10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 1-442

THE BOEING COMPANY

(Exact name of registrant as specified in its charter)

Delaware	91-0425694
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
100 N. Riverside, Chicago, IL	60606-1596
(Address of principal executive offices)	(Zip Code)

(312) 544-2000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” as defined in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of October 19, 2007, there were 775,062,884 shares of common stock, $5.00 par value, issued and outstanding.

(This number includes 31 million outstanding shares held by the ShareValue Trust which are not eligible to vote.)

THE BOEING COMPANY

FORM 10-Q

For the Quarter Ended September 30, 2007

INDEX

Part I. Financial Information (Unaudited)			Page
	Item 1.	Financial Statements	1
		Condensed Consolidated Statements of Operations	1
		Condensed Consolidated Statements of Financial Position	2
		Condensed Consolidated Statements of Cash Flows	3
		Condensed Consolidated Statement of Shareholders’ Equity	4
		Summary of Business Segment Data	5
		Note 1 – Basis of Presentation	6
		Note 2 – Standards Issued and Not Yet Implemented	6
		Note 3 – Earnings Per Share	6
		Note 4 – Income Taxes	7
		Note 5 – Inventories	8
		Note 6 – Postretirement Plans	8
		Note 7 – Share-based Compensation and Other Compensation Arrangements	9
		Note 8 – Arrangements with Off-Balance Sheet Risk	10
		Note 9 – Legal Proceedings	12
		Note 10 – Other Commitments and Contingencies	15
		Note 11 – Business Segment Data	18
		Report of Independent Registered Public Accounting Firm	20
		Forward-Looking Information Is Subject to Risk and Uncertainty	21
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
		Consolidated Operating Results	23
		Commercial Airplanes	26
		Integrated Defense Systems	28
		Boeing Capital Corporation	35
		Other	36
		Liquidity and Capital Resources	36
		Contractual Obligations	38
		Off-Balance Sheet Arrangements	38
		Standards Issued and Not Yet Implemented	38
		Contingent Items/Legal Proceedings	38
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
	Item 4.	Controls and Procedures	38
Part II. Other Information
	Item 1.	Legal Proceedings	39
	Item 1A.	Risk Factors	40
	Item 2.	Unregistered Sales of Equity Securities and Issuer Purchases of Equity Securities	40
	Item 6.	Exhibits	41
	Signature		42
	Exhibit (15) – Letter from Independent Registered Public Accounting Firm Regarding Unaudited Interim Financial Information		43
	Exhibit (31.1) – Section 302 Certification – CEO		44
	Exhibit (31.2) – Section 302 Certification – CFO		45
	Exhibit (32.1) – Section 906 Certification – CEO		46
	Exhibit (32.2) – Section 906 Certification – CFO		47

PART I. FINANCIAL INFORMATION

I tem 1. Financial Statements

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

(Dollars in millions except per share data)	Nine months ended September 30						Three months ended September 30
	2007			2006			2007			2006
Sales of products	$	42,193		$	37,539		$	14,177		$	12,388
Sales of services		6,717			6,450			2,340			2,351
Total revenues		48,910			43,989			16,517			14,739
Cost of products		(33,471	)		(30,310	)		(11,331	)		(9,789	)
Cost of services		(5,386	)		(5,409	)		(1,803	)		(2,014	)
Boeing Capital Corporation interest expense		(225	)		(267	)		(73	)		(88	)
Total costs and expenses		(39,082	)		(35,986	)		(13,207	)		(11,891	)
		9,828			8,003			3,310			2,848
Income from operating investments, net		100			95			11			42
General and administrative expense		(2,735	)		(3,077	)		(931	)		(834	)
Research and development expense, net		(2,857	)		(2,320	)		(869	)		(833	)
Loss on dispositions/business shutdown, net		(22	)		(268	)		(22	)		(272	)
Settlement with U.S. Department of Justice, net of accruals					(571	)
Earnings from operations		4,314			1,862			1,499			951
Other income, net		355			296			139			104
Interest and debt expense		(139	)		(203	)		(47	)		(67	)
Earnings before income taxes		4,530			1,955			1,591			988
Income tax expense		(1,499	)		(729	)		(482	)		(294	)
Net earnings from continuing operations		3,031			1,226			1,109			694
Net gain on disposal of discontinued operations, net of taxes of $6 and $2		10						5
Net earnings	$	3,041		$	1,226		$	1,114		$	694
Basic earnings per share from continuing operations	$	3.98		$	1.60		$	1.46		$	0.90
Net gain on disposal of discontinued operations, net of taxes		0.02						0.01
Basic earnings per share	$	4.00		$	1.60		$	1.47		$	0.90
Diluted earnings per share from continuing operations	$	3.91		$	1.57		$	1.43		$	0.89
Net gain on disposal of discontinued operations, net of taxes		0.01						0.01
Diluted earnings per share	$	3.92		$	1.57		$	1.44		$	0.89
Cash dividends paid per share	$	1.05		$	0.90		$	0.35		$	0.30
Weighted average diluted shares (millions)		776.2			789.3			773.4			784.0

See Notes to Condensed Consolidated Financial Statements.

1

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Financial Position

(Unaudited)

(Dollars in millions except per share data)	September 30 2007		December 31 2006
Assets
Cash and cash equivalents	$   8,948		$   6,118
Short-term investments	516		268
Accounts receivable, net	5,634		5,285
Current portion of customer financing, net	396		370
Deferred income taxes	2,940		2,837
Inventories, net of advances and progress billings	8,194		8,105
Total current assets	26,628		22,983
Customer financing, net	6,925		8,520
Property, plant and equipment, net of accumulated depreciation of $12,106 and $11,635	8,182		7,675
Goodwill	3,096		3,047
Other acquired intangibles, net	1,750		1,698
Deferred income taxes	823		1,051
Investments	4,053		4,085
Other assets, net of accumulated amortization of $345 and $272	3,330		2,735
Total assets	$ 54,787		$ 51,794
Liabilities and Shareholders’ Equity
Accounts payable and other liabilities	$ 16,536		$ 16,201
Advances and billings in excess of related costs	12,226		11,449
Income taxes payable	1,080		670
Short-term debt and current portion of long-term debt	1,025		1,381
Total current liabilities	30,867		29,701
Accrued retiree health care	7,694		7,671
Accrued pension plan liability	980		1,135
Non-current income taxes payable	879
Other long-term liabilities	406		391
Long-term debt	7,555		8,157
Shareholders’ equity:
Common shares, par value $5.00 – 1,200,000,000 shares authorized;
Shares issued – 1,012,261,159 and 1,012,261,159	5,061		5,061
Additional paid-in capital	5,242		4,655
Treasury shares, at cost – 235,068,046 and 223,522,176	(13,964	)	(12,459	)
Retained earnings	20,920		18,453
Accumulated other comprehensive loss	(7,569	)	(8,217	)
ShareValue Trust Shares – 31,246,307 and 30,903,026	(3,284	)	(2,754	)
Total shareholders’ equity	6,406		4,739
Total liabilities and shareholders’ equity	$ 54,787		$ 51,794

See Notes to Condensed Consolidated Financial Statements.

2

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in millions)	Nine months ended September 30
	2007			2006
Cash flows – operating activities:
Net earnings	$	3,041		$	1,226
Adjustments to reconcile net earnings to net cash provided by operating activities:
Non-cash items –
Share-based plans expense		266			553
Depreciation		975			1,057
Amortization of other acquired intangibles		116			66
Amortization of debt discount/premium and issuance costs		7			12
Pension expense		781			525
Investment/asset impairment charges, net		5			85
Customer financing valuation (benefit)/provision		(52	)		19
Gain on disposal of discontinued operations		(16	)
Loss on dispositions/business shutdown, net		22			268
Other charges and credits, net		120			112
Excess tax benefits from share-based payment arrangements		(141	)		(118	)
Changes in assets and liabilities –
Accounts receivable		(358	)		166
Inventories, net of advances and progress billings		(100	)		520
Accounts payable and other liabilities		470			(682	)
Advances and billings in excess of related costs		747			656
Income taxes receivable, payable and deferred		1,195			757
Other long-term liabilities		1			(45	)
Pension contributions		(563	)		(520	)
Accrued retiree health care		23			73
Customer financing, net		1,254			515
Other		(102	)		(187	)
Net cash provided by operating activities		7,691			5,058
Cash flows – investing activities:
Property, plant and equipment additions		(1,282	)		(1,093	)
Property, plant and equipment reductions		22			86
Acquisitions, net of cash acquired		(75	)		(1,854	)
Proceeds from dispositions					109
Contributions to investments		(2,673	)		(1,591	)
Proceeds from investments		2,563			1,775
Other		(152	)
Net cash used by investing activities		(1,597	)		(2,568	)
Cash flows – financing activities:
New borrowings		28			1
Debt repayments		(1,007	)		(1,098	)
Stock options exercised, other		196			227
Excess tax benefits from share-based payment arrangements		141			118
Common shares repurchased		(1,817	)		(1,254	)
Dividends paid		(826	)		(719	)
Net cash used by financing activities		(3,285	)		(2,725	)
Effect of exchange rate changes on cash and cash equivalents		21			21
Net increase/(decrease) in cash and cash equivalents		2,830			(214	)
Cash and cash equivalents at beginning of year		6,118			5,412
Cash and cash equivalents at end of period	$	8,948		$	5,198
Non-cash investing and financing activities:
Capital lease obligations incurred				$	356

See Notes to Condensed Consolidated Financial Statements.

3

The Boeing Company and Subsidiaries

Condensed Consolidated Statement of Shareholders’ Equity

(Unaudited)

(Dollars in millions except per share data)	Common Stock		Additional Paid-In Capital			Treasury Stock			ShareValue Trust			Retained Earnings			Accumulated Other Comphrehensive Loss			Total
Balance January 1, 2006	$	5,061	$	4,371		($	11,075	)	($	2,796	)	$	17,276		($	1,778	)	$	11,059
Net earnings													2,215						2,215
Unrealized gain on derivative instruments, net of tax of $(16)																23			23
Unrealized gain on certain investments, net of tax of $(7)																13			13
Reclassification adjustment for gains realized in net earnings, net of tax of $23																(39	)		(39	)
Minimum pension liability adjustment, net of tax of $(1,116)																1,733			1,733
Currency translation adjustment																73			73
Comprehensive income																			4,018
SFAS 158 transition amount, net of tax of $5,195																(8,242	)		(8,242	)
Share-based compensation				487															487
ShareValue Trust activity				(20	)					(259	)								(279	)
Tax benefit related to share-based plans				36															36
Excess tax pools				325															325
Treasury shares issued for stock options exercised, net				(51	)		345												294
Treasury shares issued for other share-based plans, net				(493	)1		270												(223	)
Treasury shares repurchased							(1,698	)											(1,698	)
Treasury shares transfer							(301	)		301
Cash dividends declared ($1.25 per share)													(991	)					(991	)
Dividends related to Performance Share payout													(47	)					(47	)
Balance December 31, 2006	$	5,061	$	4,655		($	12,459	)	($	2,754	)	$	18,453		($	8,217	)	$	4,739
Net earnings													3,041						3,041
Unrealized gain on derivative instruments, net of tax of $(51)																86			86
Unrealized gain on certain investments, net of tax of $(4)																5			5
Reclassification adjustment for losses realized in net earnings, net of tax of ($1)																2			2
Currency translation adjustment																63			63
Pension liability adjustment, net of tax of $(296)																492			492
Comprehensive income																			3,689
Share-based compensation				239															239
ShareValue Trust activity				530						(530	)
Tax benefit related to share-based plans				18															18
Excess tax pools				82															82
Treasury shares issued for stock options exercised, net				(30	)		225												195
Treasury shares issued for other share-based plans, net				(252	)1		155												(97	)
Treasury shares repurchased							(1,885	)											(1,885	)
Cash dividends declared ($.70 per share)													(552	)					(552	)
Dividends related to Performance Share payout													(11	)					(11	)
FIN 48 transition amount													(11	)					(11	)
Balance September 30, 2007	$	5,061	$	5,242		($	13,964	)	($	3,284	)	$	20,920		($	7,569	)	$	6,406

¹ Includes transfers of Shareholders’ equity of $183 and $224, primarily to other liabilities for employee withholding taxes during 2007 and 2006.

See Notes to Condensed Consolidated Financial Statements.

4

The Boeing Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Summary of Business Segment Data

(Unaudited)

(Dollars in millions)	Nine months ended September 30						Three months ended September 30
	2007			2006			2007			2006
Revenues:
Commercial Airplanes	$	24,520		$	20,859		$	8,258		$	6,693
Integrated Defense Systems:
Precision Engagement and Mobility Systems		10,063			9,848			3,360			3,413
Network and Space Systems		8,805			8,527			3,006			2,845
Support Systems		4,842			4,377			1,642			1,534
Total Integrated Defense Systems		23,710			22,752			8,008			7,792
Boeing Capital Corporation		619			784			197			304
Other		218			218			74			60
Accounting differences/eliminations		(157	)		(624	)		(20	)		(110	)
Total revenues	$	48,910		$	43,989		$	16,517		$	14,739
Earnings from operations:
Commercial Airplanes	$	2,611		$	2,068		$	945		$	646
Integrated Defense Systems:
Precision Engagement and Mobility Systems		1,232			915			404			462
Network and Space Systems		596			485			178			226
Support Systems		634			605			242			191
Total Integrated Defense Systems		2,462			2,005			824			879
Boeing Capital Corporation		204			254			61			122
Other		(78	)		(645	)		(46	)		(494	)
Unallocated expense		(885	)		(1,249	)		(285	)		(202	)
Settlement with U.S. Department of Justice, net of accruals					(571	)
Earnings from operations		4,314			1,862			1,499			951
Other income, net		355			296			139			104
Interest and debt expense		(139	)		(203	)		(47	)		(67	)
Earnings before income taxes		4,530			1,955			1,591			988
Income tax expense		(1,499	)		(729	)		(482	)		(294	)
Net earnings from continuing operations		3,031			1,226			1,109			694
Net gain on disposal of discontinued operations, net of taxes of $6 and $2		10						5
Net earnings	$	3,041		$	1,226		$	1,114		$	694
Research and development expense:
Commercial Airplanes	$	2,192		$	1,668		$	635		$	612
Integrated Defense Systems:
Precision Engagement and Mobility Systems		338			288			118			87
Network and Space Systems		231			225			82			68
Support Systems		74			72			27			24
Total Integrated Defense Systems		643			585			227			179
Other		22			67			7			42
Total research and development expense	$	2,857		$	2,320		$	869		$	833

This information is an integral part of the Notes to Condensed Consolidated Financial Statements. See Note 11 for further segment results.

5

The Boeing Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Dollars in millions)

(Unaudited)

Note 1 – Basis of Presentation

The condensed consolidated interim financial statements included in this report have been prepared by management of The Boeing Company (herein referred to as “Boeing”, “we”, “us”, “our”). In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation are reflected in the interim financial statements. The results of operations for the period ended September 30, 2007, are not necessarily indicative of the operating results for the full year. The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto included in our 2006 Annual Report on Form 10-K. Certain business segment data has been reclassified to conform to the current period’s presentation (See Note 11).

Note 2 – Standards Issued and Not Yet Implemented

In February 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 permits us to choose to measure certain financial assets and liabilities at fair value that are not currently required to be measured at fair value (the “Fair Value Option”). SFAS No. 159 is effective as of January 1, 2008. We currently do not plan to elect the Fair Value Option for any financial assets or liabilities within the scope of SFAS No. 159 as of January 1, 2008.

Note 3 – Earnings Per Share

The weighted average number of shares outstanding (in millions) used to compute earnings per share is as follows:

	Nine months ended September 30		Three months ended September 30
	2007	2006	2007	2006
Weighted average shares outstanding	754.0	761.2	750.1	762.5
Participating securities	8.6	10.8	9.2	10.5
Basic weighted average shares outstanding	762.6	772.0	759.3	773.0
Dilutive potential common shares	13.6	17.3	14.1	11.0
Diluted weighted average shares outstanding	776.2	789.3	773.4	784.0

The numerator used to compute diluted earnings per share is as follows:

	Nine months ended September 30				Three months ended September 30
	2007		2006		2007		2006
Net earnings	$	3,041	$	1,226	$	1,114	$	694
Expense related to diluted shares		2		11
Total numerator	$	3,043	$	1,237	$	1,114	$	694

6

Basic earnings per share is calculated by the sum of (1) net earnings less declared dividends divided by the basic weighted average shares outstanding and (2) declared dividends divided by the weighted average shares outstanding.

The weighted average number of shares outstanding (in millions), included in the table below, is excluded from the computation of diluted earnings per share because the average market price did not exceed the exercise/threshold price. However, these shares may be dilutive potential common shares in the future.

	Nine months ended September 30		Three months ended September 30
	2007	2006	2007	2006
Stock Options			5.1	6.1
Stock Units				0.1
Performance Shares	0.7	6.5	0.7	6.5
Performance Awards	2.6	1.6	2.6	1.6
ShareValue Trust	25.5	23.9	24.2	27.2

Note 4 – Income Taxes

The effective tax rates were 33.1% and 37.3% for the nine months ended September 30, 2007 and 2006. The decrease in the effective tax rate as compared with the prior year was primarily due to the global settlement with the U.S. Department of Justice in the second quarter of 2006, which was not deducted for tax purposes, and research and development credits that existed in 2007 but not in the first nine months of 2006. This was partially offset by Foreign Sales Corporation and Extraterritorial Income exclusion tax benefits that existed in 2006 but did not recur in 2007 and other income tax provision adjustments.

Effective January 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. The cumulative effects of applying this interpretation have been recorded as a decrease of $11 to Retained earnings, an increase of $125 to Deferred income taxes and an increase of $136 to Income taxes payable as of January 1, 2007.

In conjunction with adoption of FIN 48, we classified uncertain tax positions as non-current income tax liabilities unless expected to be paid in one year. We also began reporting income tax-related interest income in Income tax expense in our Condensed Consolidated Statement of Operations. In prior periods, such interest income was reported in Other income. Penalties and tax-related interest expense are reported as a component of Income tax expense. As of September 30 and January 1, 2007, the total amount of accrued income tax-related interest and penalties included in the Condensed Consolidated Statement of Financial Position was $98 and $64.

As of September 30 and January 1, 2007, we were subject to examination in the U.S. federal tax jurisdiction for the 1998-2006 tax years. We were also subject to examination in various state and foreign jurisdictions for the 2001-2006 tax years, none of which were individually material. During the third quarter of 2007 we received an IRS audit report for the 2002-2003 tax years and have filed an appeal. We have also filed appeals with the IRS for 1998-2001 tax years. We believe appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years.

7

As of September 30 and January 1, 2007, the total amount of unrecognized tax benefits was $1,209 and $1,088, of which $978 and $905 would affect the effective tax rate, if recognized. If tax matters for 1998-2006 settle with the IRS within the next 12 months, the total amount of unrecognized tax benefits may increase or decrease for all open tax years. Settlement could increase earnings in an amount up to $130 based on current estimates. Audit outcomes and the timing of audit settlements are subject to significant uncertainty.

Note 5 – Inventories

Inventories consisted of the following:

	September 30 2007			December 31 2006
Long-term contracts in progress	$	12,671		$	12,329
Commercial aircraft programs1		10,937			8,743
Commercial spare parts, used aircraft, general stock materials and other		3,319			2,888
		26,927			23,960
Less advances and progress billings		(18,733	)		(15,855	)
	$	8,194		$	8,105

¹ Includes deferred production costs and unamortized tooling related to the 777 program of $997 and $275 as of September 30, 2007 and $871 and $329 as of December 31, 2006.

Delta launch program inventories of $1,860 that will be sold at cost to United Launch Alliance (ULA) under an inventory supply agreement that terminates on March 31, 2021 are included in long-term contracts in progress inventories at December 31, 2006. No sales have occurred through September 30, 2007. As part of its integration ULA is continuing to assess the future of the Delta II program. During the third quarter of 2007, ULA determined that certain Delta II inventory is not fully recoverable. As a result we recorded a charge of $27 for non-recoverable Delta II inventory and $38 for our share of the loss recorded by ULA related to Delta II. Future decisions regarding the Delta II program could reduce our earnings by up to $100. See Note 8.

Inventories included $234 subject to claims or other uncertainties relating to the A-12 program as of September 30, 2007 and December 31, 2006. See Note 9.

Note 6 – Postretirement Plans

The components of net periodic benefit cost are as follows:

	Nine months ended September 30						Three months ended September 30
	2007			2006			2007			2006
Components of net periodic benefit cost – pensions
Service cost	$	719		$	680		$	240		$	227
Interest cost		2,011			1,872			670			624
Expected return on plan assets		(2,623	)		(2,587	)		(874	)		(865	)
Amortization of prior service costs		148			140			49			46
Recognized net actuarial loss		571			684			190			228
Net periodic benefit cost – pensions	$	826		$	789		$	275		$	260

8

	Nine months ended September 30						Three months ended September 30
	2007			2006			2007			2006
Components of net periodic benefit cost – other postretirement benefits
Service cost	$	102		$	108		$	34		$	36
Interest cost		355			327			119			109
Expected return on plan assets		(6	)		(6	)		(2	)		(2	)
Amortization of prior service costs		(66	)		(67	)		(22	)		(21	)
Recognized net actuarial loss		119			98			39			32
Net periodic benefit cost – other postretirement benefits	$	504		$	460		$	168		$	154

During the nine months ended September 30, 2007 and 2006, we made pension contributions of $563 and $513. Additional pension contributions are possible in 2007. We expect to contribute approximately $17 to our other postretirement benefit plans in 2007. During the nine months ended September 30, 2007 and 2006, we made contributions to our other postretirement benefit plans of $11 and $13.

Effective December 31, 2008, SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R) (“SFAS No. 158”) will require us to measure plan assets and benefit obligations at December 31. We currently perform this measurement at September 30 of each year. In addition, beginning in fourth quarter of 2007, SFAS No. 158 will require us to eliminate the use of a three-month lag period when recognizing the impact of curtailments or settlements and instead, recognize these amounts in the period in which they occur.

Note 7 – Share-Based Compensation and Other Compensation Arrangements

Performance Shares

A total of 5,928,952 Performance Shares with a total market value of $584 were converted or deferred during the nine months ended September 30, 2007. A total of 1,410,465 Performance Shares expired related to the 2002 grant during the three months ended March 31, 2007.

Stock options

On February 26, 2007, we granted to our executives 5,334,700 options with an exercise price equal to the fair market value of our stock on the date of grant. The stock options vest over a period of three years, with 34% vesting after the first year, 33% vesting after the second year and the remaining 33% vesting after the third year. The options expire 10 years after the date of grant. The fair value of stock options granted was estimated using the Black-Scholes option-pricing model with the following assumptions:

Grant Date	Expected Life	Expected Volatility	Dividend Yield	Risk Free Interest Rate	Weighted- Average Grant Date Fair Value
2/26/07	6 years	28.4%	1.7%	4.62%	$27.31

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Performance Awards

During the three months ended March 31, 2007, we also granted Performance Awards to our executives with the payout based on the achievement of financial goals for the three-year period ending December 31, 2009. The minimum amount is zero and the maximum amount we could be required to payout for the 2007 Performance Awards is $282.

Note 8 – Arrangements with Off-Balance Sheet Risk

We enter into arrangements with off-balance sheet risk in the normal course of business, as discussed below. These arrangements are primarily in the form of guarantees and product warranties.

Third-party guarantees

The following tables provide quantitative data regarding our third-party guarantees. The maximum potential payments represent a “worst-case scenario,” and do not necessarily reflect our expected results. Estimated proceeds from collateral and recourse represent the anticipated values of assets we could liquidate or receive from other parties to offset our payments under guarantees. The carrying amount of liabilities recorded on our Condensed Consolidated Statements of Financial Position reflects our best estimate of future payments we may incur as part of fulfilling our guarantee obligations.

As of September 30, 2007	Maximum Potential Payments		Estimated Proceeds from Collateral/ Recourse		Carrying Amount of Liabilities*
Contingent repurchase commitments	$	4,293	$	4,284	$	7
Indemnifications to ULA**		1,417				7
Residual value guarantees		103		96		16
Credit guarantees related to the Sea Launch venture		461		277		184
Other credit guarantees		49		14
Performance guarantees		48		20

As of December 31, 2006	Maximum Potential Payments		Estimated Proceeds from Collateral/ Recourse		Carrying Amount of Liabilities*
Contingent repurchase commitments	$	4,164	$	4,155	$	7
Indemnifications to ULA**		1,664				7
Residual value guarantees		252		215		15
Credit guarantees related to the Sea Launch venture		471		283		188
Other credit guarantees		31		17
Performance guarantees		47		20

* Amounts included in Accounts payable and other liabilities

** Amount includes indemnification payments related to contributed Delta launch program inventory of $1,113 and $1,375 plus indemnification payments of $289 related to the pricing of certain contracts at September 30, 2007 and December 31, 2006, and $15 related to miscellaneous Delta vendor contracts at September 30, 2007.

Contingent repurchase commitments We have entered into contingent repurchase commitments with certain customers in conjunction with signing a definitive agreement for the sale of new aircraft

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(“Sale Aircraft”). Under these commitments, we agreed to repurchase the Sale Aircraft at a specified price, generally ten years after delivery of the Sale Aircraft. Our repurchase of the Sale Aircraft is contingent upon a future, mutually acceptable agreement for the sale of additional new aircraft.

Indemnifications to ULA In December 2006, we agreed to indemnify ULA against potential losses that ULA may incur from certain contracts contributed by us. In the event ULA is unable to obtain certain additional contract pricing to which we believe ULA is entitled, we will be responsible for any shortfall and may record up to $338 in pre-tax losses. The term of the indemnification is tied to the resolution of this matter with the customer.

In December 2006, we agreed to indemnify ULA in the event that $1,375 of Delta launch program inventories included in contributed assets and $1,860 of Delta program inventories subject to an inventory supply agreement are not recoverable from existing and future orders. The term of the inventory indemnification extends to December 31, 2020. Since inception, ULA sold $247 of inventories that were contributed by us.

On July 24, 2007 we and Lockheed Martin Corporation (“Lockheed”) reached an agreement with respect to resolution of the final working capital and the value of the launch vehicle support contracts that each party contributed to form ULA. Effective August 15, 2007, the parties received all necessary approvals from the Compliance Officer pursuant to the terms of the Consent Order with the U.S. Federal Trade Commission and the terms of the agreement, which resulted in additional contributions from both parties with Boeing contributing an additional $97. Our additional contribution liability will be offset by future payments from ULA under the Inventory Supply Agreement.

Residual value guarantees We have issued various residual value guarantees principally to facilitate the sale of certain commercial aircraft. Under these guarantees, we are obligated to make payments to the guaranteed party if the related aircraft or equipment fair values fall below a specified amount at a future time. These obligations are collateralized principally by commercial aircraft and expire within 5 to 11 years.

Credit guarantees related to the Sea Launch venture We issued credit guarantees to creditors of the Sea Launch venture, of which we are a 40% partner, to assist the venture in obtaining financing. Under these credit guarantees, we are obligated to make payments to a guaranteed party in the event that Sea Launch does not make its loan payments. We have substantive guarantees from the other venture partners, who are obligated to reimburse us for their share (in proportion to their Sea Launch ownership percentages) of any guarantee payment we may make related to the Sea Launch obligations. These guarantees expire within the next 8 years.

Other credit guarantees We have issued credit guarantees, principally to facilitate the sale of commercial aircraft. Under these arrangements, we are obligated to make payments to a guaranteed party in the event that lease or loan payments are not made by the original lessee or debtor. A substantial portion of these guarantees has been extended on behalf of original lessees or debtors with less than investment-grade credit. Our commercial aircraft credit-related guarantees are collateralized by the underlying commercial aircraft. Current outstanding credit guarantees expire within the next 8 years.

Performance guarantees We have outstanding performance guarantees issued in conjunction with joint venture investments. Pursuant to these guarantees we would be required to make payments in the event a third-party fails to perform specified services. We have guarantees from the other venture partners who are obligated to reimburse us for a portion of any guarantee payments we may make related to the performance guarantee. Current performance guarantees expire within the next 10 years.

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Other indemnifications In conjunction with our sales of the Electron Dynamic Devices, Inc. and Rocketdyne Propulsion and Power businesses and the sale of our Commercial Airplanes facilities in Wichita, Kansas and Tulsa and McAlester, Oklahoma in 2005, we provided indemnifications to the buyers relating to pre-closing environmental contamination and certain other items. The terms of the indemnifications are indefinite. We currently have no knowledge of environmental contamination at the above sites that would result in claims pursuant to the above indemnifications, nor do we have any basis to estimate the maximum potential amount of future payments under these guarantees. Therefore, no liability has been recorded.

Product warranties

The following table summarizes product warranty activity recorded during the nine months ended September 30, 2007 and 2006.

	Product Warranty Liabilities*
	2007			2006
Beginning balance – January 1	$	761		$	781
Additions for new warranties		137			115
Reductions for payments made		(164	)		(156	)
Changes in estimates		161			25
Ending balance – September 30	$	895		$	765

* Amounts included in Accounts payable and other liabilities.

Note 9 – Legal Proceedings

Various legal proceedings, claims and investigations related to products, contracts and other matters are pending against us. Many potentially significant legal proceedings are related to matters covered by our insurance. Potential material contingencies are discussed below.

We are subject to various U.S. government investigations, from which civil, criminal or administrative proceedings could result or have resulted. Such proceedings involve, or could involve claims by the government for fines, penalties, compensatory and treble damages, restitution and/or forfeitures. Under government regulations, a company, or one or more of its operating divisions or subdivisions, can also be suspended or debarred from government contracts, or lose its export privileges, based on the results of investigations. We believe, based upon current information, that the outcome of any such government disputes and investigations will not have a material adverse effect on our financial position, except as set forth below.

A-12 litigation

In 1991, the U.S. Navy notified McDonnell Douglas Corporation (now one of our subsidiaries) and General Dynamics Corporation (together, the “Team”) that it was terminating for default the Team’s contract for development and initial production of the A-12 aircraft. The Team filed a legal action to contest the Navy’s default termination, to assert its rights to convert the termination to one for “the convenience of the government,” and to obtain payment for work done and costs incurred on the A-12 contract but not paid to date. As of September 30, 2007, inventories included approximately $584 of recorded costs on the A-12 contract, against which we have established a loss provision of $350. The amount of the provision, which was established in 1990, was based on McDonnell Douglas Corporation’s belief, supported by an opinion of outside counsel, that the termination for default would be converted to a termination for convenience, and that the best estimate of possible loss on termination for convenience was $350.

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On August 31, 2001, the U.S. Court of Federal Claims issued a decision after trial upholding the government’s default termination of the A-12 contract. The court did not, however, enter a money judgment for the U.S. government on its claim for unliquidated progress payments. In 2003, the Court of Appeals for the Federal Circuit, finding that the trial court had applied the wrong legal standard, vacated the trial court’s 2001 decision and ordered the case sent back to that court for further proceedings. On May 3, 2007, the U.S. Court of Federal Claims issued a decision upholding the government’s default termination of the A-12 contract. We believe that the ruling raises serious issues for appeal, and on May 4, 2007 we filed a Notice of Appeal with the Court. This follows an earlier trial court decision in favor of the Team and reversal of that initial decision on appeal.

If, after all judicial proceedings have ended, the courts determine, contrary to our belief, that a termination for default was appropriate, we would incur an additional loss of approximately $275, consisting principally of remaining inventory costs and adjustments, and, if the courts further hold that a money judgment should be entered against the Team, we would be required to pay the U.S. government one-half of the unliquidated progress payments of $1,350 plus statutory interest from February 1991 (currently totaling approximately $1,330). In that event, our loss would total approximately $1,611 in pre-tax charges. Should, however, the March 31, 1998 judgment of the U.S. Court of Federal Claims in favor of the Team be reinstated, we would be entitled to receive payment of approximately $1,079, including interest.

We believe that the termination for default is contrary to law and fact and that the loss provision established by McDonnell Douglas Corporation in 1990, which was supported by an opinion from outside counsel, continues to provide adequately for the reasonably possible reduction in value of A-12 net contracts in process as of September 30, 2007.

Final resolution of the A-12 litigation will depend on the outcome of further proceedings or possible negotiations with the U.S. government.

Employment and benefits litigation

We are a defendant in two employment discrimination class actions. In the Williams class action, which was filed on June 8, 1998 in the U.S. District Court for the Western District of Washington (alleging race discrimination), we prevailed in a jury trial in December 2005, but plaintiffs appealed the pre-trial dismissal of compensation claims in November 2005. In the Calender class action, which was filed January 25, 2005 in the U.S. Northern District of Illinois (a spin-off from Williams alleging race discrimination), plaintiffs dropped their promotions claim on June 6, 2006, and put their compensation claims on hold pending the outcome of the Williams appeal.

In addition, on March 2, 2006, we were served with a complaint filed in the U.S. District Court for the District of Kansas, alleging that hiring decisions made by Spirit Aerospace near the time of Boeing’s sale of the Wichita facility were tainted by age discrimination. The case is brought as a class action on behalf of individuals not hired by Spirit. Pursuant to an indemnity provision in the Asset Purchase Agreement, Spirit has agreed to defend and indemnify us.

On June 23, 2006, two employees and two former employees of Boeing filed a purported class action lawsuit in the U.S. District Court for the Southern District of Illinois against Boeing, McDonnell Douglas Corporation and the Pension Value Plan for Employees of The Boeing Company (the “Plan”) on behalf of themselves and similarly situated participants in the Plan. The plaintiffs allege that as of January 1, 1999 and all times thereafter, the Plan’s benefit formula used to compute the accrued benefit violates the accrual rules of Employment Retirement Income Security Act (ERISA) and that plaintiffs are entitled to a recalculation of their benefits along with other equitable relief. On March 13, 2007, the court granted Boeing’s motion and dismissed the suit with prejudice. Plaintiffs filed a motion to vacate

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the judgment, which Boeing opposed. The court denied the motion to vacate the judgment on September 6, 2007 and the parties filed a joint stipulation on September 14, 2007 concluding the lawsuit.

On September 13, 2006, two UAW Local 1069 retirees filed a class action lawsuit in the Middle District of Tennessee alleging that recently announced changes to medical plans for retirees of UAW Local 1069 constituted a breach of collective bargaining agreements under §301 of the Labor-Management Relations Act and §502(a)(1)(B) of ERISA. On September 15, 2006, Boeing filed a lawsuit in the Northern District of Illinois against the International UAW and two retiree medical plan participants seeking a declaratory judgment confirming that the Company has the legal right to make changes to these medical benefits. On June 4, 2007, the Middle District of Tennessee ordered that its case be transferred to the Northern District of Illinois. The two cases were consolidated on September 24, 2007. It is not possible at this time to determine whether an adverse outcome would have a material adverse effect on our financial position.

On October 13, 2006, we were named as a defendant in a lawsuit filed in the U.S. District Court for the Southern District of Illinois. Plaintiffs, seeking to represent a class of similarly situated participants and beneficiaries in the Boeing Company Voluntary Investment Plan (the “VIP Plan”), alleged that fees and expenses incurred by the VIP Plan were and are unreasonable and excessive, not incurred solely for the benefit of the VIP Plan and its participants, and were undisclosed to participants. The plaintiffs further alleged that defendants breached their fiduciary duties in violation of §502(a)(2) of ERISA, and sought injunctive and equitable relief pursuant to §502(a)(3) of ERISA. Plaintiffs have filed a motion to certify the class, which Boeing has opposed. On September 10, 2007, the court issued an order staying class certification pending resolution by the U.S. Court of Appeals for the Seventh Circuit of Lively v. Dynegy, Inc. It is not possible at this time to determine whether an adverse outcome would have a material adverse effect on our financial position.

BSSI/ICO litigation

On August 16, 2004, Boeing Satellite Systems International, Inc. (“BSSI”) filed a complaint for declaratory relief against ICO Global Communications (Operations), Ltd. (“ICO”) in Los Angeles County Superior Court. BSSI’s suit seeks a declaration that ICO’s prior termination of two contracts for convenience extinguished all claims between the parties. On September 16, 2004, ICO filed a cross-complaint alleging breach of contract and other claims, and seeking recovery of all amounts paid to BSSI under the contracts, which are alleged to be approximately $2,000; ICO added Boeing to the suit as a defendant approximately one year later. On January 13, 2006, BSSI filed a cross-complaint against ICO, ICO Global Communications (Holdings) Limited (“ICO Holdings”), ICO’s parent, and Eagle River Investments, LLC, parent of both ICO and ICO Holdings, alleging fraud and other claims. A trial is scheduled for March 2008. We believe that ICO’s claims lack merit and intend to aggressively pursue our claims.

BSSI/Thuraya litigation

On September 10, 2004, a group of insurance underwriters for Thuraya Satellite Telecommunications (“Thuraya”) requested arbitration before the International Chamber of Commerce (“ICC”) against BSSI. The Request for Arbitration alleges that BSSI breached its contract with Thuraya for sale of a model 702 satellite that experienced power loss anomalies. The arbitration hearing has been scheduled for April 2008 and the arbitration decision is expected to be issued later in 2008. The claimants seek approximately $199 (plus claims of interest, costs and fees) consisting of insurance payments made to Thuraya, and they further reserved the right to seek an additional $38 currently in dispute between Thuraya and some insurers. Thuraya has reserved its rights to seek uninsured losses that could increase the total amount disputed to $365. We believe these claims lack merit and intend to vigorously defend against them.

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We have insurance coverage to respond to this arbitration request and have notified responsible insurers. On May 26, 2006, a group of these insurers filed a declaratory judgment action in the Circuit Court of Cook County asserting certain defenses to coverage and requesting a declaration of their obligation under Boeing’s insurance and reinsurance policies relating to the Thuraya ICC arbitration. We believe the insurers’ position lacks merit. On May 25, 2007, the court stayed further proceedings in the coverage action pending completion of the arbitration but insurers have appealed that order.

BSSI/Telesat Canada

On November 9, 2006, Telesat Canada (“Telesat”) and a group of its insurers served BSSI with an arbitration demand alleging breach of contract, gross negligence and willful misconduct in connection with the constructive total loss of Anik F1, a model 702 satellite manufactured by BSSI. Telesat and its insurers seek over $385 in damages and $10 in lost profits. On December 1, 2006, we filed an action in the Ontario Superior Court of Justice, Ottawa, Canada, to enjoin the arbitration. We believe that the claims asserted by Telesat and its insurers lack merit, but we have notified our insurance carriers of the demand.

On April 26, 2007, a group of our insurers filed a declaratory judgment action in the Circuit Court of Cook County asserting certain defenses to coverage and requesting a declaration of their obligation under Boeing’s insurance and reinsurance policies relating to the threatened Telesat Anik F1 arbitration. We believe the insurers’ position lacks merit and intend to vigorously litigate the coverage issue if the Telesat arbitration goes forward.

BSSI/Superbird-6 litigation

On December 1, 2006, BSSI was served with an arbitration demand in subrogation brought by insurers for Space Communications Corporation alleging breach of warranty, breach of contract and gross negligence relating to the Superbird-6 communications satellite, which suffered a low perigee event shortly after launch in April 2004. The low orbit allegedly damaged the satellite, and a subsequent decision to de-orbit the satellite was made less than 12 months after launch. The model 601 satellite was manufactured by BSSI and delivered for launch by International Launch Services on an Atlas launch vehicle. The insurers seek to recover in excess of $240 from BSSI. We believe the insurers’ claims lack merit and intend to vigorously defend against them.

Note 10 – Other Commitments and Contingencies

Commercial aircraft commitments

In conjunction with signing a definitive agreement for the sale of new aircraft, we entered into specified-price trade-in commitments with certain customers that give them the right to trade in their used aircraft for the purchase of Sale Aircraft. The total contractual trade-in value was $937 and $1,162 as of September 30, 2007 and December 31, 2006. We anticipate that a significant portion of these commitments will not be exercised by customers. There were no probable contractual trade-in commitments as of September 30, 2007. Trade-in commitment agreements have expiration dates from 2008 through 2015.

Environmental matters and other contingencies

At September 30, 2007 and December 31, 2006, the aggregate amount of liabilities recorded relative to environmental matters was $579 and $582. Although not considered probable or reasonably estimable at this time, it is reasonably possible that we may incur additional remediation charges because of regulatory complexities and the risk of unidentified contamination.

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Included in Accounts payable and other liabilities is $1,042 and $1,254 as of September 30, 2007 and December 31, 2006 attributable to liabilities we have established for legal, environmental and other contingencies we deem probable and estimable.

Discontinued operations and business shutdowns

As part of the 2004 purchase and sale agreement with General Electric Capital Corporation related to the sale of Boeing Capital Corporation’s (BCC) Commercial Financial Services business, BCC is involved in a loss sharing arrangement for losses that may exist at the end of the initial and subsequent financing periods of transferred portfolio assets, or, in some instances, prior to the end of the financing term, such as certain events of default and repossession. As of September 30, 2007, our maximum exposure to loss associated with the loss sharing arrangement was $223. As of September 30, 2007 and December 31, 2006, the accrued liability under the loss sharing arrangement was $67 and $78.

During August 2006, we decided that we would exit the Connexion by Boeing high speed broadband communications business. We have not reached final settlements with all customers or suppliers. We do not believe the final settlements will have a material adverse effect on our earnings, cash flows and/or financial position.

Potential C-17 shut-down

As of September 30, 2007 we delivered 169 of the 190 C-17 aircraft ordered by the U.S. Air Force, with final deliveries scheduled for 2009. Due to the lack of additional U.S. government and international orders for the C-17, we announced in March 2007 that we stopped procurement for any new C-17 aircraft not under contract or firmly committed. However, in June 2007, based upon continued bipartisan congressional support, including the House Armed Services Committee addition of $2.4 billion for 10 C-17s in their mark of the 2008 budget, and U.S. Air Force testimony to Congress reflecting interest in additional C-17 aircraft, we directed key suppliers to begin work on 10 aircraft beyond the 190 currently on order. It is reasonably possible that we will decide in 2007 to complete production of the C-17 if further orders are not received. We are still evaluating the full financial impact of a potential production shut-down, including any recovery that would be available from the government. Such recovery from the government would not include the costs incurred by us resulting from the second quarter direction to key suppliers to begin working on the additional 10 aircraft.

Customer financing exposure and commitments

Aircraft financing is collateralized by security in the related asset. The value of the collateral is closely tied to commercial airline performance and may be subject to reduced valuation with market decline. Our financing portfolio has a concentration of various model aircraft. Aircraft financing carrying values related to major aircraft concentrations were as follows:

	September 30 2007		December 31 2006
717 Aircraft ($739 and $760 accounted for as operating leases)*	$	2,520	$	2,595
757 Aircraft ($870 and $904 accounted for as operating leases)*		1,102		1,167
767 Aircraft ($199 and $201 accounted for as operating leases)		613		740
777 Aircraft ($0 accounted for as operating leases)		102		718
MD-11 Aircraft ($535 and $555 accounted for as operating leases)*		623		645
737 Aircraft ($492 and $550 accounted for as operating leases)		526		583

* Out of production aircraft

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Financing commitments totaled $8,655 and $10,164 as of September 30, 2007 and December 31, 2006. We anticipate that a significant portion of these commitments will not be exercised by the customers as we continue to work with third party financiers to provide alternative financing to customers.

As of September 30, 2007 and December 31, 2006, future lease commitments on aircraft and other commitments not recorded on the Consolidated Statements of Financial Position totaled $250 and $323. These lease commitments extend through 2020, and our intent is to recover these lease commitments through sublease arrangements. As of September 30, 2007 and December 31, 2006, Accounts payable and other liabilities included less than $41 and $65 attributable to adverse commitments under these lease arrangements.

Sea Launch

A Sea Launch Zenit-3SL vehicle, carrying a Boeing-built NSS-8 satellite, experienced an anomaly during launch on January 30, 2007. Sea Launch has insurance to cover repairs and vehicle flight and expects to return to flight during the fourth quarter of 2007. We do not believe that this anomaly will have a material adverse impact on our results of operations, financial position, or cash flows. In addition, we continue to look at alternative capital structures for the venture.

Satellites

The Boeing-built NSS-8 satellite was declared a total loss due to an anomaly during launch on January 30, 2007. The NSS-8 satellite was insured for $200, which was collected during the second and third quarters of 2007. New Skies Satellites B.V. (“New Skies”) declined to exercise its option to purchase a replacement spacecraft due to its assertion that we anticipatorily breached the contract. We believe that had New Skies exercised its option, we would have fulfilled our contractual responsibilities. We do not expect the launch anomaly or New Skies’ assertion to materially impact our consolidated results of operations, financial position, or cash flows.

In certain launch and satellite sales contracts, we include provisions that specify that we bear risk of loss associated with the launch phase through acceptance in orbit by the customer. We have historically purchased insurance to cover these exposures when allowed under the terms of the contract and when economically advisable. The current insurance market reflects high premium rates and also suffers from a lack of capacity to handle all insurance requirements. We make decisions on the procurement of insurance based on our analysis of risk. There is one contractual launch scheduled in 2008 for which full insurance coverage may not be available or, if available, could be prohibitively expensive. We will continue to review this risk. We estimate that the potential uninsured amount for this launch could approach $350 depending on the nature of the uninsured event.

Financing commitments

We and Lockheed each will provide ULA with initial cash contributions of up to $25 and have agreed to make available to ULA a line of credit in the amount of up to $200 each as may be necessary from time to time to support ULA’s business during the five year period following December 1, 2006. ULA did not request any funds under the line of credit as of September 30, 2007.

We have entered into standby letters of credit agreements and surety bonds with financial institutions primarily relating to the guarantee of future performance on certain contracts. Contingent liabilities on outstanding letters of credit agreements and surety bonds aggregated approximately $4,640 and $4,368 as of September 30, 2007 and December 31, 2006.

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Note 11 – Business Segment Data

Effective January 1, 2007, the B-1 bomber program (formerly included in Precision Engagement and Mobility Systems) and certain Boeing Australia Limited programs (formerly included in Network and Space Systems) are included in Support Systems. Business segment data for all periods presented have been adjusted to reflect the realignment.

Our primary profitability measurements to review a segment’s operating results are earnings from operations and operating margins. See page 5 for a Summary of Business Segment Data, which is an integral part of this note.

Intersegment revenues, eliminated in Accounting differences/eliminations, are shown in the following table.

	Nine months ended September 30				Three months ended September 30
	2007		2006		2007		2006
Commercial Airplanes	$	306	$	723	$	50	$	119
Boeing Capital Corporation		79		92		24		31
Other		2		4				1
Total	$	387	$	819	$	74	$	151

Unallocated expense includes costs not attributable to business segments. Unallocated expense also includes the impact of cost measurement differences between GAAP and federal cost accounting standards as well as intercompany profit eliminations. The most significant items not allocated to segments are shown in the following table.

	Nine months ended September 30						Three months ended September 30
Unallocated expense	2007			2006			2007			2006
Share-based plans	$	(227	)	$	(540	)	$	(58	)	$	(97	)
Deferred compensation		(117	)		(131	)		(54	)		16
Pension		(420	)		(302	)		(149	)		(122	)
Post-retirement		(93	)		(60	)		(34	)		(31	)
Capitalized interest		(36	)		(33	)		(13	)		(10	)
Other		8			(183	)		23			42
Total	$	(885	)	$	(1,249	)	$	(285	)	$	(202	)

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Assets	September 30 2007		December 31 2006
Commercial Airplanes	$	11,469	$	10,296
Integrated Defense Systems:
Precision Engagement and Mobility Systems		4,734		4,718
Network and Space Systems		7,141		7,232
Support Systems		2,775		2,721
Total Integrated Defense Systems		14,650		14,671
Boeing Capital Corporation		6,806		7,987
Other		6,849		6,923
Unallocated		15,013		11,917
Total assets	$	54,787	$	51,794
Liabilities
Commercial Airplanes	$	15,090	$	13,109
Integrated Defense Systems:
Precision Engagement and Mobility Systems		3,529		3,849
Network and Space Systems		1,373		1,563
Support Systems		1,202		1,397
Total Integrated Defense Systems		6,104		6,809
Boeing Capital Corporation		5,073		6,082
Other		150		368
Unallocated		21,964		20,687
Total liabilities	$	48,381	$	47,055

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

The Boeing Company

Chicago, Illinois

We have reviewed the accompanying condensed consolidated statement of financial position of The Boeing Company and subsidiaries (the “Company”) as of September 30, 2007, and the related condensed consolidated statements of operations for the three-month and nine-month periods ended September 30, 2007 and 2006, of cash flows for the nine-month periods ended September 30, 2007 and 2006, and of shareholders’ equity for the nine-month period ended September 30, 2007. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial position of the Company as of December 31, 2006, and the related consolidated statements of operations, shareholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated February 15, 2007 (which includes an explanatory paragraph relating to the Company’s changes in accounting for pension and postretirement benefits and concessions received from vendors), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of December 31, 2006 and the condensed consolidated statement of shareholders’ equity for the year then ended is fairly stated, in all material respects, in relation to the consolidated statements of financial position and shareholders’ equity from which they have been derived.

/s/ DELOITTE & TOUCHE LLP

Chicago, Illinois

October 23, 2007

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FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY

Certain statements in this report may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. As a result, these statements speak only as of the date they were made and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Words such as “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” and similar expressions are used to identify these forward-looking statements. These include, among others, statements relating to:

· the effect of economic downturns or growth in particular regions;

· the adequacy of coverage, by allowance for losses, of risks related to our non-U.S. accounts receivable being payable in U.S. dollars;

· the continued operation, viability and growth of Commercial Airplane revenues and successful execution of our backlog in this segment;

· the timing and effects of decisions to complete or launch a Commercial Airplane program;

· the ability to successfully develop, timely produce and deliver the 787 and 747-8 aircraft;

· the effect of political and legal processes, changing priorities or reductions in the U.S. government or international government defense and space budgets on our revenues;

· the effective negotiation of collective bargaining agreements;

· the continuation of long-term trends in passenger revenue yields in the airline industry;

· the effect of valuation decline of our aircraft;

· the impact of airline bankruptcies on our revenues or operating results;

· the continuation of historical costs for fleet support services;

· the receipt of cost sharing payments for research and development;

· the receipt of estimated award and incentive fees on U.S. government contracts;

· the future demand for commercial satellites and projections of future order flow;

· the potential for technical or quality issues on development programs, including the Airborne Early Warning & Control program and other fixed price development programs, or in the commercial satellite industry to affect schedule and cost estimates or cause us to incur a material charge or experience a termination for default;

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· the outcome of any litigation and/or government investigation in which we are a party and other contingencies;

· returns on pension fund assets, impacts of future interest rate changes on pension obligations and healthcare cost inflation trends;

· the amounts and effects of underinsured operations including satellite launches;

· the scope, nature or impact of acquisition or disposition activity, such as Aviall, and investment in any joint ventures including Sea Launch and United Launch Alliance, and indemnifications related thereto; and

· the expected cash expenditures and charges associated with the exit of Connexion by Boeing.

Please see Item 1, “Business” and Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2006 for a description of risks and uncertainties that could cause our actual results to differ materially from the expectations reflected in our forward-looking statements. This report includes important information as to these risks in the “Legal Proceedings” and in the Notes to Condensed Consolidated Financial Statements included herein. Additional important information as to these risks is also included in this report in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CONSOLIDATED OPERATING RESULTS

The following table summarizes key indicators of consolidated results of operations:

	Nine months ended September 30						Three months ended September 30
(Dollars in millions)	2007			2006			2007			2006
Revenues	$	48,910		$	43,989		$	16,517		$	14,739
Earnings from operations		4,314			1,862			1,499			951
Operating margins		8.8	%		4.2	%		9.1	%		6.5	%
Effective income tax rate		33.1	%		37.3	%		30.3	%		29.8	%
Net earnings from continuing operations	$	3,031		$	1,226		$	1,109		$	694

	September 30 2007		December 31 2006
Contractual backlog	$	262,944	$	216,567
Unobligated backlog	$	32,187	$	33,717

Revenues

The following table summarizes revenues:

	Nine months ended September 30						Three months ended September 30
(Dollars in millions)	2007			2006			2007			2006
Commercial Airplanes	$	24,520		$	20,859		$	8,258		$	6,693
Integrated Defense Systems		23,710			22,752			8,008			7,792
Boeing Capital Corporation		619			784			197			304
Other		218			218			74			60
Accounting differences/eliminations		(157	)		(624	)		(20	)		(110	)
Revenues	$	48,910		$	43,989		$	16,517		$	14,739

Revenues for the nine and three months ended September 30, 2007 grew by $4,921 million and $1,778 million compared with the same periods in 2006, primarily due to the growth at Commercial Airplanes. Commercial Airplanes revenues increased by $3,661 million and $1,565 million, primarily due to higher new airplane deliveries and increased commercial aviation support activities. Integrated Defense Systems (IDS) revenues increased by $958 million and $216 million. Boeing Capital Corporation (BCC) revenues decreased by $165 million and $107 million due to a decrease in the customer financing portfolio. Accounting differences/eliminations changed by $467 million and $90 million primarily due to fewer Commercial Airplanes intercompany deliveries when compared with the same periods in 2006.

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Earnings from Operations

The following table summarizes earnings from operations:

	Nine months ended September 30						Three months ended September 30
(Dollars in millions)	2007			2006			2007			2006
Commercial Airplanes	$	2,611		$	2,068		$	945		$	646
Integrated Defense Systems		2,462			2,005			824			879
Boeing Capital Corporation		204			254			61			122
Other		(78	)		(645	)		(46	)		(494	)
Unallocated Expense		(885	)		(1,249	)		(285	)		(202	)
Settlement with U.S. Department of Justice, net of accruals					(571	)
Earnings from operations	$	4,314		$	1,862		$	1,499		$	951

Operating earnings for the nine and three months ended September 30, 2007 improved by $2,452 million and $548 million compared with the same periods in 2006. The increase is partly due to the $571 million global settlement with U.S. Department of Justice that occurred in the second quarter of 2006. Commercial Airplanes earnings increased by $543 million and $299 million compared with the same periods in 2006, primarily due to higher new airplane deliveries, commercial aviation support activities and improved cost performance offset by increased research and development expense. Commercial Airplanes’ research and development expense increased by $524 million to $2,192 million during the nine months and increased $23 million to $635 million during the three months ended September 30, 2007 compared with the same periods in 2006, primarily due to spending on the 787 and 747-8 programs. IDS earnings increased by $457 million and decreased by $55 million compared with the same periods in 2006. The increase is primarily due to a charge of $496 million in the Precision Engagement and Mobility Systems (PE&MS) segment related to Airborne Early Warning & Control (AEW&C) that was taken in the second quarter of 2006. BCC operating earnings decreased $50 million and $61 million reflecting lower revenues partially offset by improvements in aircraft valuations and lower expenses. Other segment earnings improved by $567 million and $448 million primarily due to the absence of losses related to Connexion by Boeing, including a charge of $280 million in the third quarter of 2006 which was part of our exit from this business, and a charge due to the write-down of $62 million of previously capitalized environmental costs.

The most significant expense items not allocated to segments are shown in the table below.

	Nine months ended September 30						Three months ended September 30
(Dollars in millions)	2007			2006			2007			2006
Pension and postretirement	$	(513	)	$	(362	)	$	(183	)	$	(153	)
Share-based plans		(227	)		(540	)		(58	)		(97	)
Deferred compensation		(117	)		(131	)		(54	)		16
Other		(28	)		(216	)		10			32
Unallocated expense	$	(885	)	$	(1,249	)	$	(285	)	$	(202	)

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We recorded net periodic benefit cost related to pensions and other postretirement benefits of $1,330 million and $1,249 million for the nine months ended September 30, 2007 and 2006. Not all net periodic benefit cost is recognized in earnings in the period incurred because it is allocated to production as product costs and a portion remains in inventory at the end of the reporting period. Accordingly, earnings from operations included $1,247 million and $870 million for the nine months ended September 30, 2007 and 2006. A portion of pension and other postretirement expense is recorded in the business segments and the remainder is included in unallocated pension and other postretirement expense.

Unallocated pension and other postretirement expense represents the difference between costs recognized under GAAP in the consolidated financial statements and federal cost accounting standards required to be utilized by our business segments for U.S. government contracting purposes. Pension and other postretirement expense increased during the nine months ended September 30, 2007 when compared with the same period of the prior year primarily due to increased overall pension costs recognized in inventory as of December 31, 2006, which are subsequently expensed in cost of sales in 2007.

The reduction in Share-based plans expense is primarily due to lower Performance Shares outstanding during the nine and three months ended September 30, 2007 and higher expense acceleration during the nine and three months ended September 30, 2006, resulting from ten payouts compared with six payouts in 2007. The year over year changes in deferred compensation expense are primarily driven by changes in our stock price. Other expense decreased partly due to reduced intercompany profit elimination as a result of fewer intercompany deliveries during the nine months ended September 30, 2007 when compared with the same period of 2006.

Other Earnings Items

	Nine months ended September 30						Three months ended September 30
(Dollars in millions)	2007			2006			2007			2006
Earnings from operations	$	4,314		$	1,862		$	1,499		$	951
Other income, net		355			296			139			104
Interest and debt expense		(139	)		(203	)		(47	)		(67	)
Earnings before income taxes		4,530			1,955			1,591			988
Income tax expense		(1,499	)		(729	)		(482	)		(294	)
Net earnings from continuing operations	$	3,031		$	1,226		$	1,109		$	694

Other income for the nine and three months ended September 30, 2007 increased $59 million and $35 million compared with the same periods in 2006 as a result of increases in average principal balances and higher average rates of return on cash and investments. Interest and debt expense for the nine and three months ended September 30, 2007 decreased $64 million and $20 million compared with the same periods in 2006, primarily due to capitalization of interest and debt repayments.

Our effective tax rates were 33.1% and 37.3% for the nine months ended September 30, 2007 and 2006. The decrease in the effective tax rate was primarily due to the global settlement with the U.S. Department of Justice in the second quarter of 2006, which was not deducted for tax purposes and research and development credits that existed in 2007 but not in 2006. This was partially offset by Foreign Sales Corporation and Extraterritorial Income exclusion tax benefits that existed in 2006, but did not recur in 2007, and other income tax provision adjustments.

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Backlog

Contractual backlog of unfilled orders excludes purchase options, announced orders for which definitive contracts have not been executed and unobligated U.S. and non-U.S. government contract funding. The increase in contractual backlog during the nine months ended September 30, 2007 was primarily due to orders in excess of deliveries on Commercial Airplane programs.

Unobligated backlog includes U.S. and foreign government definitive contracts for which funding has not been authorized. The decrease in unobligated backlog during the nine months ended September 30, 2007 is primarily due to funding released from existing contracts on Future Combat Systems (FCS), Proprietary, C-17 and Ground-based Midcourse Defense (GMD) partially offset by increases in the F-22 and F/A-18 programs and our space flight operations contract.

SEGMENT RESULTS OF OPERATIONS

COMMERCIAL AIRPLANES

Operating Results

	Nine months ended September 30						Three months ended September 30
(Dollars in millions)	2007			2006			2007			2006
Revenues	$	24,520		$	20,859		$	8,258		$	6,693
Earnings from operations	$	2,611		$	2,068		$	945		$	646
Operating margins		10.6	%		9.9	%		11.4	%		9.7	%

	September 30 2007		December 31 2006
Contractual backlog	$	224,414	$	174,276

Revenues

Revenues for the nine and three months ended September 30, 2007 increased by $3,661 million and $1,565 million compared with the same periods of 2006. This increase in revenue was primarily attributable to $2,252 million and $1,141 million from new airplane deliveries and increased commercial aviation support activities of $1,192 million and $329 million, partially generated by the acquisition of Aviall on September 20, 2006. The remaining increase in revenue of $217 million and $95 million was primarily from aircraft trading.

Commercial jet aircraft deliveries, including intercompany deliveries were as follows:

Program	717		737 NG	747	767	777	Total
Deliveries during the first nine months of 2007			250	12	9	58	329
Deliveries during the first nine months of 2006	5	(3)	223	11	9	47	295
Deliveries during the third quarter of 2007			81	5	3	20	109
Deliveries during the third quarter of 2006			81	3	3	13	100
Cumulative deliveries as of 9/30/2007	155		2,386	1,392	956	662

Aircraft accounted for under operating lease on a consolidated basis are in parentheses.

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Earnings from Operations and Margins

Earnings from operations for the nine and three months ended September 30, 2007 increased by $543 million and $299 million while operating margins improved by 0.7 and 1.7 percentage points to 10.6% and 11.4% compared with the same periods of 2006. The increases were primarily due to earnings of $653 million and $271 million from sales related to new airplane deliveries and increased earnings of $209 million and $42 million from commercial aviation support activities. In addition, $205 million and $9 million primarily from improved performance was offset by $524 million and $23 million of increased research and development expense.

Our research and development expense, net of supplier development cost sharing payments, was $2,192 million and $635 million for the nine and three months ended September 30, 2007, an increase of $524 million and $23 million compared with the same periods of 2006. This increase in research and development expense was primarily due to increased spending on the 787 and 747-8 programs. For the nine and three months ended September 30, 2007, supplier development cost sharing payments received were $130 million compared with $159 million and $58 million for the nine and three months ended September 30, 2006.

Backlog

The increase in contractual backlog during the nine months ended September 30, 2007 compared with December 31, 2006 was primarily due to orders in excess of deliveries on all programs.

Accounting quantity

The accounting quantities, undelivered units under firm orders and percentage of anticipated orders included in the program accounting estimates as compared with the number of cumulative firm orders were as follows:

	Program
As of 9/30/2007	737 NG	747	767	777	787
Program accounting quantities	3,600	1,474	998	950	*
Undelivered units under firm orders	1,796	114	55	344	710
Cumulative firm orders (CFO)	4,182	1,506	1,011	1,006
Anticipated orders	N/A	N/A	N/A	N/A
Anticipated orders as a % of CFO	N/A	N/A	N/A	N/A

	Program
As of 6/30/2007	737 NG	747	767	777	787
Program accounting quantities	3,600	1,474	994	950	*
Undelivered units under firm orders	1,630	118	58	331	637
Cumulative firm orders (CFO)	3,935	1,505	1,011	973
Anticipated orders	N/A	N/A	N/A	N/A
Anticipated orders as a % of CFO	N/A	N/A	N/A	N/A

	Program
As of 3/31/2007	737 NG	747	767	777	787
Program accounting quantities	3,400	1,474	994	900	*
Undelivered units under firm orders	1,515	122	61	322	514
Cumulative firm orders (CFO)	3,734	1,505	1,011	943
Anticipated orders	N/A	N/A	N/A	N/A
Anticipated orders as a % of CFO	N/A	N/A	N/A	N/A

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	Program
As of 12/31/2006	737 NG	747	767		777	787
Program accounting quantities	3,200	1,449	985		900	*
Undelivered units under firm orders	1,560	116	28		299	448
Cumulative firm orders (CFO)	3,696	1,496	975		903
Anticipated orders	N/A	N/A	8		N/A
Anticipated orders as a % of CFO	N/A	N/A	1	%	N/A

* The accounting quantity for the 787 program will be determined in the year of first airplane delivery, scheduled for 2008.

Firm orders represent new aircraft purchase agreements where the customers’ rights to cancel without penalty have expired. Cumulative firm orders represent the cumulative number of commercial jet aircraft deliveries plus undelivered firm orders.

737 Next-Generation There was no change to the accounting quantity for the 737 Next-Generation (NG) program during the third quarter of 2007.

747 Program There was no change to the accounting quantity for the 747 program during the third quarter of 2007. In 2006 we completed firm configuration of the 747-8 Freighter and expect firm configuration for the Intercontinental version and first engine test before the end of 2007. There are inherent risks associated with the development and production of any airplane, which can impact expectations. Deliveries of the first 747-8 Freighter and Intercontinental airplanes are targeted for late 2009 and late 2010.

767 Program The accounting quantity for the 767 program increased by four units during the third quarter of 2007.

777 Program There was no change to the accounting quantity for the 777 program during the third quarter of 2007.

787 Program We are in the very critical stages of final assembly and flight testing, and the risks that always inhere in these latter stages of airplane production still remain. We continue to address challenges associated with assembly of the first airplanes, including completion of out-of-sequence production work, software integration and parts availability. First flight is now anticipated to occur around the end of first quarter 2008 and initial deliveries have been rescheduled from the original target of May 2008, until late November or December 2008.

INTEGRATED DEFENSE SYSTEMS

IDS Realignment

Effective January 1, 2007, the B-1 bomber program (formerly included in PE&MS) and certain Boeing Australia Limited programs (formerly included in Network and Space Systems (N&SS)) are included in Support Systems. Business segment data for all periods presented have been adjusted to reflect the realignment. See Note 11.

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Operating Results

	Nine months ended September 30						Three months ended September 30
(Dollars in millions)	2007			2006			2007			2006
Revenues	$	23,710		$	22,752		$	8,008		$	7,792
Earnings from operations	$	2,462		$	2,005		$	824		$	879
Operating margins		10.4	%		8.8	%		10.3	%		11.3	%

	September 30 2007		December 31 2006
Contractual backlog	$	38,530	$	42,291
Unobligated backlog	$	31,856	$	33,424

Revenues

IDS revenues for the nine and three months ended September 30, 2007 increased by $958 million and $216 million, an increase of 4% and 3% from the same periods in 2006. Increase for the nine months reflects higher volume in all three segments. The increase for the three months reflects higher volume in N&SS and Support Systems partly offset by lower revenues in PE&MS.

Earnings from Operations

IDS operating earnings for the nine months ended September 30, 2007 increased by $457 million and for the three months decreased by $55 million. Operating margin for the nine months increased by 1.6% when compared with the same period in 2006 primarily due to a charge of $496 million in our PE&MS segment in the second quarter of 2006 resulting from technical and flight test issues on the AEW&C development program. Operating margin for the three months decreased by 1% when compared to the same quarter in 2006 primarily due to charges in our N&SS segment.

Backlog

IDS’ total backlog was $70,386 million at September 30, 2007, down $5,329 million from $75,715 million at December 31, 2006. The decrease was primarily due to current year deliveries and sales on multi-year contracts awarded in prior years with the largest decreases in FCS, C-17 and Proprietary programs, which were partially offset by a multi-year contract for F-22 aircraft and international orders for F/A-18 and AEW&C aircraft.

For further details on the changes between periods, refer to the discussions of the individual segments below.

Additional Considerations

Our business includes a variety of development programs which have complex design and technical challenges. Many of these programs have cost-type contracting arrangements. In these cases the associated financial risks are primarily in lower profit rates or program cancellation if milestones and technical progress are not accomplished. Examples of these programs include Airborne Laser, E/A-18G, Family of Beyond Line-of-Sight Terminals, FCS, GMD, Joint Tactical Radio System, P-8A and Proprietary programs.

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Some of our development programs are contracted on a fixed-price basis. Many of these programs have very complex designs. As technical or quality issues arise, we may experience schedule delays and cost impacts, which could increase our estimated cost to perform the work or reduce our estimated price, either of which could result in a material charge. These programs are ongoing, and while we believe the cost and fee estimates incorporated in the financial statements are appropriate, the technical complexity of these programs creates financial risk as additional completion costs may become necessary or scheduled delivery dates could be missed, which could trigger termination-for-default provisions, the loss of satellite on-orbit incentive payments, or other financially significant exposure. These programs have risk for reach-forward losses if our estimated costs exceed our estimated fees. Examples of these programs include AEW&C, international KC-767 Tankers, commercial and military satellites, SBInet, Vigilare and High Frequency Modernisation.

Precision Engagement and Mobility Systems

Operating Results

	Nine months ended September 30						Three months ended September 30
(Dollars in millions)	2007			2006			2007			2006
Revenues	$	10,063		$	9,848		$	3,360		$	3,413
Earnings from operations	$	1,232		$	915		$	404		$	462
Operating margins		12.2	%		9.3	%		12.0	%		13.5	%

	September 30 2007		December 31 2006
Contractual backlog	$	22,058	$	24,739
Unobligated backlog	$	10,298	$	8,962

Revenues

PE&MS revenues for the nine months ended September 30, 2007 increased by $215 million and for the three months decreased by $53 million, an increase of 2% and a decrease of 2% compared with the same periods in 2006. The increase for the nine months is primarily due to increased deliveries of Chinook and F-15 aircraft and increased volume on the P-8A program, partially offset by lower Apache and Joint Direct Attack Munition deliveries. The decrease for the three months is primarily due to lower volume on the F-22 program and changes in aircraft delivery mix.

Deliveries of units for new-build production aircraft, excluding remanufactures and modifications were as follows:

	Nine months ended September 30		Three months ended September 30
	2007	2006	2007	2006
F-18 Models	33	32	11	11
T-45TS Goshawk	7	11	2	4
F-15E Eagle	6	3	3	3
C-17 Globemaster	12	12	4	4
CH-47 Chinook	7	0	1	0
AH-64 Apache	17	21	9	7
C-40A Clipper	2	1	0	0
Total New-Build Production Aircraft	84	80	30	29

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Earnings from Operations

PE&MS operating earnings for the nine and three months ended September 30, 2007 increased by $317 million and decreased by $58 million. The increase for the nine months is primarily due to higher earnings in 2007 on the F-22 programs and the second quarter 2006 charge of $496 million on the AEW&C development program. These increases were partially offset by revised cost estimates on the international KC-767 Tanker program during the first two quarters of 2007 and lower price escalation on the C-17 program. The decrease for the three months is primarily due to contract mix and timing on several tactical aircraft, rotorcraft and weapon programs.

Backlog

PE&MS total backlog was $32,356 million as of September 30, 2007, a decrease of 4% from December 31, 2006. The decrease was due to deliveries and sales on multi-year contracts awarded in prior years for C-17, P-8A and F-15. These decreases were partially offset by a multi-year contract for F-22 aircraft and international orders for F/A-18 and AEW&C aircraft.

Additional Considerations

Items which could have a future impact on PE&MS operations include the following:

AEW&C We recorded charges of $496 million in the second quarter of 2006 and $274 million in the fourth quarter of 2006 on our international AEW&C program. This development program, also known as Wedgetail in Australia and Peace Eagle in Turkey, consists of a 737-700 aircraft outfitted with a variety of command and control and advanced radar systems, some of which have never been installed on an airplane before. Wedgetail includes six aircraft and Peace Eagle includes four aircraft. This is an advanced and complex fixed-price development program involving technical challenges at the individual subsystem level and in the overall integration of these subsystems into a reliable and effective operational capability. We believe that the cost estimates incorporated in the financial statements are appropriate; however, the technical complexity of the programs creates financial risk as additional completion costs may be necessary or scheduled delivery dates could be missed.

International KC-767 Tanker Program During the first and second quarters of 2007, the PE&MS segment recorded charges on the international KC-767 Tanker program, which were partially offset at the consolidated level. Currently this program includes four aircraft for the Italian Air Force and four aircraft for the Japanese Air Self Defense Force. These charges are associated with additional estimated costs for mitigating both the risks on the flight test program and the delivery risk associated with the Italy and Japan contracts. These programs are ongoing, and while we believe the cost estimates incorporated in the financial statements are appropriate, the technical complexity of the programs creates financial risk as additional completion and development costs may be necessary or scheduled delivery dates could be missed.

C-17 As of September 30, 2007, we delivered a total of 169 of the 190 C-17 aircraft ordered by the U.S. Air Force, with final deliveries scheduled for 2009. Due to the lack of additional U.S. government and international orders for the C-17, we announced in March 2007 that we stopped procurement for any new C-17 aircraft not under contract or firmly committed. However, in June 2007, based upon continued bipartisan congressional support, including the House Armed Services Committee addition of $2.4 billion for 10 C-17s in their mark of the 2008 budget, and U.S. Air Force testimony to Congress reflecting interest in additional C-17 aircraft, we directed key suppliers to begin work on 10 aircraft beyond the 190 currently on order. It is reasonably possible that we will decide in 2007 to complete production of the C-17 if further orders are not received. We are still evaluating the full financial impact of a potential production shut-down, including any recovery that would be available from the government. Such recovery from the government would not include the costs incurred by us resulting from the second quarter direction to key suppliers to begin working on the additional 10 aircraft.

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Network and Space Systems

Operating Results

	Nine months ended September 30						Three months ended September 30
(Dollars in millions)	2007			2006			2007			2006
Revenues	$	8,805		$	8,527		$	3,006		$	2,845
Earnings from operations	$	596		$	485		$	178		$	226
Operating margins		6.8	%		5.7	%		5.9	%		7.9	%

	September 30 2007		December 31 2006
Contractual backlog	$	7,045	$	7,838
Unobligated backlog	$	20,727	$	23,723

Revenues

N&SS revenues for the nine and three months ended September 30, 2007 increased by $278 million and $161 million, increases of 3% and 6% compared with the same periods in 2006. The increase in 2007 is primarily due to increased volume on SBInet and several satellite programs. In addition, we had commercial Delta launches in both the second and third quarters of 2007. Exclusion of military Delta volume, now a component of our equity investment in United Launch Alliance (ULA), partially offset the increases and reduced revenues for both the nine and three month periods.

Earnings from Operations

N&SS operating earnings for the nine and three months ended September 30, 2007 increased by $111 million and decreased by $48 million, a 23% increase and 21% decrease from the same periods in 2006. There were significant items in both nine month periods. Our third quarter 2007 results include charges of $94 million related to Delta II, of which $38 million represents our share of losses recorded by ULA related to Delta II. The first nine months of 2006 were impacted by charges of $117 million on the Delta programs due to a settlement of an Evolved Expendable Launch Vehicle launch capability services contract and Mission Manifest changes in quantity and timing of launches. Charges from revised cost estimates on Wideband Global SATCOM and Vigilare, both fixed priced development programs, further reduced 2006 earnings.

Backlog

N&SS total backlog was $27,772 million at September 30, 2007, a decrease of 12% from December 31, 2006. Decreases due to revenues recognized on the FCS, Proprietary, and GMD programs were partially offset by an increase in our space flight operations contract.

Additional Considerations

Items which could have a future impact on N&SS operations include the following:

United Launch Alliance On December 1, 2006, we completed the transaction with Lockheed Martin Corporation (“Lockheed”) to create a 50/50 joint venture named United Launch Alliance L.L.C. (“ULA”). ULA combines the production, engineering, test and launch operations associated with U.S. government launches of Boeing Delta and Lockheed Atlas rockets. In connection with the transaction, we initially contributed net assets of $914 million at December 1, 2006. On July 24, 2007 we and Lockheed reached agreement with respect to resolution of the final working capital and the value of the

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launch vehicle support contracts that each party contributed to form ULA. Effective August 15, 2007 the parties received all necessary approvals from the Compliance Officer pursuant to the terms of the Consent Order with the U.S. Federal Trade Commission and the terms of the agreement which resulted in additional contributions from both parties with Boeing contributing an additional $97 million. We do not expect to incur a cash outflow as a result of the settlement. The amount due from us will be offset against future payments due to us from ULA associated with an inventory supply agreement. Additionally, conformed accounting adjustments made by ULA during the second quarter resulted in adjustments to ULA’s balance sheet. The book value of our investment exceeds our proportionate share of ULA’s net assets. This difference will be expensed ratably in future years. Based on the adjusted contributions and the conformed accounting policies established by ULA, this amortization is expected to be approximately $15 million annually for the next 17 years.

We and Lockheed each will provide ULA with initial cash contributions of up to $25 million, and we each have agreed to extend a line of credit to ULA of up to $200 million to support its working capital requirements. In connection with the transaction, we and Lockheed transferred performance responsibility for certain U.S. government contracts to ULA as of the closing date. We and Lockheed agreed to jointly guarantee the performance of those contracts to the extent required by the U.S. government.

In December 2006, we agreed to indemnify ULA through December 31, 2020 against potential non-recoverability of $1,375 million of Boeing Delta inventories included in contributed assets plus $1,860 million of remaining inventory subject to the inventory supply agreement which ends on March 31, 2021. Since inception, ULA sold $247 million of inventories that were contributed by us. As part of its integration ULA is continuing to assess the future of the Delta II program. During the third quarter of 2007, ULA determined that certain Delta II inventory is not fully recoverable. As a result we recorded a charge of $27 million for non-recoverable Delta II inventory and $38 million for our share of the loss recorded by ULA related to Delta II. Future decisions regarding the Delta II program could reduce our earnings by up to $100 million.

We also indemnified ULA in the event ULA is unable to obtain re-pricing of certain contracts which we contributed to ULA and to which we believe ULA is entitled. We will be responsible for any shortfall and may record up to $338 million in pre-tax losses related to these contracts.

Sea Launch The Sea Launch venture, in which we are a 40% partner, provides ocean-based launch services to commercial satellite customers.

We issued credit guarantees to creditors of the Sea Launch venture to assist it in obtaining financing. In the event we are required to perform on these guarantees, we believe we can recover a portion of the cost (estimated at $486 million) through guarantees from the other venture partners. The components of this exposure are as follows:

(Dollars in millions)	Estimated Maximum Exposure		Established Reserves		Estimated Proceeds from Recourse		Estimated Net Exposure
Credit guarantees	$	461	$	184	$	277
Partner loans (principal and interest)		472		283		189
Trade receivable from Sea Launch		323		323
Performance guarantees		33				20		13
Subcontract termination		7						7
Other receivables and Inventory		53		39				14
	$	1,349	$	829	$	486	$	34

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We suspended recording equity losses after writing our investment in and direct loans to Sea Launch down to zero in 2001 and accruing our obligation for third-party guarantees on Sea Launch indebtedness. We are not obligated to provide any further financial support to the Sea Launch venture. However, in the event that we do extend additional financial support to Sea Launch in the future, we will recognize suspended losses as appropriate.

A Sea Launch Zenit-3SL vehicle, carrying a Boeing-built NSS-8 satellite, experienced an anomaly during launch on January 30, 2007. Sea Launch has insurance to cover repairs and vehicle flight and expects to return to flight during the fourth quarter of 2007. We do not believe that this anomaly will have a material adverse impact on our results of operations, financial position or cash flows. In addition, we continue to look at alternative capital structures for the venture.

Satellites The Boeing-built NSS-8 satellite was declared a total loss due to an anomaly during launch on January 30, 2007. The NSS-8 satellite was insured for $200 million which was collected during the second and third quarters of 2007. New Skies Satellites B.V. (“New Skies”) declined to exercise its option to purchase a replacement spacecraft due to its assertion that we anticipatorily breached the contract. We believe that had New Skies exercised its option, we would have fulfilled our contractual responsibilities. We do not expect the launch anomaly or New Skies’ assertion to materially impact our consolidated results of operations, financial position or cash flows.

See the discussions of Boeing Satellite Systems International, Inc. (“BSSI”) litigation/arbitration with ICO Global Communications (Operations), Ltd., Thuraya Satellite Telecommunications, Telesat Canada and Space Communications Corporation in Note 9 Legal Proceedings.

Support Systems

Operating Results

	Nine months ended September 30						Three months ended September 30
(Dollars in millions)	2007			2006			2007			2006
Revenues	$	4,842		$	4,377		$	1,642		$	1,534
Earnings from operations	$	634		$	605		$	242		$	191
Operating margins		13.1	%		13.8	%		14.7	%		12.5	%

	September 30 2007		December 31 2006
Contractual backlog	$	9,427	$	9,714
Unobligated backlog	$	831	$	739

Revenues

Support Systems revenues for the nine and three months ended September 30, 2007 increased by $465 million and $108 million, an increase of 11% and 7% compared with the same periods in 2006. The growth in both periods was primarily due to higher Integrated Logistics program volume resulting from the acquisition of Aviall in the third quarter of 2006 and increased revenue on the C-17 support program. Higher international program volume resulting from our increased ownership in Alsalam Aircraft Company which occurred during the second quarter of 2006 also increased the 2007 nine month revenues.

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Earnings from Operations

Support Systems operating earnings for the nine and three months ended September 30, 2007 increased by $29 million and $51 million compared with the same periods in 2006. Operating margins decreased slightly by 0.7% for the nine months and an increased by 2.2% for the three months, primarily due to improved contract mix.

Backlog

Support Systems total backlog was $10,258 million at September 30, 2007, a decrease of 2% from December 31, 2006. Decreases due to revenues in Integrated Logistics programs and Maintenance, Modification and Upgrade programs were partially offset by increases in International Support programs and Training Systems and Services programs.

BO EING CAPITAL CORPORATION

Operating Results

	Nine months ended September 30						Three months ended September 30
(Dollars in millions)	2007			2006			2007			2006
Revenues	$	619		$	784		$	197		$	304
Earnings from operations	$	204		$	254		$	61		$	122
Operating margins		33.0	%		32.4	%		31.0	%		40.1	%

Revenues

BCC segment revenues consist principally of lease income from equipment under operating lease, interest from financing receivables and notes and investment income. BCC’s revenues for the nine and three months ended September 30, 2007, decreased $165 million and $107 million when compared with the same periods in 2006 primarily due to lower net gain on disposal of assets, lower investment income and lower interest income on notes receivable.

Operating Earnings

BCC’s operating earnings are presented net of interest expense, provision for losses, asset impairment expense, depreciation on leased equipment and other operating expenses. Operating earnings for the nine and three months ended September 30, 2007 decreased by $50 million and $61 million reflecting lower revenues partially offset by improvements in aircraft valuations, lower asset impairment expense, lower interest expense and lower depreciation expense.

Financial Position

The following table presents selected financial data for BCC:

(Dollars in millions)	September 30 2007			December 31 2006
BCC Customer Financing and Investment Portfolio	$	6,816		$	8,034
Valuation Allowance as a % of Total Receivables		2.4	%		2.4	%
Debt	$	4,670		$	5,590
Debt-to-Equity Ratio		5.0-to-1			5.0-to-1

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BCC’s customer financing and investment portfolio at September 30, 2007 decreased from December 31, 2006 due to pre-payment of certain notes receivable, normal portfolio run-off, and the sale of certain portfolio assets. At September 30, 2007 and December 31, 2006, BCC had $117 million and $259 million of assets that were held for sale or re-lease, of which $116 million and $253 million had firm contracts to be sold or placed on lease. Additionally, leases with a carrying value of approximately $339 million are scheduled to terminate in the next 12 months. The related aircraft are being remarketed and $314 million were subject to firm contracts at September 30, 2007.

Restructurings and Restructuring Requests

From time to time, certain BCC customers request a restructuring of their transactions with BCC. BCC has not reached agreement on any restructuring requests that they believe would have a material adverse effect on its earnings, cash flows and/or financial position.

OTHER

Other segment losses for the nine and three months ended September 30, 2007 were $78 million and $46 million compared with losses of $645 million and $494 million for the same periods of 2006. The reductions of $567 million and $448 million for the nine and three months ended September 30, 2007 were primarily due to the absence of losses related to Connexion by Boeing, which we exited during the third quarter of 2006. As part of our exit from this business, we recognized a charge of $280 million in the third quarter of 2006 in addition to losses of $209 million and $85 million for the nine and three months ended September 30, 2006. We have not reached final settlements with all customers or suppliers. We do not believe the final settlements will have a material adverse effect on our earnings, cash flows and/or financial position. Additionally, during the third quarter of 2006, the Other segment recorded a charge due to the write-down of $62 million of previously capitalized environmental costs.

LIQ UIDITY AND CAPITAL RESOURCES

Cash flow summary

	Nine months ended September 30
(Dollars in millions)	2007			2006
Net earnings	$	3,041		$	1,226
Non-cash items		2,083			2,579
Changes in working capital		2,567			1,253
Net cash provided by operating activities		7,691			5,058
Net cash used by investing activities		(1,597	)		(2,568	)
Net cash used by financing activities		(3,285	)		(2,725	)
Effect of exchange rate changes on cash and cash equivalents		21			21
Net increase/(decrease) in cash and cash equivalents		2,830			(214	)
Cash and cash equivalents at beginning of year		6,118			5,412
Cash and cash equivalents at end of period	$	8,948		$	5,198

Operating Activities

Net cash provided by operating activities increased by $2,633 million to $7,691 million during the nine months ended September 30, 2007, primarily due to an increase in operating earnings, an increase in accounts payable compared with a decrease during the nine months ended September 30, 2006, and

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decreases in customer financing assets due to pre-payment of certain notes receivable and normal portfolio run-off.

Investing Activities

Cash used for investing activities decreased to $1,597 million during the nine months ended September 30, 2007 from $2,568 million during the nine months ended September 30, 2006, primarily due to our investment of $1,738 million in the acquisition of Aviall, Inc. in September 2006.

As of September 30, 2007, our externally managed portfolio of investment grade fixed income instruments had an average duration of 1.5 years. The investments balance as of September 30, 2007 was $3,311 million, of which $372 was classified as short-term, and held as available-for-sale.

Financing Activities

Cash used by financing activities increased to $3,285 million during the nine months ended September 30, 2007 from $2,725 million during the nine months ended September 30, 2006, primarily due to an increase in common shares repurchased of $563 million.

During the nine months ended September 30, 2007, we repaid $1,007 million of debt, including scheduled repayments of $937 million of debt held at BCC. The recorded balance of debt as of September 30, 2007 was $8,580 million, of which $4,670 million was recorded at BCC. There were no debt issuances during the nine months ended September 30, 2007 or 2006.

During the nine months ended September 30, 2007, we repurchased 19,608,431 shares at an average price of $96.10 in our open market share repurchase program, and 27,668 shares in stock swaps. During the nine months ended September 30, 2006, we repurchased 16,021,802 shares at an average price of $78.32 in our open market share repurchase program, 3,749,377 shares at an average price of $80.28 as part of the ShareValue Trust distribution, and 36,416 shares in stock swaps. Cash used for treasury share repurchases was $1,817 million for the nine months ended September 30, 2007, compared with $1,254 million for the same period in 2006.

Credit Ratings

Our credit ratings are summarized below:

	Fitch	Moody’s	Standard & Poor’s
Long-term:
Boeing/BCC	A+	A2	A+
Short-term:
Boeing/BCC	F1	P-1	A-1

On September 12, 2007, Fitch Ratings revised its ratings outlook to positive from stable, citing continuation of strong orders and production ramp up of large commercial aircraft, in addition to an over-funded status of our pension plans, debt reduction and stronger than expected cash flows. The ratings were reaffirmed at A+ for long-term borrowings and F1 for short-term borrowings.

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Capital Resources

Boeing and BCC each have a commercial paper program that continues to serve as a significant source of short-term liquidity. As of September 30, 2007, neither we nor BCC had any outstanding commercial paper issuances.

We believe we have substantial borrowing capability. Currently, we have $3,000 million ($1,500 million exclusively available for BCC) of unused borrowing on revolving credit line agreements.

As of September 30, 2007, we continue to be in full compliance with all covenants contained in our debt agreements.

CONTR ACTUAL OBLIGATIONS

Our 2006 Annual Report on Form 10-K contains a table that summarizes our known obligations to make future payments pursuant to certain contracts as of December 31, 2006. As of September 30, 2007, our total liability for income taxes payable, including uncertain tax positions, was $1,959 million, of which $1,080 million we expect to pay in the next twelve months. We are not able to reasonably estimate the timing of future cash flows related to the remaining $879 million. See Note 4.

OFF-BAL ANCE SHEET ARRANGEMENTS

We enter into arrangements with off-balance sheet risk in the normal course of business. These arrangements are primarily in the form of guarantees, product warranties, and variable interest entities. See Notes 8 and 10.

STANDARDS ISSUED AND NOT YET IMPLEMENTED

See Note 2 for discussion of Standards Issued and Not Yet Implemented.

CONTINGENT ITEMS/LEGAL PROCEEDINGS

Various legal proceedings, claims and investigations related to products, contracts and other matters are pending against us. Most significant legal proceedings are related to matters covered by our insurance. Material contingencies are discussed in Notes 9 and 10, including our contesting the default termination of the A-12 aircraft, employment and benefits litigation brought by several of our employees, and litigation/arbitration involving BSSI.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes to our market risk since December 31, 2006.

Item 4. Controls and Procedures

(a) Disclosure controls and procedures.

Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls as of September 30, 2007 and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed

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by us in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting.

We continued our migration strategy to a single, enterprise-wide instance of a general ledger/project costing system with the implementation of this system in our Shared Services Group in the third quarter. This change was made as part of an ongoing process improvement initiative to strengthen the overall design and operating effectiveness of our financial reporting controls and is not in response to an identified internal control deficiency. There were no other changes during the third quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Currently, we are a defendant in a number of legal proceedings. For a discussion of contingencies related to legal proceedings, see Note 9 to our Condensed Consolidated Financial Statements, which is hereby incorporated by reference.

We possess a National Pollutant Discharge Elimination System (NPDES) permit allowing us to discharge industrial waste water and surface storm water from our Santa Susana Field Laboratory (SSFL) site in Simi Valley, California. The permit regulates surface water discharges at various locations on the property and imposes limits on the permissible levels of certain chemical compounds in the discharges. In July 2004 and again in January and March 2006, the California Regional Water Quality Control Board, Los Angeles Region (“Regional Board”), amended our 1998 NPDES Permit for the SSFL site. The amendments imposed increasingly more stringent numeric surface water discharge limits. We appealed the permit amendments to the California Water Resources Control Board (“State Board”) in early 2006. In December 2006, the State Board issued its order remanding the matter to the Regional Board to establish a compliance schedule, but upheld the Regional Board’s inclusion of the limits in the permit. On January 17, 2007, we filed a petition for a writ challenging the State Board’s adverse rulings in Los Angeles County Superior Court and that matter is pending.

On October 16, 2007, the Regional Board on remand from the State Board issued (1) a draft permit that contained revised requirements and numeric discharge limits and proposed compliance schedule, and (2) a draft cease and desist order that would provide a further compliance schedule and interim discharge limits. The Regional Board is scheduled to consider the draft permit and draft cease and desist order at a hearing on November 1, 2007.

In the period 2004 to the present, we have received five violation notices for exceeding permissible limits under our NPDES permit. In November 2005, the U.S. Attorney’s office in Los Angeles served us with a grand jury subpoena seeking documents pertaining to our compliance with the NPDES permit during the period 2001 to the present and subsequently alleged that we have violated the federal Clean Water Act. We have produced documents pursuant to the subpoena but have maintained that no criminal violations of the Clean Water Act have occurred and that the issue should be resolved administratively, not through criminal prosecution. On July 25, 2007, the Regional Board issued a Complaint for Administrative Liability for 79 self-reported incidents where permissible discharge limits had been exceeded between October 17, 2004 and January 16, 2006. On August 27, 2007, we paid $0.471 million to settle the complaint, with half of the payment constituting an administrative penalty

and the other half being disbursed to state-approved environmental nonprofit groups. This resolution

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addressed most but not all of the incidents reported, and additional administrative or other action is still possible.

On October 12, 2007, we entered into an agreement with the State of California under which we will donate, upon completion of the required remediation, the SSFL site to the state as open-space state park land. We will remain responsible for any future claims arising out of pre-existing conditions at the site at the time of the transfer.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in our 2006 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Issuer Purchases of Equity Securities

The following table provides information about purchases we made during the quarter ended September 30, 2007 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act:

ISSUER PURCHASES OF EQUITY SECURITIES

(Dollars in millions except per share data)

	(a)	(b)		(c)	(d)
Period	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Approximate Dollar Value That May Yet be Purchased Under the Plans or Programs
7/01/07 thru 7/31/07	2,421,387	$	101.56	2,420,277	$	1,146
8/01/07 thru 8/31/07	2,837,257	$	98.39	2,836,375	$	867
9/01/07 thru 9/30/07	3,822,793	$	99.38	3,822,754	$	487
TOTAL	9,081,437	$	99.65	9,079,406

⁽¹⁾ We repurchased an aggregate of 9,079,406 shares of our common stock in the open market pursuant to our repurchase program. On August 28, 2006 our Board of Directors approved the repurchase of $3 billion of common stock (the “Program”). Unless terminated earlier by a Board resolution, the Program will expire when we have used all authorized funds for repurchase. Outside of the Program, we purchased an aggregate of 2,031 shares in swap transactions.

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Item 6. Exhibits

(a) Exhibits:

(3)	Articles of Incorporation and By-Laws
	(i)        By-Laws,as amended on August 28, 2007.
(15)	Letter from Independent Registered Public Accounting Firm regarding unaudited interim financial information.
(31.1)	Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
(31.2)	Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
(32.1)	Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
(32.2)	Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE BOEING COMPANY
	(Registrant)
October 23, 2007	/S/     HARRY S. MCGEE III
(Date)	Harry S. McGee III
	Vice President Finance
	& Corporate Controller
	(Chief Accounting Officer)

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EX-3.I

Exhibit 3.1

The Boeing Company By-Laws

(as amended and restated August 28, 2007)

ARTICLE I

Stockholders’ Meetings

1. Section 1 Annual Meetings

2. Section 2 Special Meetings

3. Section 3 Place of Meeting

4. Section 4 Notice of Meetings

5. Section 5 Waivers of Notice

6. Section 6 Quorum

7. Section 7 Proxies

1.    7.1 Appointment

2.    7.2 Delivery to Corporation; Duration

8. Section 8 Inspectors of Election

1.    8.1 Appointment

2.    8.2 Duties

3.    8.3 Determination of Proxy Validity

9. Section 9 Fixing the Record Date

1.    9.1 Meetings

2.    9.2 Consent to Corporate Action Without a Meeting

3.    9.3 Dividends, Distributions, and Other Rights

4.    9.4 Voting List

10. Section 10 Action By Stockholders Without a Meeting

11. Section 11 Notice of Stockholder Business and Nominations; Required Vote for Directors; Director Qualification

1.    11.1 Notice of Stockholder Business and Nominations

• 11.1.A Annual Meeting of Stockholders

• 11.1.B Special Meeting of Stockholders

• 11.1.C General

2.    11.2 Required Vote for Directors

3.    11.3 Director Qualification: Submission of Questionnaire, Representation and Agreement

12. Section 12 Notice to Corporation

ARTICLE II

Board of Directors

1. Section 1 Number and Term of Office

2. Section 2 Nomination and Election

1.    2.1 Nomination

2.    2.2 Election

3. Section 3 Place of Meeting

4. Section 4 Annual Meeting

5. Section 5 Stated Meetings

6. Section 6 Special Meetings

1.    6.1 Convenors and Notice

2.    6.2 Waiver of Notice

7. Section 7 Quorum and Manner of Acting

8. Section 8 Chairman of the Board

9. Section 9 Resignations

10. Section 10 Removal of Directors

11. Section 11 Filling of Vacancies Not Caused by Removal

12. Section 12 Directors’ Fees

13. Section 13 Action Without a Meeting

ARTICLE III

Board Committees

1. Section 1 Audit Committee

2. Section 2 Other Committees

1.    2.1 Committee Powers

2.    2.2 Committee Members

3. Section 3 Quorum and Manner of Acting

ARTICLE IV

Officers and Agents:

Terms, Compensation, Removal, Vacancies

1. Section 1 Officers

2. Section 2 Term of Office

3. Section 3 Salaries of Elected Officers

4. Section 4 Bonuses

5. Section 5 Removal of Elected and Appointed Officers

6. Section 6 Vacancies

ARTICLE V

Officers’ Duties and Powers

1. Section 1 Chairman of the Board

2. Section 2 President

3. Section 3 Chief Executive Officer

4. Section 4 Vice Presidents and Controller

5. Section 5 Secretary

6. Section 6 Treasurer

7. Section 7 Additional Powers and Duties

8. Section 8 Disaster Emergency Powers of Acting Officers

ARTICLE VI

Stock and Transfers of Stock

1. Section 1 Stock Certificates

2. Section 2 Transfer Agents and Registrars

3. Section 3 Transfers of Stock

4. Section 4 Lost Certificates

ARTICLE VII

Miscellaneous

1. Section 1 Fiscal Year

2. Section 2 (Repealed)

3. Section 3 Signing of Negotiable Instruments

4. Section 4 Indemnification of Directors and Officers

1.    4.1 Right to Indemnification

2.    4.2 Right of Indemnitee to Bring Suit

3.    4.3 Nonexclusivity of Rights

4.    4.4 Insurance, Contracts, and Funding

5.    4.5 Persons Serving Other Entities

6.    4.6 Indemnification of Employees and Agents of the Corporation

7.    4.7 Procedures for the Submission of Claims

5. Section 5 Designated Engineer

1.    Appointment of Designated Engineer

2.    Grant of Authority to the Designated Engineer

3.    Grant of Authority to Appropriate Officers

ARTICLE VIII

Amendments

1. Section 1 Amendment of the By Laws: General

2. Section 2 Amendments as to Compensation and Removal of Officers

ARTICLE I

Stockholders’ Meetings

SECTION 1. Annual Meetings.

The Annual Meeting of the stockholders shall be held on such date and at such time as the Board of Directors shall determine, for the election of directors and the transaction of such other business as may come before the meeting.

SECTION 2. Special Meetings.

A special meeting of the stockholders may be called at any time by the Board of

Directors, or by stockholders holding together at least twenty five percent of the outstanding shares of stock entitled to vote, except as otherwise provided by statute or by the Certificate of Incorporation or any amendment thereto.

SECTION 3. Place of Meeting.

All meetings of the stockholders of the Corporation shall be held at such place or places within or without the State of Delaware as may from time to time be fixed by the Board of Directors or as shall be specified or fixed in the respective notices or waivers of notice thereof.

SECTION 4. Notice of Meetings.

Except as otherwise required by statute and as set forth below, notice of each annual or special meeting of stockholders shall be given to each stockholder of record entitled to vote at such meeting not less than thirty nor more than sixty (or the maximum number permitted by applicable law) days before the meeting date. If the Corporation has an Interested Stockholder as defined in Article EIGHTH of the Certificate of Incorporation, notice of each special meeting of stockholders shall be given to each stockholder of record entitled to vote at such meeting not less than fifty five nor more than sixty (or the maximum number permitted by applicable law) days before the meeting date, unless the calling of such meeting is ratified by the affirmative vote of a majority of the Continuing Directors as defined in Article EIGHTH of the Certificate of Incorporation, in which case notice of such special meeting shall be given to each stockholder of record entitled to vote at such meeting not less than thirty nor more than sixty (or the maximum number permitted by applicable law) days before the meeting date. Such notice shall be given by delivering to each stockholder a written or printed notice thereof either personally or by mailing such notice in a postage prepaid envelope addressed to the stockholder’s address as it appears on the stock books of the Corporation. Except as otherwise required by statute, no publication of any notice of a meeting of stockholders shall be required. Every notice of a meeting of stockholders shall state the place, date, and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

SECTION 5. Waivers of Notice.

Whenever any notice is required to be given to any stockholder under the provisions of these By Laws, the Certificate of Incorporation, or the Delaware General Corporation Law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. The attendance of a stockholder at a meeting, in person or by proxy, shall constitute a waiver of notice of such meeting, except when a stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

SECTION 6. Quorum.

At all meetings of stockholders, except when otherwise provided by statute or by the Certificate of Incorporation or any amendment thereto, or by the By Laws, the presence, in person or by proxy duly authorized, of the holders of one third of the outstanding

shares of stock entitled to vote shall constitute a quorum for the transaction of business; and except as otherwise provided by statute or rule of law, or by the Certificate of Incorporation or any amendment thereto, or by the By Laws, the vote, in person or by proxy, of the holders of a majority of the shares constituting such quorum shall be binding upon all stockholders of the Corporation. In the absence of a quorum, a majority of the shares present in person or by proxy and entitled to vote may adjourn any meeting, from time to time but not for a period of more than thirty days at any one time, until a quorum shall attend. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally called. Unless otherwise provided by statute, no notice of an adjourned meeting need be given.

SECTION 7. Proxies.

7.1 Appointment.

Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy. Such authorization may be accomplished by (a) the stockholder or such stockholder’s authorized officer, director, employee, or agent executing a writing or causing his or her signature to be affixed to such writing by any reasonable means, including facsimile signature, or (b) by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the intended holder of the proxy or to a proxy solicitation firm, proxy support service, or similar agent duly authorized by the intended proxy holder to receive such transmission; provided, that any such telegram, cablegram, or other electronic transmission must either set forth or be accompanied by information from which it can be determined that the telegram, cablegram, or other electronic transmission was authorized by the stockholder. Any copy, facsimile telecommunication, or other reliable reproduction of the writing or transmission by which a stockholder has authorized another person to act as proxy for such stockholder may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication, or other reproduction shall be a complete reproduction of the entire original writing or transmission.

7.2 Delivery to Corporation; Duration.

A proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting or the delivery to the Corporation of the consent to corporate action in writing. A proxy shall become invalid three years after the date of its execution, unless otherwise provided in the proxy. A proxy with respect to a specified meeting shall entitle the holder thereof to vote at any reconvened meeting following adjournment of such meeting but shall not be valid after the final adjournment thereof.

SECTION 8. Inspectors of Election.

8.1 Appointment. In advance of any meeting of stockholders, the Board of Directors of the Corporation

shall appoint one or more persons to act as inspectors of election at such meeting and to make a written report thereof. The Board of Directors may designate one or more persons to serve as alternate inspectors to serve in place of any inspector who is unable or fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the chairman of such meeting shall appoint one or more persons to act as inspector of elections at such meeting.

8.2 Duties.

The inspectors shall: (a) ascertain the number of shares of the Corporation outstanding and the voting power of each such share; (b) determine the shares represented at the meeting and the validity of proxies and ballots; (c) count all votes and ballots; (d) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by them; and (e) certify their determination of the number of shares represented at the meeting and their count of the votes and ballots. Each inspector of election shall, before entering upon the discharge of his or her duties, take and sign an oath to faithfully execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors of election may appoint or retain other persons or entities to assist them in the performance of their duties.

8.3 Determination of Proxy Validity.

The validity of any proxy or ballot executed for a meeting of stockholders shall be determined by the inspectors of election in accordance with the applicable provisions of the Delaware General Corporation Law as then in effect. In determining the validity of any proxy transmitted by telegram, cablegram, or other electronic transmission, the inspectors shall record in writing the information upon which they relied in making such determination.

SECTION 9. Fixing the Record Date.

9.1 Meetings.

For the purpose of determining stockholders entitled to notice of and to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall be not fewer than thirty nor more than sixty (or the maximum number permitted by applicable law) days before the date of such meeting. If the Corporation has an Interested Stockholder as defined in Article EIGHTH of the Certificate of Incorporation, the record date for each special meeting of stockholders shall be not fewer than fifty five nor more than sixty (or the maximum number permitted by applicable law) days before the meeting date, unless the calling of such meeting is ratified by the affirmative vote of a majority of the Continuing Directors, as defined in Article EIGHTH of the Certificate of Incorporation. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice

of and to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

9.2 Consent to Corporate Action Without a Meeting.

For the purpose of determining the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (or the maximum number permitted by applicable law) days after the date on which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by Chapter 1 of the Delaware General Corporation Law as now or hereafter amended, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the records of proceedings of meetings of stockholders. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by Chapter 1 of the Delaware General Corporation Law as now or hereafter amended, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

9.3 Dividends, Distributions, and Other Rights.

For the purpose of determining the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion, or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (or the maximum number permitted by applicable law) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

9.4. Voting List.

At least ten days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting shall be made, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. This list shall be open to examination by any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the

place where the meeting is to be held. The list shall also be produced and kept at such meeting for inspection by any stockholder who is present.

SECTION 10. Action by Stockholders Without a Meeting.

Subject to the provisions of Article NINTH of the Certificate of Incorporation, any action which could be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, are (a) signed by the holders of outstanding stock having not fewer than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and (b) delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the records of proceedings of meetings of stockholders. Delivery made to the Corporation’s registered office shall be by hand or by certified mail or registered mail, return receipt requested. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless written consents signed by a sufficient number of stockholders to take such action are delivered to the Corporation, in the manner required by this Section, within sixty (or the maximum number permitted by applicable law) days of the date of the earliest dated consent delivered to the Corporation in the manner required by this Section 10. The validity of any consent executed by a proxy for a stockholder pursuant to a telegram, cablegram, or other means of electronic transmission transmitted to such proxy holder by or upon the authorization of the stockholder shall be determined by or at the direction of the Secretary of the Corporation. A written record of the information upon which the person making such determination relied shall be made and kept in the records of the proceedings of the stockholders. Any such consent shall be inserted in the minute book as if it were the minutes of a meeting of the stockholders. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

SECTION 11. Notice of Stockholder Business and Nominations; Required Vote for Directors; Director Qualification.

11.1 Notice of Stockholder Business and Nominations.

A. Annual Meetings of Stockholders.

1. 1. Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation’s notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who (i) was a stockholder of record at the time of giving of notice provided for in this By Law and at the time of the annual meeting, (ii) is entitled to vote at the meeting and (iii) complies with the notice procedures set forth in this By Law.

2. 2. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to Section 11.1.A(1)(c) of this By Law, the stockholder must have given timely notice thereof in writing to the Secretary and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred and twentieth day and not later than the close of business on the ninetieth day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than thirty days before or more than sixty days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the one hundred and twentieth day prior to such annual meeting and not later than the close of business on the later of the ninetieth day prior to such annual meeting and the tenth day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above. To be in proper form, a stockholder’s notice to the Secretary must: (a) set forth, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, if any, (ii) the class or series and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, if any, as of the date of such notice (which information shall be supplemented by such stockholder and beneficial owner, if any, not later than ten days after the record date for the meeting to disclose such ownership as of the record date), and (iii) any other information relating to such stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”); (b) if the notice relates to any business other than the nomination of a director that the stockholder proposes to bring before the meeting, set forth (i) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest of such stockholder and beneficial owner, if any, in such business and (ii) a description of all agreements, arrangements and understandings between such stockholder and beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such business by such stockholder; (c) set forth, as to each person, if any, whom the stockholder proposes to nominate for election or reelection as a director (i) all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act (including such person’s written consent to being named in the

proxy statement as a nominee and to serving as a director if elected and a statement whether such person, if elected, intends to tender, promptly following such person’s election or re-election, an irrevocable resignation effective upon such person’s failure to receive the required vote for re-election at the next meeting at which such person would face re-election and upon acceptance of such resignation by the Board of Directors) and (ii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; and (d) with respect to each nominee for election or reelection to the Board of Directors, include the completed and signed questionnaire, representation and agreement required by Section 11.3 of this By Law. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.

3. 3. Notwithstanding anything in the second sentence of Section 11.1.A(2) of this By Law to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least one hundred days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this By Law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation.

B. Special Meetings of Stockholders.

Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who (i) is a stockholder of record at the time of giving of notice provided for in this By Law and at the time of the special meeting, (ii) is

entitled to vote at the meeting and (iii) complies with the notice procedures set forth in this By Law. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by Section 11.1.A(2) of this By Law (including the completed and signed questionnaire, representation and agreement required by Section 11.3 of this By Law) shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred and twentieth day prior to such special meeting and not later than the close of business on the later of the ninetieth day prior to such special meeting and the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder’s notice as described above.

C. General.

1. 1. Only such persons who are nominated in accordance with the procedures set forth in this By Law shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this By Law. Except as otherwise provided by law, the Certificate of Incorporation or these By Laws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this By Law and, if any proposed nomination or business is not in compliance with this By Law, to declare that such defective proposal or nomination shall be disregarded.

2. 2. For purposes of this By Law, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

3. 3. Notwithstanding the foregoing provisions of this By Law, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this By Law. Nothing in this By Law shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a 8 under the Exchange Act or (ii) of the holders of any series of Preferred Stock if and to the extent provided for under law, the Certificate of Incorporation or these By Laws.

11.2 Required Vote for Directors.

A nominee for director shall be elected to the Board of Directors if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election; provided,

however, that the directors shall be elected by a plurality of the votes cast at any meeting of stockholders for which (i) the Secretary of the Corporation receives a notice that a stockholder has nominated a person for election to the Board of Directors in compliance with the advance notice requirements for stockholder nominees for director set forth in Section 11.1 of this By-law and (ii) such nomination has not been withdrawn by such stockholder on or prior to the tenth day preceding the date the Corporation first mails its notice of meeting for such meeting to stockholders. If directors are to be elected by a plurality of the votes cast, stockholders shall not be permitted to vote against a nominee. Votes cast shall exclude abstentions with respect to that director’s election.

11.3 Director Qualification: Submission of Questionnaire, Representation and Agreement.

To be eligible to be a nominee for election or reelection as a director of the Corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under Section 11.1 of this By Law) to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request), which agreement shall (i) provide that such person (A) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (2) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein, and (C) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation.

SECTION 12. Notice to Corporation.

Any written notice required to be delivered by a stockholder to the Corporation pursuant to Section 11.1 of this Article I or Section 2.1 of Article II of these By Laws must be given, either by personal delivery or by registered or certified mail, postage prepaid, to the Secretary at the Corporation’s executive offices in the City of Seattle, State of Washington.

ARTICLE II

Board of Directors

SECTION 1. Number and Term of Office.

The number of directors shall be twelve, but the number may be increased, or decreased to not less than three, from time to time, either by the directors by adoption of a resolution to such effect or by the stockholders by amendment of the By Laws in accordance with Article VIII hereof. Until the annual meeting of stockholders of the Corporation to be held in 2006, the directors shall be divided into three classes, each of which shall be composed as nearly as possible of one third of the directors. Until the annual meeting of stockholders to be held in 2006, each director shall serve for the term to which the director was elected, and until a successor shall have been elected and qualified or until the director’s prior death, resignation, or removal. The terms of all directors in office immediately prior to the opening of the polls for the 2006 annual meeting of stockholders of the Corporation shall expire at the time of the opening of the polls for the 2006 annual meeting of stockholders of the Corporation. At each succeeding annual meeting of stockholders of the Corporation, each director shall be elected to hold office until the next annual meeting of stockholders or until his or her successor shall be elected and qualified or until his or her earlier resignation or removal.

SECTION 2. Nomination and Election.

2.1 Nomination.

Only persons who are nominated in accordance with Article I, Section 11 of these By Laws shall be eligible for election as directors.

2.2 Election.

At each election of directors by stockholders, the persons who are elected in accordance with Article I, Section 11 of these By Laws shall be the directors.

SECTION 3. Place of Meeting.

Meetings of the Board of Directors, or of any committee thereof, may be held either within or without the State of Delaware.

SECTION 4. Annual Meeting.

Each year the Board of Directors shall meet in connection with the annual meeting of stockholders for the purpose of electing officers and for the transaction of other business. No notice of such meeting is required. Such annual meeting may be held at any other time or place which shall be specified in a notice given as hereinafter provided for special meetings of the Board, or in a consent and waiver of notice thereof, signed by all the directors.

SECTION 5. Stated Meetings.

The Board of Directors may, by resolution adopted by affirmative vote of a majority of the whole Board, from time to time appoint the time and place for holding stated meetings of the Board, if by it deemed advisable; and such stated meetings shall thereupon be held at the time and place so appointed, without the giving of any special

notice with regard thereto. In case the day appointed for a stated meeting shall fall upon a legal holiday, such meeting shall be held on the next following day, not a legal holiday, at the regularly appointed hour. Except as otherwise provided in the By Laws, any and all business may be transacted at any stated meeting.

SECTION 6. Special Meetings.

6.1 Convenors and Notice.

Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board or any two directors. Notice of a special meeting of the Board of Directors, stating the place, day, and hour of the meeting, shall be given to each director in writing (by mail, wire, facsimile, or personal delivery) or orally (by telephone or in person).

6.2 Waiver of Notice.

With respect to a special meeting of the Board of Directors, a written waiver, signed by a director, shall be deemed equivalent to notice to that director. A director’s attendance at a meeting shall constitute that director’s waiver of notice of such meeting, except when the director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the waiver of notice of such meeting.

SECTION 7. Quorum and Manner of Acting.

Except as herein otherwise provided, forty percent of the total number of directors fixed by or in the manner provided in these By Laws at the time of any stated or special meeting of the Board or, if vacancies exist on the Board of Directors, forty percent of such number of directors then in office, provided, however, that such number may not be less than one third of the total number of directors fixed by or in the manner provided in these By Laws, shall constitute a quorum for the transaction of business; and, except as otherwise required by statute or by the Certificate of Incorporation or any amendment thereto, or by the By Laws, the act of a majority of the directors present at any such meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum, a majority of the directors present may adjourn any meeting, from time to time, until a quorum is present. No notice of any adjourned meeting need be given.

SECTION 8. Chairman of the Board.

The Chairman of the Board shall preside, when present, at all meetings of the Board, except as otherwise provided by law.

SECTION 9. Resignations.

Any director of the Corporation may resign at any time by giving written notice thereof to the Secretary. Such resignation shall take effect at the time specified therefor or if the

time is not specified, upon delivery thereof; and, unless otherwise specified with respect thereto, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 10. Removal of Directors.

Until the 2006 annual meeting of stockholders of the Corporation, any director may be removed solely for cause by the affirmative vote of the holders of record of a majority of the outstanding shares of stock entitled to vote, at a meeting of the stockholders called for that purpose; and the vacancy on the Board caused by any such removal may be filled by the stockholders at such meeting or at any subsequent meeting. All directors elected at and after the 2006 annual meeting of stockholders of the Corporation may be removed with or without cause by the affirmative vote of the holders of record of a majority of the outstanding shares of stock entitled to vote, at a meeting of the stockholders called for that purpose; and the vacancy on the Board caused by any such removal may be filled by the stockholders at such meeting or at any subsequent meeting.

SECTION 11. Filling of Vacancies Not Caused by Removal.

In case of any increase in the number of directors, or of any vacancy created by death or resignation, the additional director or directors may be elected or, as the case may be, the vacancy or vacancies may be filled, either (a) by the Board of Directors at any meeting, (i) if the Corporation has an Interested Stockholder as defined in Article EIGHTH of the Certificate of Incorporation, by the affirmative vote of a majority of the Continuing Directors, as defined in Article EIGHTH, or (ii) if the Corporation does not have an Interested Stockholder, by the affirmative vote of a majority of the remaining directors, though less than a quorum; or (b) by the stockholders entitled to vote, either at an annual meeting or at a special meeting thereof called for the purpose, by the affirmative vote of a majority of the outstanding shares entitled to vote at such meeting.

SECTION 12. Directors’ Fees.

The Board of Directors shall have authority to determine from time to time the amount of compensation which shall be paid to its members for attendance at meetings of the Board or of any committee of the Board.

SECTION 13. Action Without a Meeting.

Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.

ARTICLE III

Board Committees

SECTION 1. Audit Committee.

In addition to any committees appointed pursuant to Section 2 of this Article, there shall be an Audit Committee, appointed annually by the Board of Directors, consisting of at

least three directors who are not members of management. It shall be the responsibility of the Audit Committee to review the scope and results of the annual independent audit of books and records of the Corporation and its subsidiaries and to discharge such other responsibilities as may from time to time be assigned to it by the Board of Directors. The Audit Committee shall meet at such times and places as the members deem advisable, and shall make such recommendations to the Board of Directors as they consider appropriate.

SECTION 2. Other Committees.

2.1 Committee Powers.

The Board of Directors may appoint standing or temporary committees and invest such committees with such powers as it may see fit, with power to subdelegate such powers if deemed desirable by the Board of Directors; but no such committee shall have the power or authority of the Board of Directors to adopt, amend, or repeal the By Laws of the Corporation or approve, adopt or recommend to the stockholders of the Corporation any action or matter expressly required by the Certificate of Incorporation, these By Laws or the Delaware General Corporation Law to be submitted to stockholders for approval.

2.2 Committee Members.

The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.

SECTION 3. Quorum and Manner of Acting.

A majority of the number of directors composing any committee of the Board of Directors, as established and fixed by resolution of the Board of Directors, shall constitute a quorum for the transaction of business at any meeting of such committee but, if less than a majority are present at a meeting, a majority of such directors present may adjourn the meeting from time to time without further notice. The act of a majority of the members of a committee present at a meeting at which a quorum is present shall be the act of such committee.

ARTICLE IV

Officers and Agents: Terms, Compensation, Removal, Vacancies

SECTION 1. Officers.

The elected officers of the Corporation shall be a Chairman of the Board (who shall be a director) and, at the discretion of the Board, a President (who shall be a director), and one or more Vice Presidents (each of whom may be assigned by the Board of Directors or the

Chief Executive Officer an additional title descriptive of the functions assigned to such officer and one or more of whom may be designated Executive or Senior Vice President). The Board may also elect one or more Vice Chairmen. The Board of Directors shall also designate either the Chairman of the Board or the President as the Chief Executive Officer of the Corporation. The Board of Directors shall appoint a Controller, a Secretary, and a Treasurer. Any number of offices, whether elective or appointive, may be held by the same person. The Chief Executive Officer may, by a writing filed with the Secretary, designate titles as officers for employees and agents and appoint Assistant Secretaries and Assistant Treasurers, as, from time to time, may appear to be necessary or advisable in the conduct of the affairs of the Corporation and may, in the same manner, terminate or change such titles.

SECTION 2. Term of Office.

So far as practicable, all elected officers shall be elected at the annual meeting of the Board in each year, and shall hold office until the annual meeting of the Board in the next subsequent year and until their respective successors are chosen. The Controller, Secretary, and Treasurer shall hold office at the pleasure of the Board.

SECTION 3. Salaries of Elected Officers.

The salaries paid to the elected officers of the Corporation shall be authorized or approved by the Board of Directors.

SECTION 4. Bonuses.

None of the officers, directors, or employees of the Corporation or any of its subsidiary corporations shall at any time be paid any bonus or share in the earnings or profits of the Corporation or any of its subsidiary corporations except pursuant to a plan approved by affirmative vote of two thirds of the members of the Board of Directors.

SECTION 5. Removal of Elected and Appointed Officers.

Any elected or appointed officer may be removed at any time, either for or without cause, by affirmative vote of a majority of the whole Board of Directors, at any meeting called for the purpose.

SECTION 6. Vacancies.

If any vacancy occurs in any office, the Board of Directors may elect or appoint a successor to fill such vacancy for the remainder of the term.

ARTICLE V

Officers’ Duties and Powers

SECTION 1. Chairman of the Board.

The Chairman of the Board shall preside, when present, at all meetings of the stockholders (except as otherwise provided by statute) and at all meetings of the Board of Directors. The Chairman shall have general power to execute bonds, deeds, and contracts

in the name of the Corporation; to affix the corporate seal; to sign stock certificates; and to perform such other duties and services as shall be assigned to or required of the Chairman by the Board of Directors.

SECTION 2. President.

The President shall have general power to execute bonds, deeds, and contracts in the name of the Corporation and to affix the corporate seal; to sign stock certificates; during the absence or disability of the Chairman of the Board to exercise the Chairman’s powers and to perform the Chairman’s duties; and to perform such other duties and services as shall be assigned to or required of the President by the Board of Directors; provided, that if the office of President is vacant, the Chairman shall exercise the duties ordinarily exercised by the President until such time as a President is elected or appointed.

SECTION 3. Chief Executive Officer.

The officer designated by the Board of Directors as the Chief Executive Officer of the Corporation shall have general and active control of its business and affairs. The Chief Executive Officer shall have general power to appoint or designate all employees and agents of the Corporation whose appointment or designation is not otherwise provided for and to fix the compensation thereof, subject to the provisions of these By Laws; to remove or suspend any employee or agent who shall not have been elected or appointed by the Board of Directors or other body; to suspend for cause any employee, agent, or officer, other than an elected officer, pending final action by the body which shall have appointed such employee, agent, or officer; and to exercise all the powers usually pertaining to the office held by the Chief Executive Officer of a corporation.

SECTION 4. Vice Presidents and Controller.

The several Vice Presidents and the Controller shall perform all such duties and services as shall be assigned to or required of them, from time to time, by the Board of Directors or the Chief Executive Officer, respectively.

SECTION 5. Secretary.

The Secretary shall attend to the giving of notice of all meetings of stockholders and of the Board of Directors and shall keep and attest true records of all proceedings thereat. The Secretary shall have charge of the corporate seal and have authority to attest any and all instruments or writings to which the same may be affixed and shall keep and account for all books, documents, papers, and records of the Corporation relating to its corporate organization. The Secretary shall have authority to sign stock certificates and shall generally perform all the duties usually appertaining to the office of secretary of a corporation. In the absence of the Secretary, an Assistant Secretary or Secretary pro tempore shall perform the duties of the Secretary.

SECTION 6. Treasurer.

The Treasurer shall have the care and custody of all moneys, funds, and securities of the Corporation, and shall deposit or cause to be deposited all funds of the Corporation in accordance with directions or authorizations of the Board of Directors or the Chief Executive Officer. The Treasurer shall have power to sign stock certificates, to indorse

for deposit or collection, or otherwise, all checks, drafts, notes, bills of exchange, or other commercial paper payable to the Corporation, and to give proper receipts or discharges therefor. In the absence of the Treasurer, an Assistant Treasurer shall perform the duties of the Treasurer.

SECTION 7. Additional Powers and Duties.

In addition to the foregoing especially enumerated duties and powers, the several officers of the Corporation shall perform such other duties and exercise such further powers as may be provided in these By Laws or as the Board of Directors may from time to time determine, or as may be assigned to them by any superior officer.

SECTION 8. Disaster Emergency Powers of Acting Officers.

If, as a result of a disaster or other state of emergency, the Chief Executive Officer is unable to perform the duties of that office, (a) the powers and duties of the Chief Executive Officer shall be performed by the employee with the highest base salary who shall be available and capable of performing such powers and duties and, if more than one such employee has the same base salary, by the employee whose surname begins with the earliest letter of the alphabet among the group of those employees with the same base salary; and (b) the officer performing such duties shall continue to perform such powers and duties until the Chief Executive Officer becomes capable of performing those duties or until the Board of Directors shall have elected a new Chief Executive Officer or designated another individual as Acting Chief Executive Officer; and (c) such officer shall have the power in addition to all other powers granted to the Chief Executive Officer by these By Laws and by the Board of Directors to appoint an acting President, acting Vice President – Finance, acting Controller, acting Secretary, and acting Treasurer, if any of the persons duly elected to any such office is not by reason of such disaster or emergency able to perform the duties of such office, each of such acting appointees to serve in such capacities until the officer for whom the appointee is acting becomes capable of performing the duties of such office or until the Board of Directors shall have designated another individual to perform such duties or have elected another person to fill such office; and (d) any such acting officer so appointed shall be entitled to exercise all powers vested by the By Laws or the Board of Directors in the duly elected officer for whom the acting officer is acting; and (e) anyone transacting business with this Corporation may rely upon a certification by any two officers of the Corporation that a specified individual has succeeded to the powers of the Chief Executive Officer and that such person has appointed other acting officers as herein provided and any person, firm, corporation, or other entity to which such certification has been delivered by such officers may continue to rely upon it until notified of a change in writing signed by two officers of this Corporation.

ARTICLE VI

Stock and Transfers of Stock

SECTION 1. Stock Certificates.

Every stockholder shall be entitled to a certificate, signed by the Chairman of the Board or the President or a Vice President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, certifying the number of shares owned by the stockholder in the Corporation. Any and all of the signatures on a certificate may be a facsimile. If any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent, or registrar at the date of issue.

SECTION 2. Transfer Agents and Registrars.

The Board of Directors may, in its discretion, appoint responsible banks or trust companies in the Borough of Manhattan, in the City of New York, State of New York, and in such other city or cities as the Board may deem advisable, from time to time, to act as transfer agents and registrars of the stock of the Corporation; and, when such appointments shall have been made, no stock certificate shall be valid until countersigned by one of such transfer agents and registered by one of such registrars.

SECTION 3. Transfers of Stock.

Shares of stock may be transferred by delivery of the certificates therefor, accompanied either by an assignment in writing on the back of the certificates or by written power of attorney to sell, assign, and transfer the same, signed by the record holder thereof; but no transfer shall affect the right of the Corporation to pay any dividend upon the stock to the holder of record thereof, or to treat the holder of record as the holder in fact thereof for all purposes, and no transfer shall be valid, except between the parties thereto, until such transfer shall have been made upon the books of the Corporation.

SECTION 4. Lost Certificates.

The Board of Directors may provide for the issuance of new certificates of stock to replace certificates of stock lost, stolen, mutilated, or destroyed, or alleged to be lost, stolen, mutilated, or destroyed, upon such terms and in accordance with such procedures as the Board of Directors shall deem proper and prescribe.

ARTICLE VII

Miscellaneous

SECTION 1. Fiscal Year.

The fiscal year of the Corporation shall be the calendar year.

SECTION 2. (Repealed in its entirety by vote of the stockholders, May 5, 1975.)

SECTION 3. Signing of Negotiable Instruments.

All bills, notes, checks, or other instruments for the payment of money shall be signed or countersigned by such officer or officers and in such manner as from time to time may be prescribed by resolution (whether general or special) of the Board of Directors.

SECTION 4. Indemnification of Directors and Officers.

4.1. Right to Indemnification.

Each person who was or is made a party or is threatened to be made a party to or is otherwise involved (including, without limitation, as a witness) in any actual or threatened action, suit, or proceeding, whether civil, criminal, administrative, or investigative (hereinafter a “proceeding”), by reason of the fact that he or she is or was a director or officer of the Corporation or that, being or having been such a director or officer or an employee of the Corporation, he or she is or was serving at the request of an executive officer of the Corporation as a director, officer, employee, or agent of another corporation or of a partnership, joint venture, trust, or other enterprise, including service with respect to an employee benefit plan (hereinafter an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as such a director, officer, employee, or agent or in any other capacity while serving as such a director, officer, employee, or agent, shall be indemnified and held harmless by the Corporation to the full extent permitted by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), or by other applicable law as then in effect, against all expense, liability, and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) actually and reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the indemnitee’s heirs, executors, and administrators; provided, however, that except as provided in Section 4.2 with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized or ratified by the Board of Directors of the Corporation. The right to indemnification conferred in this Section 4.1 shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an “advancement of expenses”); provided, however, that an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an under taking (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Section 4.1 or otherwise; and provided, further, that an advancement of expenses shall not be made if the Corporation’s Board of Directors makes a good faith determination that such payment would violate law or public policy.

4.2 Right of Indemnitee to Bring Suit.

If a claim under Section 4.1 is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall also be entitled to be paid the expense of prosecuting or defending such suit. The indemnitee shall be presumed to be entitled to indemnification under this Section 4 upon submission of a written claim (and, in an action brought to enforce a claim for an advancement of expenses, where the required undertaking has been tendered to the Corporation), and thereafter the Corporation shall have the burden of proof to overcome the presumption that the indemnitee is not so entitled. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee is not entitled to indemnification shall be a defense to the suit or create a presumption that the indemnitee is not so entitled.

4.3 Nonexclusivity of Rights.

The rights to indemnification and to the advancement of expenses conferred in this Section 4 shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provisions of the Certificate of Incorporation, By Laws, agreement, vote of stockholders or disinterested directors, or otherwise. Notwithstanding any amendment to or repeal of this Section 4, or of any of the procedures established by the Board of Directors pursuant to Section 4.7, any indemnitee shall be entitled to indemnification in accordance with the provisions hereof and thereof with respect to any acts or omissions of such indemnitee occurring prior to such amendment or repeal.

4.4 Insurance, Contracts, and Funding.

The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee, or agent of the Corporation or another corporation, partnership, joint venture, trust, or other enterprise against any expense, liability, or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability, or loss under the Delaware General Corporation Law. The Corporation may, without further stockholder approval, enter into contracts with any indemnitee in furtherance of the provisions of this Section 4 and may create a trust fund, grant a security interest, or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Section 4.

4.5 Persons Serving Other Entities.

Any Corporation may, by action of its Board of Directors, authorize one or more executive officers to grant rights to advancement of expenses to employees or agents of the Corporation on such terms and conditions as such officer or officers deem appropriate under the circumstances. The Corporation may, by action of its Board of Directors, grant rights to indemnification and advancement of expenses to employees or agents or groups of employees or agents of the Corporation with the same scope and effect as the provisions of this Section 4 with respect to the indemnification and advancement of expenses of directors and officers of the Corporation; provided, however, that an undertaking shall be made by an employee or agent only if required by the Board of Directors.

4.6 Indemnification of Employees and Agents of the Corporation.

The Corporation may, by action of its Board of Directors, authorize one or more executive officers to grant rights to advancement of expenses to employees or agents of the Corporation on such terms and conditions as such officer or officers deem appropriate under the circumstances. The Corporation may, by action of its Board of Directors, grant rights to indemnification and advancement of expenses to employees or agents or groups of employees or agents of the Corporation with the same scope and effect as the provisions of this Section 4 with respect to the indemnification and advancement of expenses of directors and officers of the Corporation; provided, however, that an undertaking shall be made by an employee or agent only if required by the Board of Directors.

4.7 Procedures for the Submission of Claims.

The Board of Directors may establish reasonable procedures for the submission of claims for indemnification pursuant to this Section 4, determination of the entitlement of any person thereto, and review of any such determination. Such procedures shall be set forth in an appendix to these By Laws and shall be deemed for all purposes to be a part hereof.

SECTION 5. Designated Engineer in the State of Washington.

5.1 Appointment of Designated Engineer.

The Board of Directors, as required by the Revised Code of Washington, has appointed a licensed professional engineer in the State of Washington the Designated Engineer as being in responsible charge for the practice of engineering performed by the Corporation in Washington.

5.2 Grant of Authority to the Designated Engineer.

The Board of Directors grants and delegates to the Designated Engineer the full authority to make all final engineering decisions on behalf of the Corporation with respect to engineering work performed in the State of Washington.

5.3 Grant of Authority to Appropriate Officers.

The Board of Directors grants and delegates to the appropriate officers of the Corporation the authority to designate each successor Designated Engineer as being in responsible charge for the practice of engineering and to notify the Washington Board of Registration for Professional Engineers and Land Surveyors of the appointment of each successor Designated Engineer within 30 days after the effective date of the appointment.

ARTICLE VIII

Amendments

SECTION 1. Amendment of the By Laws: General.

Except as herein otherwise expressly provided, the By Laws of the Corporation may be altered or repealed in any particular and new By Laws, not inconsistent with any provision of the Certificate of Incorporation or any provision of law, may be adopted, either by

1. A. the affirmative vote of the holders of record of a majority in number of the shares present in person or by proxy and entitled to vote at an annual meeting of stockholders or at a special meeting thereof, the notice of which special meeting shall include the form of the proposed alteration or repeal or of the proposed new By Laws, or a summary thereof; or

2. B. either by

1. i the affirmative vote of a majority of the whole Board of Directors at any meeting thereof, or

2. ii the affirmative vote of all the directors present at any meeting at which a quorum, less than a majority, is present;

provided, in either of the latter cases, that the notice of such meeting shall include the form of the proposed alteration or repeal or of the proposed new By Laws, or a summary thereof; and provided, further, that Article I Section 11.2 of these By-Laws may be amended only as set forth in Section 1.A of this By-Law, except that any amendment required by law or necessary or desirable to cure an administrative or technical deficiency may be made as provided in Section 1.B of this By-Law

SECTION 2. Amendments as to Compensation and Removal of Officers.

Notwithstanding anything contained in these By Laws to the contrary, the affirmative vote of the holders of record of a majority of the Voting Stock, as defined in Article FOURTH of the Certificate of Incorporation, at a meeting of the stockholders called for the purpose, shall be required to alter, amend, repeal, or adopt any provision inconsistent with Sections 3, 4 and 5 of Article IV hereof, notice of which meeting shall include the form of the proposed amendment, or a summary thereof.

EX-15

EXHIBIT (15)

Letter from Independent Registered Public Accounting Firm Regarding

Unaudited Interim Financial Information

LETTER IN LIEU OF CONSENT FOR REVIEW REPORT

October 23, 2007

To the Board of Directors and Shareholders of

The Boeing Company

Chicago, Illinois

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of The Boeing Company and subsidiaries for the periods ended September 30, 2007 and 2006, as indicated in our report dated October 23, 2007; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, is incorporated by reference in Registration Statement Nos. 33-25332, 33-31434, 33-43854, 33-58798, 33-52773, 333-03191, 333-16363, 333-26867, 333-32461, 333-32491, 333-32499, 333-32567, 333-35324, 333-41920, 333-47450, 333-54234, 333-73252, 333-107677 and 333-140837 on Form S-8 and Registration Statement Nos. 333-99509 and 333-113844 on Form S-3.

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/S/ DELOITTE & TOUCHE LLP

Chicago, Illinois

43

EX-31.2

EXHIBIT (31.1)

CERTIFICATION PURSUANT TO

RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, W. James McNerney, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Boeing Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 23, 2007

/s/     W. James McNerney, Jr.

W. James McNerney, Jr.

Chairman, President and

Chief Executive Officer

44

EX-31.2

EXHIBIT (31.2)

CERTIFICATION PURSUANT TO

RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James A. Bell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Boeing Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 23, 2007

/s/     JAMES A. BELL

James A. Bell

Executive Vice President and

Chief Financial Officer

45

EX-32.1

EXHIBIT (32.1)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Boeing Company (the “Company”) on Form 10-Q for the period ending September 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, W. James McNerney, Jr., Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/     W. JAMES MCNERNEY, JR.

W. James McNerney, Jr.

Chairman, President and

Chief Executive Officer

October 23, 2007

46

EX-32.2

EXHIBIT (32.2)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Boeing Company (the “Company”) on Form 10-Q for the period ending September 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James A. Bell, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/     JAMES A. BELL

James A. Bell

Executive Vice President and

Chief Financial Officer

October 23, 2007

47