Transactions With Boeing

6 Months Ended

Jun. 30, 2011

Transactions With Boeing

Transactions With Boeing

Note 2 – Transactions with Boeing

As a wholly owned subsidiary of Boeing, our mission is to arrange for the financing of products manufactured by Boeing. When third party financing is not available, we may provide such financing directly.

We have a number of general contractual arrangements with Boeing to facilitate our operations including, among others, a support agreement, tax sharing agreement and an agreement allowing us to borrow under Boeing's committed revolving lines of credit. We also have an intercompany borrowing and lending arrangement with Boeing.

In addition, we may require other forms of support from Boeing with respect to certain financing transactions we undertake. This support may take the form of intercompany guarantees, subsidies, remarketing agreements or other support arrangements.

There can be no assurances that these intercompany agreements and arrangements will not be terminated or modified by us or Boeing. However, our and Boeing's ability to terminate or modify the support agreement is subject to certain conditions. See Item 8. Financial Statements and Supplementary Data, Note 2 of our 2010 Annual Report on Form 10-K.

At June 30, 2011, we were the beneficiary under $1,682 of guarantees from Boeing which mitigates our risk with respect to portfolio assets totaling $2,063.

Intercompany guarantee amounts by aircraft type are summarized as follows:

	June 30, 2011				December 31, 2010
	Guarantee Amount		Carrying Value		Guarantee Amount		Carrying Value
717 (out of production)	$	1,528	$	1,852	$	1,586	$	2,099
Out of production single-aisle aircraft		61		61		66		66
Out of production twin-aisle aircraft		50		65		51		71
Other, including other Boeing aircraft		43		85		46		90
	$	1,682	$	2,063	$	1,749	$	2,326

At June 30, 2011 and December 31, 2010, Accounts with Boeing included $43 and $47 for deferred revenue associated with guarantee and subsidy settlements and terminations.

We recorded the following activity under the intercompany guarantee and subsidy agreements for the six months ended June 30:

	2011			2010
Finance lease income (1)	$	(1	)	$	1
Interest income on notes receivable		1			1
Operating lease income		33			25
Net gain on disposal of assets		2			–
Asset impairment expense		–			5
	$	35		$	32

⁽¹⁾ For the six months ended June 30, 2011 and 2010, finance lease income included $(1) and $(1) for fees paid to Boeing related to guarantee agreements.

For the six months ended June 30, 2010, we recorded operating lease income from Boeing, exclusive of guarantees and subsidies, of $5.

For the six months ended June 30, 2010, we recorded new business volume of $20 related to Boeing aircraft, equipment or services we purchased or financed.