
	2023	2022
Beginning balance – January 1	$1,864	$2,940

Reductions for payments made	(304)	(959)
Reductions for concessions and other in-kind considerations	(55)	(29)
Changes in estimates	(54)	(16)
Ending balance – September 30	$1,451	$1,936

The liability balance of $1.5 billion at September 30, 2023 includes $1.4 billion of contracted customer concessions and other liabilities and $0.1 billion that remains subject to negotiation with customers. The contracted amount includes $0.6 billion expected to be liquidated by lower customer delivery payments, $0.7 billion expected to be paid in cash and $0.1 billion in other concessions. Of the cash payments to

customers, we expect to pay $0.3 billion in 2023 and the remaining $0.4 billion in future years. The type of consideration to be provided for the remaining $0.1 billion will depend on the outcomes of negotiations with customers.

The liabilities recorded represent our best estimate or the low end of a range of reasonably possible costs expected to be incurred to remediate sites, including operation and maintenance over periods of up to 30 years. It is reasonably possible that we may incur costs that exceed these recorded amounts because of regulatory agency orders and directives, changes in laws and/or regulations, higher than expected costs and/or the discovery of new or additional contamination. As part of our estimating process, we develop a range of reasonably possible alternate scenarios that includes the high end of a range of reasonably possible cost estimates for all remediation sites for which we have sufficient information based on our experience and existing laws and regulations. There are some potential remediation obligations where the costs of remediation cannot be reasonably estimated. At September 30, 2023 and December 31, 2022, the high end of the estimated range of reasonably possible remediation costs exceeded our recorded liabilities by $1,017 and $1,058.

In conjunction with signing definitive agreements for the sale of new aircraft, we have entered into trade-in commitments with certain customers that give them the right to trade in used aircraft at a specified price. The probability that trade-in commitments will be exercised is determined by using both quantitative information from valuation sources and qualitative information from other sources. The probability of exercise is assessed quarterly, or as events trigger a change, and takes into consideration the current economic and airline industry environments. Trade-in commitments, which can be terminated by mutual consent with the customer, may be exercised only during the period specified in the agreement, and require advance notice by the customer.

Trade-in commitment agreements at September 30, 2023 have expiration dates from 2023 through 2029. At September 30, 2023 and December 31, 2022 total contractual trade-in commitments were $1,430 and $1,117. As of September 30, 2023 and December 31, 2022, we estimated it was probable we would be obligated to perform on certain of these commitments with net amounts payable to customers totaling $360 and $286 and the fair value of the related trade-in aircraft was $360 and $286.

Financing commitments related to aircraft on order, including options and those proposed in sales campaigns, and refinancing of delivered aircraft, totaled $16,499 and $16,105 as of September 30, 2023 and December 31, 2022. The estimated earliest potential funding dates for these commitments as of September 30, 2023 are as follows:

As of September 30, 2023, all of these financing commitments relate to customers we believe have less than investment-grade credit. We have concluded that no reserve for future potential losses is required for these financing commitments based upon the terms, such as collateralization and interest rates, under which funding would be provided.

We have entered into standby letters of credit and surety bonds with financial institutions primarily relating to the guarantee of our future performance on certain contracts and security agreements. Contingent liabilities on outstanding letters of credit agreements and surety bonds aggregated approximately $4,420 and $5,070 as of September 30, 2023 and December 31, 2022.

The Company has supply chain financing programs in place under which participating suppliers may elect to obtain payment from an intermediary. The Company confirms the validity of invoices from participating suppliers and agrees to pay the intermediary an amount based on invoice totals. The majority of amounts payable under these programs are due within 30 to 90 days but may extend up to 12 months. At September 30, 2023 and December 31, 2022, Accounts payable included $2.9 billion and $2.5 billion payable to suppliers who have elected to participate in these programs. We do not believe that future changes in the availability of supply chain financing would have a significant impact on our liquidity.

Our final incurred costs for each year are subject to audit and review for allowability by the U.S. government, which can result in payment demands related to costs they believe should be disallowed. We work with the U.S. government to assess the merits of claims and where appropriate reserve for amounts disputed. If we are unable to satisfactorily resolve disputed costs, we could be required to record an earnings charge and/or provide refunds to the U.S. government.

Long-term contracts that are contracted on a fixed-price basis could result in losses in future periods. Certain of the fixed-price contracts are for the development of new products, services and related technologies. This development work scope is inherently uncertain and subject to significant variability in estimates of the cost and time required to complete the work by us and our suppliers. The operational and

technical complexities of fixed-price development contracts create financial risk, which could trigger additional earnings charges, termination provisions, order cancellations, or other financially significant exposure.

The Company’s firm fixed-price contract for the Engineering and Manufacturing Development (EMD) effort on the U.S. Air Force’s (USAF) VC-25B Presidential Aircraft, commonly known as Air Force One, is a $4.3 billion program to develop and modify two 747-8 commercial aircraft. During the year ended December 31, 2022, we increased the reach-forward loss on the contract by $1,452. This year we made progress completing engineering and production requirements. During the three months ended September 30, 2023, we increased the reach-forward loss on the contract by $482 driven by engineering changes to support the build and installation process; the resolution of supplier negotiations; and factory performance related to labor instability. While we have provisioned for all of our anticipated costs to complete the contract, risk remains that we may record additional losses in future periods.

In 2011, we were awarded a contract from the USAF to design, develop, manufacture, and deliver four next generation aerial refueling tankers as well as priced options for 13 annual production lots totaling 179 aircraft. Since 2016, the USAF has authorized nine low rate initial production (LRIP) lots for a total of 124 aircraft. The EMD contract and authorized LRIP lots total approximately $24 billion as of September 30, 2023. During the year ended December 31, 2022, we increased the reach-forward loss on the KC-46A Tanker program by $1,374. During the three months ended March 31, 2023, we increased the reach-forward loss on the KC-46A Tanker program by $245 resulting from factory disruption and additional rework due to a supplier quality issue. As of September 30, 2023, we had approximately $160 of capitalized precontract costs and $150 of potential termination liabilities to suppliers related to unexercised future lots. Risk remains that we may record additional losses in future periods.

In the third quarter of 2018, we were awarded the MQ-25 EMD contract by the U.S. Navy. The contract is a fixed-price contract that includes development and delivery of seven aircraft and test articles at a contract price of $890. During the year ended December 31, 2022, we increased the MQ-25 reach-forward loss by $579. During the three months ended June 30, 2023, we increased the reach-forward loss by $68 primarily driven by production and flight testing delays for EMD aircraft. During the three months ended September 30, 2023, we increased the reach-forward loss by $71 reflecting higher than anticipated production costs to complete EMD aircraft attributable to recent factory performance. Risk remains that we may record additional losses in future periods.

In 2018, we were awarded the T-7A Red Hawk program. The EMD portion of the contract is a $860 fixed-price contract and includes five aircraft and seven simulators. During the year ended December 31, 2022, we recorded earnings charges of $203 related to the T-7A Red Hawk fixed-price EMD contract, which had a reach-forward loss at December 31, 2022. The production portion of the contract includes 11 production lots for aircraft and related services for 346 T-7A Red Hawk aircraft that we believe are probable of being exercised. We expect the first production and support contract option to be exercised in 2025. During the year ended December 31, 2022, we increased the reach-forward loss by $552. During the three months ended June 30, 2023, we increased the reach-forward loss by $189 primarily reflecting higher estimated production costs. At September 30, 2023, we had approximately $162 of capitalized precontract costs and $421 of potential termination liabilities to suppliers related to unexercised future lots. Risk remains that we may record additional losses in future periods.