Boeing to Take Charges in Second Quarter for Airborne Surveillance Program and Previously Disclosed Tentative Legal Settlement

The Boeing Company [NYSE:BA] announced today that it will recognize charges related to delays on an international airborne surveillance program and a previously disclosed tentative legal settlement with the U.S. government when it announces second-quarter 2006 results July 26.

Boeing expects to record a charge of between $300 million and $500 million pre-tax due to delays related to its Airborne Early Warning & Control (AEW&C) program for Australia and Turkey. Additionally, the company expects to recognize a $615 million charge to reflect a tentative settlement with the U.S. Justice Department related to the hiring of a former Air Force official and handling of a competitor's proprietary information.

The expected charge for AEW&C program delays will be finalized after ongoing reviews and will be recorded in the Precision Engagement & Mobility Systems segment of Boeing's Integrated Defense Systems business. The actual amount of the charge will be determined over the course of the next few weeks as the recovery plan is better understood and will be disclosed when Boeing issues its second quarter financial results.

This international airborne surveillance program, known as Wedgetail in Australia and Peace Eagle in Turkey, consists of the 737-700 aircraft outfitted with highly complex, integrated command and control and advanced radar systems.

Australia has purchased six AEW&C aircraft and Turkey has purchased four. Delivery of the first two Wedgetail aircraft and that effort's flight test schedule have been delayed up to 18 months because of development and integration issues with certain hardware and software components. Boeing now plans to deliver all six Wedgetail aircraft by the end of 2008 and is developing the Peace Eagle schedule with its Turkish customer.

"We regret the impact that these program delays are having on our customers," said Boeing Chairman, President and Chief Executive Officer Jim McNerney. "However, we are fully committed to a recovery plan that will deliver systems that meet their operational requirements."

IDS has reorganized the AEW&C program, strengthened the management team and put additional oversight in place. The team is working with the customers and suppliers to implement a go-forward plan. That plan will target the talent and resources necessary to develop Wedgetail and Peace Eagle on realistic schedules compatible with the team's ability to deliver reliable, mission-ready systems.

Separately, the tentative agreement with U.S. Justice Department announced on May 15, 2006, resolves all potential civil and criminal claims and includes a monetary penalty. While the agreement is still being finalized, the charge will be recorded in the second quarter.

The company will hold an analyst conference call to discuss these charges today at 9:30 a.m. Central Time.

Boeing will update its 2006 and 2007 financial guidance, including the impact of these charges, at its next scheduled quarterly financial performance announcement on July 26.

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For further information:
Anne Eisele
(312) 544-2002
Dave Dohnalek
Investor Relations
(312) 544-2140