Fitch Comments on Boeing's New 787 Schedule; Outlook Negative

NEW YORK--(Business Wire)--
Fitch Ratings considers The Boeing Company's (BA) new 787 schedule to be an
incremental negative to BA's credit ratings. Cash flow pressures will persist
through 2010 due to inventory build-up, delayed advance payments, and higher
development expenditures. Fitch believes that break-even or negative free cash
flow (cash from operations less capital expenditures and dividends) is a
possibility in 2010 depending on the ultimate schedule for 787 deliveries and
other factors such as pension contributions. BA has doubled parent company debt
levels in the past six months, allowing BA to maintain a healthy liquidity
position, but pressuring credit metrics. Fitch considers BA's credit metrics to
be weak for the 'A+' rating, and the 787 developments have eroded the margin of
safety at the current rating level.

BA's ratings are not being changed at this time because of solid performance in
the rest of BA's business portfolio. Fitch revised BA's Rating Outlook to
Negative from Stable in April. The Outlook revision reflected Fitch's higher
level of concern regarding several issues, including the global recession's
impact on the commercial aerospace industry, increasing pressure on Department
of Defense (DoD) budgets, the health of the aircraft finance market, the risk of
further delays in the 787 program, and BA's buildup of inventories in 2008,
which reduced the company's liquidity position by $8.5 billion. Other than the
additional delays in the 787 program, most of the other concerns reflected in
the Negative Outlook have moderated in the past five months.

The nine month slip in the planned first delivery is the key change in the 787
schedule in Fitch's view given the impact on inventories and advance payments.
The $2.5 billion non-cash charge caused by the reclassification of inventories
to R&D expense is not a credit issue because Fitch did not expect BA to generate
material cash flows from selling the first three test aircraft. The fact that
the 787 program is not in a forward loss position highlights the potential
long-term credit benefits from the program if BA is successful in executing the
updated plan, but Fitch is still concerned about the program given that BA still
needs to achieve first flight, certification, and a successful production
ramp-up.

As of June 30, 2009, BA's liquidity position, excluding Boeing Capital
Corporation (BCC), was approximately $6.4 billion, consisting of $4.9 billion in
cash and investments, and complete availability under $1.5 billion of bank
facilities. BCC also had $100 million of cash and $1.5 billion of bank facility
availability as of the end of the second quarter. In July, BA issued $1.95
billion of long-term debt, adding to the liquidity position, but weakening some
of BA's credit metrics. Non-operating uses of cash in the third quarter will
include the purchase of some of Vought Aircraft Industries' 787 facilities for
$580 million and the payment of approximately $450 million for credit guarantees
BA provided to Sea Launch Company, which filed for bankruptcy in June.

Fitch projects that BA's leverage in 2009 will be in the range of 1.0 times (x)
to 1.3x, including the impact of the proposed debt offerings, and leverage could
deteriorate in 2010 depending on commercial airplane build rates and 787
developments. The preceding calculations exclude BCC by accounting for the
subsidiary using the equity method, and non-recourse debt at BA is also
excluded.

Fitch currently rates BA and BCC as follows:

--Issuer Default Rating (IDR) 'A+';

--Senior unsecured debt 'A+';

--Bank facilities 'A+';

--Short-term IDR 'F1';

--Commercial paper programs 'F1'.

The Rating Outlook is Negative. The ratings cover approximately $11.1 billion of
debt ($7.4 billion at BA, including approximately $380 million of non-recourse
debt, and $3.6 billion at BCC). BCC's ratings are linked to BA's ratings due to
the existence of a support agreement and other factors such as an operating
agreement and transactional support provided to BCC by BA.

Rating concerns include the susceptibility of the commercial aerospace industry
to shocks such as terrorism and disease; portfolio concentration at BCC; margin
levels that are low for the rating category; periodic labor disruptions; and the
performance of some programs at both Boeing Commercial Airplanes (BCA) and
Integrated Defense Systems. The pension deficit and several litigation actions
are also potential concerns.

BA's debt ratings are supported by the company's balanced business portfolio
(approximately 50% defense and 50% commercial), financial flexibility,
competitive positions in both of its main business lines, large backlog, high
levels of defense spending, and solid credit metrics. BA's liquidity position
and favorable debt maturity schedule also support the ratings. Fitch believes
that BA has evolved into a more diverse and lower-risk company than it was at
the beginning of the last aerospace downcycle that began in late 2001.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, 'www.fitchratings.com'. Published ratings, criteria
and methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, New York
Craig Fraser, 212-908-0310
(for Boeing)
William Artz, 312-368-3178, Chicago
(for Boeing Capital)
or
Media Relations:
Cindy Stoller, 212-908-0526, New York
Email: cindy.stoller@fitchratings.com

Copyright Business Wire 2009