Customer Financing

Customer financing primarily relates to the Boeing Capital (BCC) segment and consisted of the following:



	September 30 2013			December 31 2012
Financing receivables:
Investment in sales-type/finance leases		$1,736			$1,850
Notes	600			592
Operating lease equipment, at cost, less accumulated depreciation of $550 and $628	1,936			2,038
Gross customer financing	4,272			4,480
Less allowance for losses on receivables	(53		)	(60		)
Total		$4,219			$4,420

We determine a receivable is impaired when, based on current information and events, it is probable that we will be unable to collect amounts due according to the original contractual terms. At September 30, 2013 and December 31, 2012, we individually evaluated for impairment customer financing receivables of $555 and $616 and determined that $418 and $446 were impaired. We recorded no allowance for losses on these impaired receivables as the collateral values exceed the carrying values of the receivables.

The adequacy of the allowance for losses is assessed quarterly. Three primary factors influencing the level of our allowance for losses on customer financing receivables are customer credit ratings, default rates and collateral values. We assign internal credit ratings for all customers and determine the creditworthiness of each customer based upon publicly available information and information obtained directly from our customers. Our rating categories are comparable to those used by the major credit rating agencies.

Our financing receivable balances by internal credit rating category are shown below.



Rating categories	September 30 2013		December 31 2012
BBB		$1,118		$1,201
BB	57		63
B	146		51
CCC	460		511
D	454		524
Other	101		92
Total carrying value of financing receivables		$2,336		$2,442

At September 30, 2013, our allowance primarily related to receivables with ratings of CCC and we applied default rates that averaged 46% to the exposure associated with those receivables.

In the fourth quarter of 2011, American Airlines Inc. (American Airlines) filed for Chapter 11 bankruptcy protection. We believe that our customer financing receivables from American Airlines of $454 are sufficiently collateralized such that we do not expect to incur losses related to those receivables and have not recorded an allowance for losses as of September 30, 2013 as a result of the bankruptcy.

Customer Financing Exposure Customer financing is collateralized by security in the related asset. The value of the collateral is closely tied to commercial airline performance and overall market conditions and may be subject to reduced valuation with market decline. Declines in collateral values are also a significant driver of our allowance for losses. Generally, out-of-production aircraft have experienced greater collateral value declines than in-production aircraft. Our customer financing portfolio is primarily collateralized by out-of-production aircraft. The majority of customer financing carrying values are concentrated in the following aircraft models:



	September 30 2013		December 31 2012
717 Aircraft ($449 and $465 accounted for as operating leases) ⁽¹⁾		$1,701		$1,781
757 Aircraft ($408 and $454 accounted for as operating leases) ⁽¹⁾	473		561
MD-80 Aircraft (Accounted for as sales-type finance leases)⁽¹⁾	418		446
787 Aircraft (Accounted for as operating leases)	370		286
747 Aircraft ($230 and $221 accounted for as operating leases)	336		221
MD-11 Aircraft (Accounted for as operating leases) ⁽¹⁾	257		269
737 Aircraft ($144 and $193 accounted for as operating leases)	218		316
767 Aircraft ($62 and $63 accounted for as operating leases)	204		223


⁽¹⁾	Out-of-production aircraft.