

	March 31 2019			December 31 2018
Financing receivables:
Investment in sales-type/finance leases		$1,096			$1,125
Notes	609			730
Total financing receivables	1,705			1,855
Operating lease equipment, at cost, less accumulated depreciation of $220 and $203	879			782
Operative lease incentive				250
Gross customer financing	2,584			2,887
Less allowance for losses on receivables	(8		)	(9		)
Total		$2,576			$2,878

We acquire aircraft to be leased to customers through trades, lease returns, purchases in the secondary market, and new aircraft transferred from our Commercial Airplanes segment. Leasing arrangements typically range in terms from 1 to 12 years and may include options to extend or terminate the lease. Certain leases include provisions to allow the lessee to purchase the underlying aircraft at a specified price. A minority of leases contain variable lease payments based on actual aircraft usage and are paid in arrears.

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 March 31, 2019 and December 31, 2018, we individually evaluated for impairment customer financing receivables of $406 and $409, of which $395 and $398 were determined to be impaired. We recorded no allowance for losses on these impaired receivables as the collateral values exceeded 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.



Rating categories	March 31 2019		December 31 2018
BBB		$638		$883
BB	423		430
B	241		135
CCC	403		407
Total carrying value of financing receivables		$1,705		$1,855

At March 31, 2019, our allowance related to receivables with ratings of B, BB and BBB. We applied default rates that averaged 21.7%, 6.2% and 0.6%, respectively, to the exposure associated with those receivables.

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 could result in asset impairments, reduced finance lease income, and an increase in the allowance for losses. Our customer financing collateral is concentrated in

out-of-production aircraft and 747-8 aircraft. Generally, out-of-production aircraft have experienced greater collateral value declines than in-production aircraft.



	March 31 2019		December 31 2018
717 Aircraft ($201 and $204 accounted for as operating leases)		$882		$918
747-8 Aircraft ($131 and $132 accounted for as operating leases)	475		477
777 Aircraft ($169 and $60 accounted for as operating leases)	288		68
737 Aircraft ($259 and $263 accounted for as operating leases)	285		290
MD-80 Aircraft (accounted for as sales-type finance leases)	207		204
757 Aircraft ($24 and $24 accounted for as operating leases)	195		200
747-400 Aircraft ($42 and $45 accounted for as operating leases)	111		116

As part of selected lease transactions, Boeing may provide incentives to commercial customers. At December 31, 2018, Customer Financing included $250 of lease incentives with one customer experiencing liquidity issues. At March 31, 2019, we concluded that these lease incentives were impaired and recorded a charge of $250.

Lease income recorded in Revenue on the Condensed Consolidated Statements of Operations included $16 from sales-type/finance leases and $36 from operating leases.

As of March 31, 2019, undiscounted cash flows for sales-type/finance and operating leases over the next five years and thereafter are as follows:



	Sales-type/finance leases			Operating leases
Year 1		$203			$130
Year 2	159			106
Year 3	115			91
Year 4	106			74
Year 5	110			55
Thereafter	167			77
Total lease receipts	860			533
Less imputed interest	(189		)
Estimated unguaranteed residual values	425
Total		$1,096			$533