James Bell: It is mostly the 777, but there would be some mix relative to the 777s as well that is in the cost base that is beyond which you are seeing in deferred production and it would be the mix between freighter and passenger.

George Shapiro: You have the portfolio size at Boeing Capital going down this year and next year, does that mean that you will not finance any of the American planes that they are going to get next year?

Jim McNerney: That does not mean that. What it does mean is we are preparing ourselves in the event it is necessary to use BCA, BCC and our balance sheet in order to finance airplanes. Right now, given what we know, we are not anticipating we will need to.

George Shapiro: Are you taking a different view on increasing financing as to what Boeing Capital Corp will do and saying that the portfolio size is going to be lower in 2008 and 2009?

James Bell: In our current backlog, we see that the Ex-Im bank is going to finance about 80% of it. We have over the last several years been preparing BCC and The Boeing balance sheet that if called upon we can answer the call. Right now, we do not have any information that suggest we will be, but if we are we will deal with it then, and BCC and The Boeing backlog will be more than able to do that.

George Shapiro: Your projection of lower is just to assuming that the economic environment does not get any worst than what it is today. Is that correct?

Jim McNerney: There are two things, one we see what we see on economic environment. And secondly, in contrast with coming out of 9/11 we are much less than half of our planes were financed Ex-Im internationally. We now have 80% of them financed Ex-Im internationally, which puts us in a stronger position to absorb any financing requirements we have and that has changed this point. We have run the portfolio down, so we have plenty of capacity to deal with it if we need to. And what we have to deal with will be significantly less than the last recession we have.

Doug Harned: On BCA margins and your guidance for 2008, you added $400 million more to R&D where you kept the margins at the same level. What the sources of improvement are?

James Bell: If our absolute focus on productivity is the benefit we are getting from the moving line in 777, as we continue to experience good progress on that implementation if the productivity we are getting on 777, as we continue to harvest that mature program and the mature concept that is deployed there on the moving line. It is our efforts on looking at every cost that does end up in our products to see how we can be more productive in doing those activities that create those costs and driving those cost down while we increase the quality of that effort with all of it.

David Strauss: Could you talk about the IDS growth from a program basis?

Jim McNerney: The current growth is across the board. All the production programs are running well, FCS, GMD high road fees, recent reaffirmation of our status as the assistance integrator. Those are big programs. C-17 sustainment the multi-year on Apache and F-18 were at the mid point there some international orders that we are now delivering on to Korea, Singapore, and other places. So it is SPI net, so it is on across the board slowly and also the rest of the couple of businesses over the couple of years and which sort of muddied the growth look at IDS and we are now beginning to out run some of that.

David Strauss: How you feel the competitive position of IDS moving forward, even beyond tanker the win rate on some of the big programs has not been that great recently?

Jim McNerney: We won nine big competitions last year. We pointed out 9/11 of the major competitions we were in. We have washed 2 cents, but now it is 9 out of 13. Our hit rate recently has been high. When you look at this year and see a number of international orders that promise to come through and the number major orders in the United and a couple of other ones. Even if we return to our normal hit rate, the two year period would have been outstanding by any measure in terms of new business.

David Strauss: What have you assumed in 2009 on C-17and when do you get to the point that you do have to make a decision in terms of shelling down the line?

Jim McNerney: The assumption this year is that we will continue and we will also be continuing production next year. That is the assumption. The international order base continues to strengthen; the smoke signals out of Washington are strong right now in terms of 2008 supplemental and potential order in the 2009 base budget next year. We are always on tender hooks. We feel relatively strong about the prospects short and medium-term of C-17.

Ivy Wood: When you go through and analyze the range of possible additional costs on these customer penalties and supplier support, in totality what is the highest negative cost outcome that is realistic?

James Bell: We go through and struggle with that same thing ourselves and with the information we have to date, it is hard to set a number. That is why we have taken the position that we are going to start off booking the program at a zero margin to make sure we have adequate reserve in order to deal with that. I can not predict what the number will be. I know that our past history would suggest that we do a good job of mitigating that and not having and roll through to be a significant impact to your financial performance.

Ivy Wood: How will you make the determination for the accounting block size for earnings recognition?

James Bell: Typically when we got to a point of delivering the first airplane we sell it about a 100, this in raw numbers on our new airplane models. Typically the initial block turns out to be and about 400 airplane range. What that is beyond the long orders you look at what the market potential is for the airplane you look at a time period over which you can estimate your cost and estimate you revenue. And so you take those things in consideration and then you settle on what the accounting quantity is and then what is your booking margin ought to be on these airplane as you deliver them. In the case of the 787 we are going to have a 1000, so by the time we deliver it, we are going to be more constrained by which gives us great opportunity over a time period to product good earnings and value for both us and our customers and it also gives you great capacity to deal with unknowns that you do not understand you will experience as you look back to today. We will be more constrained about is what we will be able to estimate over a time period and what we will be able to produce in that time period. So you can get the significant opportunity we are going to have on the initial opening quantity here. What we see today and what we understand based on what our contracts have in them, based on N-SAR, our preliminary discussion with our customers, it is hard to estimate what the customer settlements will be but we do believe that whatever the opening quantity will be based on the price theory, there will be significant profitability in the program today to cover.

Ivy Wood: There is backing out the door to buy 787s and your costs are rising on the plane, but in this situation your costs are rising and we are not getting confirmation for higher customer demand. Can you walk us through your rationale there?