion market for 29. The commercial airplane division with significant operations worldwide is well positioned to benefit from the growing commercial airline market. While spending authorizations for defense related programs by the US government have increased in recent years and in particular after the September 11. the US defense budget declined in the late 1980s and the early 1990s. including in the areas of national security. and program cancellations. The IDS segment of the company derived 50% of total revenue in FY2008 from fixed-price contracts. These reductions caused most defense related government contractors to experience declining revenues. including delays caused by factors outside the company's control. Changes in the budgetary priorities of the US Government. The © Datamonitor Page 10 . For instance. On rare occasions. some of the engagements obligate the company to provide ongoing maintenance and other supporting or ancillary services with limitations on its ability to increase prices. increased pressure on operating margins and even net losses in certain cases. Fixed-price contracts require the company to price contracts by predicting expenditures in advance. could make these contracts less profitable or unprofitable. In addition. primarily in connection with state government clients. A significant decline in the overall US government spending. The SWOT Analysis real economic growth rate of 3%. resulting in a slowdown in new programs. Threats Change in the US budgetary priorities Boeing is dependent on the US government for majority of its revenues. program delays. Boeing recorded a charge of $685 million for a reach-forward loss on its 747 program as a result of schedule delays and higher cost estimates associated with Boeing Company. Issues arising from fixed-price contract The company performs a portion of engagements on a variety of fixed-price contract vehicles. Based on long-term global economic growth projections. 2001 terrorist attacks. these losses have been significant. the company projects a $3.

results of operations. SPEEA and UAW.1 per hour since 1997.5 per hour from July 2007. the tightening of credit in financial markets may adversely affect Boeing’s supplier base and increase the potential for one or more of its suppliers to experience financial distress or bankruptcy. Such problems in the future with fixed price contracts could have a negative impact on the company's revenues. the world economy will slow sharply in 2009 and in 2010. Further. tight labor markets. In recent times. which could adversely affect its business. The © Datamonitor Page 11 . with the US likely to slide into recession reflecting the damage from the financial turmoil in more than a half-century. The federal minimum wage rate in the US. which had remained at $5. Further.25 an hour effective July 2009. Labor market woes in the US The US economy is facing a serious challenge in its labor market. Therefore. increased to $6. cash flows and financial condition. Further. further recession in global economy would harm the company’s business by adversely affecting its revenues. The SWOT Analysis the development of the 747-8 freighter and passenger derivative aircraft. Boeing Company. increased overtime.Boeing Company. government mandated hike in minimum wages and a higher proportion of full-time employees are resulting in an increase in labor costs. which could strain relationships with customers and cause a loss of revenues that would adversely affect the company’s operations. The federal minimum wage rate is further expected to rise to $7. which could materially impact the company's results of operation. will lose considerable speed slowing to 0. Boeing has relationship with 14 different US labor organizations and seven different non-US labor organizations. that the global economy. Work stoppages and instability in union relationships could negatively impact the timely production and development of products. the company has experienced a work stoppage in 2008 when a labor strike halted commercial aircraft and certain BMA program production and it may experience additional work stoppages in the future. which was 3. This could result in a decrease in or cancellation of orders for Boeing’s products and services as well as impact the ability of its customers to make payments. The tightening of credit in financial markets adversely affects the ability of the company’s customers to obtain financing for significant purchases and operations. These unions may also limit the company’s flexibility in dealing with its workforce.4% in 2008. Forecasted global recession in 2009 According to the world economy outlook of the IMF. The IMF forecasts.5% in 2009 its lowest rate since World War II. 33% of the company’s employees are associated with certain labor associations like IAM.

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