Boeing is exposed to a variety of market risks, including the effects of changes in interest rates, foreign currency exchange rates, and commodity prices. These exposures are managed, in part, with the use of derivatives. Boeing also faces other risks. The article summarizes Boeing's risk management strategies.
Established
by William Boeing in 1916, Boeing is now the world's
largest aerospace and defense company with leading
market positions in three major business segments:
Commercial airplanes; Defense-specializing in military
aircraft and missile systems; and Space and
Communications. It also has capital finance company,
Boeing Capital Corp. (BCC). Boeing employs 78,400 people
in Seattle area and is state's largest private employer.
At the end of 2001, two-thirds of Boeing's sales were
generated in US. Overseas revenues were generated in
Europe (14%), Asia excluding China (12%) and China (3%).
Boeing's
core business segment is commercial airplanes. These are
sold to airlines all over the world. Despite severe
downturn in demand for commercial jets, this segment
still generates roughly half of group revenue and
operating profits. The division (59% of revenues, 51% of
operating profits and 7.5% profit margins in 2001) makes
a full line of commercial aircraft, ranging from
100-passenger 717s to giant 500-seat 747s. Based on
recent orders, BA and Airbus each control about 50% of
the mature, global 100-plus seat passenger jet market.
The worldwide commercial aircraft fleet is expected to
grow from 11,300 planes in 2001 to 20,100 planes by
2020, which translates into a Compound Annual Growth
Rate (CAGR) of 2.9%.
Military
aircraft and missile systems contribute to over
one-third of group sales and operating profits. For this
division, the primary customer is US government.
Boeing's military weapons-making segment primarily makes
F-18 fighter jets, C-17 troop and equipment transport
planes, helicopters, AH-64D Apache Longbow, refueling
planes, and various precision missiles. The segment is
also a major producer of computer-based battle
management systems used in missile defense applications.
The less profitable R&D segment of US defense budget
is expected to grow at a higher rate than the higher
margin procurement segment. |
