How Boeing Makes Money

Defense, Space and Security segment is the largest revenue source

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 the 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.
  • The Defense, Space and Security unit has overtaken Commercial Airplanes as Boeing's largest revenue source.
  • The U.S. government is one of Boeing's largest customers.
  • Boeing recorded a $3.5 billion pre-tax non-cash charge in Q4 FY 2021 related to work performed to bring its 787 aircraft up to the FAA's standards in order to resume deliveries.

Boeing's Financials

Boeing announced in late January financial results for Q4 of its 2021 fiscal year (FY), the three-month period ended Dec. 31, 2021. The company reported a net loss attributable to its shareholders of $4.1 billion, an improvement from the net loss of $8.4 billion in the year-ago quarter. Revenue fell 3.3% year over year (YOY) to $14.8 billion. Boeing uses earnings from operations as a profitability metric for its individual business segments. In the fourth quarter, the company reported a $4.2 billion loss from operations, narrower than the $8.0 billion loss from operations reported in the year-ago quarter.

Boeing said in its quarterly earnings report that increased production and deliveries of its 737 MAX aircraft, which the company has returned to service in nearly all global markets. The 737 MAX was grounded by the Federal Aviation Administration (FAA) in early 2019 after the aircraft was involved in two fatal accidents. In late 2020, the FAA lifted its grounding order, allowing the company to resume deliveries.

Boeing has also had to pause deliveries of its 787 Dreamliner aircraft in May 2021 due to production quality issues. The company continues to work on the issues in order to resume deliveries of the aircraft. The COVID-19 pandemic's impact on demand for air travel has also adversely impacted demand for the company's commercial jets. But demand is beginning to pick up again amid vaccine rollouts and the easing of restrictions.

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. The company also includes an unallocated items, eliminations and other category, which reported revenue of -$173 million during the fourth quarter.

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 Q4 FY 2021, the segment's loss from operations narrowed to $4.5 billion from $7.6 billion in the year-ago quarter. Revenue rose 0.5% YOY to $4.8 billion, comprising about 32% of Boeing's total revenue. BCA has been adversely impacted by issues related to its Max 737 and 787 aircrafts, as discussed above.

Defense, Space and 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. Department of Defense. The BDS segment reported a loss from operations of $255 million in Q4 FY 2021, a deterioration from the $502 million in earnings from operations it generated in the year-ago quarter. Revenue fell 13.5% YOY to $5.9 billion, comprising 39% 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, pilot and maintenance training systems and services, data analytics, and digital services. Earnings from operations were $401 million in Q4 FY 2021, up 180.4% YOY. It accounted for more than 98% of companywide earnings from operations during the quarter. Revenue rose 14.9% YOY to $4.3 billion, comprising nearly 29% 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 were $7 million in Q4 FY 2021, down 56.3% YOY. Earnings from operations comprised about 2% of the total across all segments. Revenue rose 12.5% YOY to $63 million, comprising a tiny share of Boeing's total revenue.

Boeing’s Recent Developments

On Feb. 15, 2022, the FAA said that it will perform final inspections on new Boeing 787 Dreamliner aircrafts and issue airworthiness certificates when it feels that the company's quality control and manufacturing processes are able to consistently produce aircraft that meet the administration's standards. The FAA also said that it would not allow the company to self-certify its jets. Boeing recorded a pre-tax non-cash charge of $3.5 billion in Q4 FY 2021 related to actions the company was performing in order to resume deliveries of the 787. Deliveries of the aircraft are expected to remain paused for a number of months longer.

Article Sources
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  2. Boeing Co. "Form 10-K for the fiscal year ended December 31, 2021," Page 4.

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  6. Boeing Co. "Form 10-K for the fiscal year ended December 31, 2021," Page 1.

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