Boeing Co. (BA), one of the world's leading aerospace companies, develops and manufactures commercial jets, military aircraft, weapons systems, and strategic defense and intelligence systems. The company offers services and support to customers globally, and provides financing for orders and deliveries. One of Boeing's biggest customers is the U.S. government.

One of Boeing's biggest rivals, especially for commercial aircraft, is Europe-based aerospace firm Airbus SE (EADSY). Boeing also has aerospace rivals based in Russia, China, and Japan. Additionally, the company's defense and space business faces competition from major players like Lockheed Martin Corp. (LMT), Northrop Grumman Corp. (NOC), Raytheon Co. (RTX), General Dynamics Corp. (GD), U.K.-based BAE Systems PLC (BAESY), and Elon Musk's Space X.

Key Takeaways

  • Boeing produces commercial and military aircraft, weapons systems, strategic defense and intelligence systems, and related products and services.
  • Defense, Space & Security has overtaken Commercial Airplanes as Boeing's largest revenue source.
  • The U.S. government is one of Boeing's largest customers.
  • Boeing plans to shed 7,000 more jobs due to reduced air travel and demand for jetliners amid pandemic.

Boeing's Financials

Boeing has faced a number of struggles over the past year that have adversely impacted its business, including the COVID-19 pandemic and the continued grounding of the company's 737 Max aircraft. Boeing posted a net loss of $466 million in Q3 2020, a significant deterioration from the $1.2 billion in net earnings reported in the year-ago quarter. Revenue fell 29.2% year over year (YOY) to $14.1 billion.

The company noted in its quarterly filing for Q3 2020 that the pandemic has caused a significant shock to demand for air travel. The fall in demand has adversely impacted the entire aerospace manufacturing and services sector. Boeing said it expects it to take about three years before travel will return to 2019 levels and a few years longer for the industry to get back on its long-term growth trend.

Unlike other aerospace companies, however, Boeing also faces financial challenges related to its 737 Max passenger jet, which was grounded in March 2019 by the Federal Aviation Administration (FAA) after being involved in two fatal air crashes. Boeing said that it was continuing to work with the FAA and non-U.S. civil authorities to complete the remaining steps required for certification and return to service of its aircraft.

Boeing’s Business Segments

Boeing operates its business through four segments: Commercial Airplanes (BCA); Defense, Space & Security (BDS); Global Services (BGS): and Boeing Capital (BCC). The company provides a breakdown of revenue and earnings from operations for each of these segments. The pie chart for earnings from operations pictured above does not include segments that reported a loss for the period, such as Boeing's Commercial Airplanes segment.

Commercial Airplanes (BCA)

Boeing's commercial airplane segment develops, produces and markets commercial jet aircraft and provides fleet support services, primarily for the global airline industry. The segment supplies jetliners to meet global airlines' varying requirements for transporting passengers and cargo. In Q3 2020, the segment posted a loss from operations of $1.4 billion. Revenue fell 56.4% to $3.6 billion, comprising about 25% of Boeing's total revenue. BCA is the segment responsible for producing the Max 737, and was thus hit hard by the aircraft's grounding in March 2019.

Defense, Space & Security (BDS)

Boeing's BDS segment researches, develops, produces, and modifies military aircraft and weapons systems for strike, surveillance, and mobility. The segment also researches, develops, produces, and modifies strategic defense and intelligence systems, as well as satellite systems. The segment's top customer is the U.S. government, which accounted for 90% of its revenue in Q3 2020. Earnings from operations fell 16.7% in Q3 2020 to $628 million, comprising nearly 68% of the total. Revenue fell 2.2% to $6.8 billion, comprising 48% of the total for all segments.

Global Services (BGS)

Boeing's global services segment offers services to its commercial and defense customers around the globe. The segment provides a wide range of platforms, systems, products and services. These include supply chain and logistics management, engineering, maintenance and modifications, upgrades and conversions, spare parts, and data analytics and digital services. Earnings from operations fell 59.7% in Q3 2020 to $271 million, comprising about 29% of the total. Revenue fell 20.7% to $3.7 billion, comprising nearly 26% of the total for all segments.

Boeing Capital (BCC)

Boeing Capital provides customers with financing to buy and take delivery of their orders, and manages the parent company's overall financing exposure. The segment's portfolio is comprised of equipment under operating leases, sales-type/finance leases, notes and other receivables, assets held for sale or re-lease and investments. Earnings from operations grew 3.4% in Q3 2020 to $30 million, comprising 3% of the total. Revenue rose 7.6% to $71 million, comprising a tiny share of Boeing's total revenue.

Boeing’s Recent Developments

Boeing announced in October that it plans to cut another 7,000 jobs due to the reduction in air travel and reduced demand for jetliners amid the pandemic. The grounding of the 737 Max has also hurt demand for Boeing's airplanes. Boeing CEO Dave Calhoun told employees that the company plans to have a staff of 130,000 by the end of 2021, down from 160,000 at the start of 2020.