Transactions with Boeing

9 Months Ended

Sep. 30, 2012

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, a 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. 

Boeing has given us exclusive access to $750 of its $2,300 364-day credit line expiring in November 2013 and $750 of the $2,300 five-year revolving credit line expiring in November 2017. The 364-day facility has a one-year term out option which allows the borrower to extend the maturity of any borrowings one year beyond the aforementioned expiration date. At September 30, 2012 and December 31, 2011, we had no amounts outstanding under these credit facilities. Any borrowings by us under these agreements will be guaranteed by 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 2011 Annual Report on Form 10-K.

At September 30, 2012, we were the beneficiary of up to a maximum of $1,519 under our guarantees from Boeing which mitigates our risk with respect to portfolio assets totaling $1,859.

Intercompany guarantee amounts by aircraft type are summarized as follows:

	September 30, 2012				December 31, 2011
	Guarantee Amount		Carrying Value		Guarantee Amount		Carrying Value
717 (out of production)	$	1,435	$	1,731	$	1,481	$	1,790
Out of production single-aisle aircraft		46		46		55		55
Other, including other Boeing aircraft		38		82		41		83
	$	1,519	$	1,859	$	1,577	$	1,928

At September 30, 2012 and December 31, 2011, Accounts with Boeing included $31 and $38 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 nine months ended September 30:

	2012			2011
Finance lease income(1)	$	(2	)	$	(2	)
Interest income on notes receivable		1			1
Operating lease income		37			49
Net gain on disposal of assets		–			2
	$	36		$	50

⁽¹⁾  For the nine months ended September 30, 2012 and 2011, Finance lease income included $(2) and $(2) for fees paid to Boeing related to guarantee agreements.

For the nine months ended September 30, 2012 and 2011, we recorded new business volume of $20 and $105 related to Boeing aircraft, equipment or services we purchased or financed.