<aut=albaught><autanmois=albaught199809><autan=albaught1998><anaut=1998albaught><anmois=199809><an=1998>

*space *industry

*the *rise of a *global *industry,

*or *inter-*regional *competition?

*it's quite an honor for me to be here with such a distinguished panel. *they represent the heavyweights of the satellite industry. *i need to make sure *i take good notes on what my fellow panelists are saying since they represent both my customers and competitors.

*as *didier [*moderator] has said, we've just undergone a major reorganization in *boeing. *my group is now responsible for satellites, as well as launch services.

*since *i was originally asked to provide the launch services perspective for this conference, *i'll leave the satellite industry perspective to the rest of the panel.

*the theme of this panel asks a very important question: *will we become a global industry *or, will we divide into competitive regions?

*in the space transportation and satellite manufacturing industries, arguments can be made for both outcomes.

*but, in the end, the customer will decide, and the decision will be based on best value. *and, it's my view, along with many others, that the only way to get best value is by being a global competitor.

*this means competing globally at every level - at the component, the subsystem, and launch vehicle level. *if we don't, we can never provide our customers - the satellite builders, the service providers, and the ultimate users - a best value product.

*in many ways, commercial space is already a global industry. *the global span of our customers - and of their customers -- makes it so. *i think this is reflected in the numerous global partnerships formed in the last several years.

*growth in the commercial satellite market is driving us. *you - our customers - have been very busy:

+ *there are more than a thousand companies worldwide that develop, manufacture and operate space systems. + *there's a communications satellite launched every 12 days. + *and, *i won't bore you with the projections of the number of satellites to be launched in the next ten years or the revenues generated. *you know those numbers better than *i do. *just as an aside, it's also interesting to look at the business plans of the launch service providers over the next ten years. *all of us assume we will capture 50 percent of the worldwide market. *this should provide a very interesting and value-oriented marketplace for satellite builders and users.

*aside from the fact that no single nation has the capacity to address the total launch market, there are three principal reasons why *boeing thinks doing business globally is in all our best interests:

*first, only by working with global partners, can we give our customers access to all of the technologies available. *this allows us to offer the best solution for the customer's requirements.

*i think it's presumptuous for *boeing to think it has all the answers, right at our fingertips. *we don't. *no one does. *only by choosing the best ideas available from around the world can we provide the best solutions to our customer's requirements.

*for example, on *sea *launch, we needed a rocket that could be stored and serviced horizontally. *the *russians and *ukrainians are world leaders in that technology. *that's where we went.

*second, a global approach means that we have access to markets we wouldn't otherwise have access to.

*at *boeing, we're working hard on global alliances with both launch providers and satellite builders that will allow both *boeing and our partners to provide best value to their customers - and to increase market share. *in many cases, these are markets we couldn't be in without these relationships.

*third, it allows us to have access to products that we wouldn't otherwise have.

*within these three reasons, two important words appear again and again. *one of them is "partner." *the other one is "customer."

*first, *i want to say that suppliers are easy to come by. *partners are more difficult to find. *and, we're looking for partners.

*we're seeking partners who are willing to take a long-term view of the marketplace. *we're seeking partners interested in reciprocal arrangements. *when we are asked by companies, "what can we build for *boeing," we ask in return, "what can we build for you."

*i'd like to have *boeing hardware on all competitively sourced vehicles launched worldwide. *it doesn't matter to me whether the vehicle says *boeing on the side or not.

*all of this must happen under an umbrella of value to the customer. *the customer always, the customer. *our customers are operating seamlessly worldwide, and so must we. *partnerships are extending across international boundaries.

*for example: *i recently read that *t*v set-top decoder technology from *comstream in *san *diego is being manufactured in *wales by the *u*k arm of the *japanese electronic giant *matsushita for sale in *the *netherlands under the *panasonic brand name. *how would you like to be the contracts manager on that one?

*what does this new worldwide orientation mean? *it means that launch service companies must be flexible. *they will offer integrated, one-stop shopping of launch services. *they must also serve as merchant suppliers to other providers.

*boeing does this now. *you can sign up with *boeing to build and launch satellite, end-to-end. *or, for example, you can come to our *rocketdyne business for engines only. *companies will be trying to do this on both a global and regional basis.

*as we heard in the last panel, *european satellite manufacturing is consolidating before our eyes. *regardless of how *european satellite consolidation turns out, *i believe that, over the long haul, launch service decisions will be based on value - not regionalism.

*in the *united *states -- *ariane, *atlas, *delta, *h-2*a and others compete for the launch market. *i believe that will happen also in *europe and *asia.

*even for highly integrated products built by a single company, there'll be higher and higher global content. *for instance, on *delta *i*i*i, it includes both *european and *asian hardware. *saab *ericsson, *mitsubishi, and *s*e*p - to name just a few - are all part of our *delta *i*i*i team.

*the trend toward global content in launch vehicles will continue with our *delta *i*v product. *on *delta *i*v, *boeing has a goal of a 50 percent reduction in the cost of placing a pound in orbit. *i know our friends at *lockheed *martin have a similar goal. *i think we can do it - but only if we utilize all the capabilities and technology available to us worldwide.

*let me close by summarizing with three points:

+ *first, only through competing in the global launch marketplace can we drive costs down and provide best value. + *second, companies, or countries, which don't embrace the global marketplace will quickly find that they are not competitive. + *and third, if those of us in this room today don't embrace the second point on the global marketplace, a different set of leading companies will be sitting here five years from now. *our business is not about countries or regions; it's about a world changing changing towards a deregulated, market-based economy.

*i look forward to the panel discussion. *thank you.

*fb.

<aut=albaught><autanmois=albaught200002><autan=albaught2000><anaut=2000albaught><anmois=200002><an=2000>

*satellite 2000 *international *conference and *exhibition

*i hope you enjoyed the visual experience [video screening] we offered you this afternoon. *we did it as a tribute to the satellite industry and to the folks like you who make it such an exciting and dynamic business to be in. *in the presentation we just saw, *leonardo da *vinci takes a brief look at how, over the centuries, advances in communications and transportation have gone hand-in-hand. *in fact, one reason we chose *leonardo to narrate a video about communications was because of his early research into flight. *since 1916, much of the business of *the *boeing *company has been about putting people in touch in a physical way - by moving them from place to place. *allowing them to have face-to-face communications, to maintain relationships, to conduct business, to explore the world. *as we move into the 21st *century, satellite communications is doing the same thing, but in a virtual way. *ubiquitous connectivity is the future and satellites will be a big part of it. *the point *i think *leonardo makes in the video is that throughout history, communications has had an impact on transportation and vice versa. *years ago, if you wanted to communicate with someone far away, you had to go there yourself or send a messenger. *the telegraph and, later, long-distance telephones, made the messenger obsolete. *but for these new technologies to be implemented, advances in transportation were required -- trains to string telegraph poles and special ships to lay underwater cable. *r*f [radio frequency] communications followed and suddenly we could communicate with things that moved. *but *r*f had limitations -- it couldn't provide global connectivity. *satellites could, but required a new method of transportation -- space launch vehicles. *but enough about history *what *i want to talk about today is how *i see the future of the satellite industry how *i see the market for information and communications services and related support infrastructure shaping up over the next 10 years and where *i think the real growth will occur. *one can envision a future in which we have the ability to be connected to people, resources and information -- whenever we want and wherever we are. *that connectivity will be seamless and simple because the underlying complexity of required systems and infrastructure will be transparent to the user, connected by an invisible web of integrated systems. *in this fast-paced world of the future, our lives will be increasingly mobile and dynamic. *seamless connectivity will be required to enhance our personal and professional lives. *i'm sure many of you know the numbers better than *i do, but projections for the space-based *information and *communication market range from around $40 billion today to $120 billion or more per year by the end of the decade. (*that's down significantly from prior forecasts but still huge growth). *given that assumption, let's take a look at where the industry is today: *first let's look at the market. *we've all heard about the troubles in the industry. *last year's headlines sent a chill through the financial markets that remains today. *but is the picture all bad? *i don't believe so, especially in the *g*e*o market. *in 1999, 25 commercial geostationary satellites totaling $3 billion were put on order. *at the end of last year, there was a backlog of about 350 satellites - nearly half of them were medium- to large-sized *g*e*os. *in fact, by some estimates, last year was the satellite industry's second most active year ever, second only to 1995, and up 10 percent from 1998. *true, there were definite signs of slowdown in 1999, particularly in *asia and *latin *america. *these regions that had been driving much of the industry's growth, ordered only two satellites last year. *but now even *asia and, to a lesser extent, *latin *america, are showing signs of coming back. *the fact is, satellite-based communications is an enduring need in these areas of the world and will be for a long time to come. *so, despite some recent press reports to the contrary, in a lot of ways *i think the future remains bright. *but to a large extent, this depends on how well we can address, manage and meet customer expectations. *in a world of 10-10-321 5 cents a minute and 30-day money-back guarantees, our "offerings" -- whether products or services -- must be high-value, user-friendly and flexible to changing demands. *the real value to customers, and the real growth opportunity that *i see, is in providing seamless services that integrate separate systems and provide customers hassle-free, transparent operations. *no customer today wants a voice system, a location system, a data system and an entertainment system, separately. *customers want -- and demand -- integrated solutions an answer that can connect the dots. *for instance, connect the dots between a *g*p*s system, a communications satellite, a ground system and an airplane to provide an integrated air traffic management system -- allowing us to fly safer and put more planes in the sky. *at *boeing, when we talk about a network of separate systems operating together as a single unit, we call it "*system of *systems." *one example of that kind of system interoperability is called *c*s*e*l -- the *combat *survivor *evader *locator. *this product provides soldiers in the field with multiple satellite links for over-the-horizon communication, voice, global positioning, secure digital messaging and the full spectrum of radio and ground equipment interfaces. *this is a complete systems solution in a package weighing about the same as a paperback novel. (*wouldn't it be great to have one of these things in your briefcase, just like we now carry cell phones?) *tomorrow, the complex systems that allow *c*s*e*l to work will be imbedded in every form of service we use. *the satellite and information technology industries will lead the way. *in fact, they already are. *we've all witnessed the explosion in demand for bandwidth over the past 10 years. *and, while terrestrial systems are building out to address much of the demand, satellites will play a significant role in addressing this fundamental need. *just look at all the programs in work if you want any indication of whether or not this is true: *space*way, *astrolink, *skybridge, *teledesic and *cyber*star. *we also know this business isn't for the faint of heart. *we are constantly on the cutting-edge of technology, working in areas of extreme environments. *much can go wrong and people do focus on our failures. *but if you step back, your successes have been many. *those of you who are sitting in this room today have changed our world in so many ways. *you've brought us products and services such as: digital broadcast,*v*s*a*t*s, *earth observation and climate-monitoring satellites, *g*p*s and related applications, national security and reconnaissance imaging, and near-instant connectivity around the world, anytime, anywhere, with no infrastructure required. *so what are the issues we, as an industry, face? *what impediments must be addressed to grow this market and to satisfy customer needs? *i think there are two: performance and compliance. *first, performance -- *we must repair our quality image both in terms of launch vehicles and satellites. *we must provide customers with reliable access-to-space and, once on orbit, high-quality, reliable service at a competitive price. *on the financial side -- *we must live up to expectations and stop surprising *wall *street. *individual companies suffer from surprising analysts and our industry can't do that and expect to have investors' confidence. *in short, technically and financially, we must perform! *in the area of compliance -- *the communications marketplace is a global one. *government regulators and we as an industry must address the issue of export control. *many of us in industry spend too much time complaining about export controls instead of facing up to the fact that we're part of the problem and doing something about it. *certainly national security must be protected - *boeing clearly understands that - but we, like many, have not done a very good job in this area. *in my view, there are three things we [industry] must do collectively with the government: + *redefine the critical technologies + *streamline the existing licensing process + *ensure that the government is properly staffed in this area *so, those are some of the challenges we face, as well as some of the tremendous opportunities within our reach if we address them successfully. *and just as if climbing a mountain, it's important to look back once in awhile and marvel at the terrific progress we've made along the way. *today the satellite industry provides services hardly imagined 15 years ago. *far be it from me to say with certainty what the future will look like. *i'll leave that to the likes of *leonardo, and to those of you in this room, to create the future. *thank you.

*fb. <aut=albaught><autanmois=albaught199906><autan=albaught1999><anaut=1999albaught><anmois=199906><an=1999>

*joint *propulsion *conference '99

*thanks for that kind introduction. *i'm very pleased to be here. *i see a lot of friends from *rocketdyne, *pratt & *whitney, *aerojet, *lockheed *martin, *daimler*chrysler *aerospace and *s*e*p.

*as *tom (*tom *massman, *division *director, *advanced *programs and *business *development for *boeing *rocketdyne *propulsion & *power) mentioned, *i spent some time at *rocketdyne. *in my new position, *i have other responsibilities that include, among other things, the *space *shuttle. *it's still hard to get adjusted to the fact that a *shuttle mission isn't over in 8 1/2 minutes with the main engine cut off.

*i also have to stop joking with *russ *turner (*president, *united *space *alliance) and *rick *stephens (*general *manager and *vice *president, *boeing *reusable *space *systems) that the *shuttle *orbiter is nothing but a mobile test platform for the *s*s*m*e (*space *shuttle *main *engine). *also, haven't you noticed the pictures of *shuttle are always from the bottom?

*you are discussing many very important topics at this conference, such as liquid propulsion, hybrid rockets, propellants and combustion, air breathing propulsion, electric propulsion and advanced propulsion concepts. *what the folks in this room do is important, and it is difficult.

*remember that the phrases "rocket science" and "rocket scientist" are synonymous with intellect and the ability to solve the world's toughest problems. *what you do is truly rocket science.

*what *i'd like to talk about today is what we as an industry are capable of doing. *and, what we, in fact, must do. *what we are able to do in the air and in space as a nation. *the human race depends in large part on the propulsion systems available to us.

*i don't want to say that propulsion is the "long pole in the tent" because that has a negative connotation. *let me say that propulsion, to a large degree, is the limiting factor - or enabling factor - in many things, including low-cost access to space and *h*s*c*t (high-speed civil transport).

*the recent string of launch vehicle failures has caused folks to question our industry. *they say, "we've lost the recipe." *i'd say they're partially right. *perhaps there are some fundamentals we need to focus on. *after all this is rocket science, and there are no tricks in our business. *it reminds me of a story by former football wide receiver *james *lofton.

*when asked what "tricks" he uses, *lofton said, "*one trick is to work harder than the other guy. *the second trick is, always hustle. *the third trick is to study and know what you're doing. *the fourth trick is always be prepared. *the fifth trick is never give up. *those are my tricks," he concluded.

*while *i have read in the press that some feel we, as an industry, have lost expertise as a result of retirements, and others say because we have gone to *integrated *product *teams and we have lost the emphasis on *system *integration. *i don't buy that.

*ultimately, *i believe we'll come back stronger because our work ethic is much like *james *lofton's and we will fix the recent problems we've had.

*i certainly don't have to tell this audience that one of the great themes of the 20th *century is progress in human flight: *from *kitty *hawk to the *moon in 66 years. *from a tiny internal combustion engine on the *wright *flyer, to the *f-1 engine on the *saturn *v, propulsion pioneers made it happen. *we did it because we dared to dream.

*looking back, it's hard to believe that it's been 30 years since *neil *armstrong walked on the moon. *let me ask you to step back to that time because it was like today in many ways. *it was a time of great energy and grand visions.

*at this very moment, thirty years ago, the *u.*s. space program was at full-tilt. *from *october 1968 through *july 1969, ten short months, we launched five *apollo missions: + *apollo 7, the first flight to *earth orbit + *apollo 8, the first orbit of the moon + *apollo 9 and 10, testing the *lunar *module + *and, of course, the *apollo 11 landing

*five incredible missions in ten months! *just think of it, in less than a decade - in less than half a generation - we went from being tethered to *earth... to the moon and back.

*that's the kind of thing our industry is capable of doing. *many of you may remember that at the time of the first *moon landing in 1969, we thought *mars would soon follow.

*many of you may also remember that at the time, *pan *american *airways began taking reservations for passenger flights to the moon. *they estimated that service would begin in the year 2000 and that a round-trip would cost about $28,000. *in 1971, the airline quietly suspended taking reservations, despite the fact that they had more than 30,000 people signed up for trips.

*the irony today is that passenger flights to the moon are probably more realistic than ever flying with *pan *american from *new *york to *paris again.

*that's the past. *let's look forward now. *what will the 21st *century bring ... what will its great themes be? *and will our industry still be at the forefront?

*part of the answer is embodied in the "*call for *papers" of this conference. *to paraphrase, it said... *"*global partnerships between nations, governments and industries must be forged to develop cost-effective systems for a new generation of programs."*

*certainly our business is no longer one dominated by government, or one that is domestic in nature. *you don't have to look any further than *sea *launch or *international *launch *services to see that.

*despite current problems, satellite constellations like *iridium, *globalstar and others yet to come will remake our industry. *through their demand for launch capacity they already have changed the launch vehicle business. *and while the demand for launches has softened, *i'm still bullish over the long haul.

*and how about airplanes... *despite what you read about the hurdles we face, at some point there will be a cost-effective *h*s*c*t. *and propulsion will be an enabling technology. *it, too, will change our world. *there will also be a convergence of air and space flight.

*yet, this is the *age of *market *competition. *it means the emphasis will be on three things... *cost... cost... and cost. *in my mind, there are two ways to address cost: doing things better and frame-breaking technologies.

*first, let me talk about doing things better. *this gives me a chance to talk about one of my favorite subjects, the *r*s-68 engine, which *boeing is developing for our *delta *i*v version of the *e*e*l*v (*evolved *expendable *launch *vehicle).

*byron *wood (*vice *president and *general *manager, *rocketdyne) spoke about it yesterday, so *i'll just touch on it for a moment. *the *r*s-68 is the first new *u.*s. rocket engine development in 25 years and we were able to take a "clean sheet" approach.

*this engine delivers 50 percent more thrust than the *space *shuttle *main *engine, yet it has 80 percent fewer unique parts and takes 95 percent less labor to assemble. *combined with the advances on the *delta *i*v vehicle itself, we believe we'll be able to reduce launch costs by 40-50 percent.

*however, despite the great strides we've made, the *e*e*l*v will be a "transitional" vehicle in the long run. *in fact, *i think the *r*s-68 engine may be the last expendable engine that *rocketdyne develops. *i call it transitional because of the limits of physics.

*what we've basically done is perfect what we've been doing for 40 years.

*if you look at chemical propulsion, perhaps we can get the specific impulse up to 475 seconds... maybe even 480 seconds.

*we all know that to get to *s*s*t*o (single stage to orbit), and to really reduce the cost of access to space, we need specific impulses much higher than that. *there are a lot of concepts that sound pretty far-out today, but some of them will change the industry.

*it might be *pulse-*wave *detonation or *rocket-*based *combined *cycle... or something we haven't heard of yet. *but, for us to change our world, we must break out of the box.

*speaking of "breaking out of the box," *i'm sure you're all very aware of the challenges *dan *goldin has set for *n*a*s*a and the aerospace industry. *in aeronautics, he has set the goal of making commercial air travel ten times safer and half as expensive. *in astronautics, he has set performance targets to make space launch 10,000 times safer and 100 times cheaper.

*some say his goals are too difficult. *i would say the only question is timing, because his goals are the right ones. *it's not if - it's how and when. *we've accomplished things like this in the past, such as going to the moon and back.

*getting to the moon took strong national will and significant investment. *the nation invested $100 billion in *apollo, including $50 billion to develop the *saturn *v rocket. *even the *space *shuttle took a $40-billion investment. *clearly, those kinds of investments aren't available in today's environment. *the solution lies in sorting out the roles of government and industry.

*there's so much talk about the word commercialization these days that some folks confuse it with the word free. *let me be real clear. *the word commercial and the word free are not synonymous!

*if we are to have a robust space industry and a *h*s*c*t, the government needs to step up to investments in long-term, high-risk *r&*d. *industry will make the necessary investments to commercialize when the market and technology is ready.

*one of the best analogies *i know of in this development process is the way airplanes reached the critical mass necessary for passenger flight. *as this audience knows, it was through the growth of the airmail system.

*the government helped develop the planes that were needed to meet the growing demand for airmail service. *as the volume grew, the costs came down and economics took over. *when the costs got low enough, airplanes attracted passenger travel and the rest is history.

*so where do we go from here? *the one thing *i think we all agree on is that, unless we get costs down dramatically, we won't be able to achieve our dreams. *this is true for space and air travel. *and it will take a concerted effort by government and industry.

*we must lobby to get increases in the science and technology budgets for propulsion. *we must continue to push the limits of existing technology and also explore new ones. *also, export control is stifling our business. *we need to work with government to ensure that export controls focus only on critical technologies. *meetings like this support all of those aims.

*like everyone in this room, *i love working in our industry. *i love the zoom and boom and the potential that we all dream about. *i want to take that $28,000 ride to the moon and back. *the people in this room have the vision and skills to make it happen.

*we have a limitless future ahead of us with many opportunities and challenges. *i look forward to working with all of you as we go into that future together.

*thank you.

*fb.

<aut=albaught><autanmois=albaught199906><autan=albaught1999><anaut=1999albaught><anmois=199906><an=1999>

*working *together *globally

-focused products - *this chart very graphically displays that *boeing is much more than a commercial airplane company and how we're involved in some of the world's most exciting projects. - *in my brief comments today *i will show you how we've aligned these projects -- and many others -- into four market-focused businesses.

*long heritage; strong core competencies + *while the *space &*communications *group was formed in *september 1998, we have a long heritage and strong core competencies from all the former companies that complemented each other *north *american, *rockwell, *mc*donnell *douglas, *boeing. + *it's a new organization, but we've been in these businesses for a long time. + *we quickly focused this tremendous combination into the four market areas shown on this chart: *launch *services, *information &*communications, *orbital *systems &*exploration, and *missile *defense *systems. + *when you look at these four areas, there is a common requirement for expertise in large-scale systems integration. + *this allows us to gain synergies by moving people and technology back and forth -- just as we do with the other parts of *boeing. *we have the power to use the expertise of the entire company to address any issue. + *the other point *i'd like to make on this chart is that we view these markets as increasingly global in nature, and you'll see a lot more global initiatives from *boeing in these areas.

+ *we are *n*a*s*a's largest contractor and are working with 16 countries to construct the largest and most complex structure ever placed in orbit -- *international *space *station. + *sea *launch is now a success with global partners. + *we are operating globally with *n*a*t*o and *japan *a*w*a*c*s, and our 737 *a*e*w will open even more international markets. + *we're committed to building on this experience to take an even more global approach. + *we will have less traditional business arrangements with a prime contractor/supplier relationship, and we'll have more strategic alliances and joint ventures. + *i'll highlight each of the four businesses on the chart, but first *i want to show you the market potential we're pursuing.

*market outlook + *this chart shows the market outlook for our four business areas. + *you've probably seen similar forecasts that show the total space market growing to $160-170 billion. + *first, look at the three lines on the bottom: *launch *services, *orbital *systems &*exploration, and *missile *defense. *they are all stable, long-term businesses. *while they seem to be flat markets in this graph, they are in constant dollars. *also, we believe we can grow our market share in all these areas. + *information &*communications is the real growth area, especially in the services area.

*launch *services -*in the *launch *services area we have strong core competencies across the board. - *expendable vehicle family supports the full spectrum of users -- 2,000 kg (4,400 lb) to 13,200 kg (29,000 lb). - *delta *i*i is the world's most reliable. *it has a 98 percent successful performance rate. - *sea *launch success gives us another excellent vehicle and more flexibility. *it's also a strong example of international cooperation. *we have global partners, and a solid manifest. *the first *sea *launch commercial flight is scheduled for *aug. 29 for *hughes/*d*i*r*e*c*t*v. - *delta *i*i*i -- *of course we've had two unrelated failures. *we have a handle on the problems and are looking to return to flight this fall. *we have two teams -- one looking at the *delta *i*i*i failures, and the other looking at mission assurance for all *boeing launch programs -- *delta, *sea *launch and *i*u*s. - *delta *i*v substantially lowers price when it enters service in 2001/2002. *first new *u.*s. vehicle in a generation uses advanced, yet simplified design for both the vehicle and propulsion. *it has reduced operating margins and a flexible mix of vehicles that meet wide customer needs. *reusables - *the *space *shuttle is the world's most versatile vehicle. *it can fly 10-20 more years. *boeing has unmatched capability -- *orbiter, *propulsion, *systems *integration. - *working with *n*a*s*a and the *u.*s. *space *alliance, *boeing aims to reduce operating costs by 3- percent -- with a targeted 40 percent reduction over the next 4-5 years.

*propulsion - *we are developing propulsion systems for the future. - *r*s-68 rocket engine is currently in test. - *solar *orbit *transfer *vehicle.

*orbital *systems &*exploration - *we are *n*a*s*a's largest contractor -- this year *n*a*s*a is celebrating its 40th anniversary and we've been with them all the way. - *international *space *station prime contractor: *the toughest integration job in history. *very successful *f*e*l in *november/*december 1998. *first logistics mission just landed last week. *we look forward to launching the service module late this year, followed by the first crew early next year. *a more global view - *large-scale systems integration at its finest. *this is true on the hardware side -- which is the world's most complex space project ever built, but also through our experience of working together with 16 nations. - *it will help us -- and our partners and our customers -- greatly in the future as we pursue global alliances and joint ventures. *this market area also includes *x-37, *space *maneuver *vehicle *reusable *upper *stage, and long-term exploration.

*information &*communications - *the broad *information &*communications expertise at *boeing is not obvious to most observers. - *we're leveraging broad-based network communication expertise, such as *c*s*e*l, *h*f-*mod, *tactical *networks) - *we built and operate the world's most successful satellite constellation: 40 *g*p*s satellites (*block *i and *i*i), performance exceeding requirements (8 years v. 6 years). - *now working on follow-on *block *i*i *f (up to 33 satellites): *double-life improvement (12.7 years v. 6 years), cost reduction -- 35 percent ($28 million v. $43 million) - *we are in the final stretch of our evaluation of how we will pursue this overall market, which would target both passengers on commercial airplanes and *a*w*a*c*s. *strategic decisions during the next 1-3 months on investment levels, roles and responsibilities, and long-term potential. *airborne *information &*surveillance *systems - *also, the long-time leader in airborne information and surveillance systems, such as the *airborne *warning and *control *system (*a*w*a*c*s). *we have demonstrated the ability to integrate sophisticated sensors that detect, identify and track targets, with command &control systems to execute decisions with split-second timing. - *upgrades and international business with *n*a*t*o and *japan provide the base. - *new low-cost 737 *airborne *early *warning &*control opens substantial new international markets: *australia/*turkey (two competitors in each country; winner announced in early *july), an excellent product that will support the defense needs of many nations.

*missile *defense *systems - *participation in all phases of missile defense: *theater hit-to-kill (*p*a*c-3, *navy *theatre-*wide), *n*m*d-*l*s*i, and *directed *energy (both *u.*s. national programs *a*b*l and *s*b*l). - *again, our abilities in large-scale systems integration -- with sensors, *c2 and fire control -- that has allowed us to succeed in this area over the last couple of years. - *while much of this business is domestic, we do have growing international activity. *p*a*c-3 is part of the *european *m*e*a*d*s program; *navy *theatre-*wide is being considered by several nations that have *aegis-class destroyers/cruisers. *these ships already have the *standard *missile in inventory. - *large growth potential as these programs enter production. - *worldwide weapons proliferation will drive this long-term market.

*apollo's 30th anniversary - *i'd like to end my comments with a glance back at the *apollo program since the 30th anniversary of *neil *armstrong's first step is next month. - *if you look closely at the chart, it's quite astounding. - *the *apollo program is the single icon that most graphically shows the strength of the new *boeing *company... - *boeing: 1st stage, lunar rover, *saturn *v integration - *north *american *rockwell: 2nd stage, command and service modules, every engine on every stage by *rocketdyne. - *mc*donnell *douglas: 3rd stage. - *this integrated strength is now working on the *international *space *station. *great energy and grand visions - *that time was like today in many ways -- a time of great energy and grand visions. - *at this very moment, 30 years ago, the *u.*s. *space *program was at full tilt. - *from *october 1968 through *july 1969 -- 10 short months -- we launched five *apollo missions - *apollo 7, the first flight to *earth orbit - *apollo 8, the first orbit of the moon - *apollo 9 and 10 tested the lunar module - *apollo 11, just two months afterward

(*continued) - *five incredible missions in 10 months! *just think of it -- in less than a decade in less than half a generation we went from being tethered to *earth to the moon and back. - *walter *cronkite summed it up this way: *of all humankind's achievements in the 20th century, the one event that will dominate the history books a half a millennium from now, will be our escape from our earthly environment and landing on the moon. - *as we look forward, we do, in fact, believe this team can do anything.

*increased commercialization and globalization of space - *we are in an exciting time -- feels like it's 30 years ago. - *we are prepared for the increasing commercialization and globalization of space: two new engines in development; three new launch vehicles. - *the *international *space *station is entering its operational phase. - *we are well positioned for the growing missile defense requirements -- *t*m*d and *n*m*d. - *we are making tough decisions to take advantage of the exponential growth in the *i*c markets. - *we also are divesting non-core and low-margin businesses. - *we're bullish on the long-term outlook for *space and *communications.

*fb.

<aut=albaught><autanmois=albaught199904><autan=albaught1999><anaut=1999albaught><anmois=199904><an=1999>

*space & *communications - *expanding the *limits

*it's great to be here tonight and see friends from our *southern *california locations where *i've worked over the last 12 years.

*i've attended many of these leadership nights and listened to discussions about the wonderful products we build. *tonight, *i'd like to talk about how we make our business decisions. *a big part of evaluating a new venture is making sure people have all the information they need to make wise decisions. *i hope *i can give you relevant information tonight.

*there are some 40,000 of us in *california. *while we are the leading private employer in the state of *california, we have yet to make our weight felt in this state. *i think it's incumbent on all of us on the leadership team, and *i include everyone in this room, to ensure that we make our presence known with our community leaders, with our legislators and certainly with our congressmen. *the *boeing *company is already engaged in this activity.

*if you watched the *tournament of *roses *parade last *january 1st, you saw there was a *space *shuttle float, an *apollo *saturn *v and a number of airplanes. *i kept thinking to myself, why are other companies sponsoring floats with our products? *as most of you probably know already, we will have a float next *new *year's *day and people are already asking how they can get involved. *the work is going to start about two months before *january. *we will need many volunteers, so anybody who wants to participate should look for information on the web.

*we have several *southern *california *management *association groups here tonight, and *i want to thank them for giving me the opportunity to come here and talk with you. *the *management *association serves a great purpose for *the *boeing *company. *they give us a chance to get together in a relaxed setting like this and renew old acquaintances. *they also give us an opportunity to communicate things that are important to the business. *they do a wonderful job in the community and they support the training needs of *the *boeing *company. *i'd like to thank each of the groups for the work they're doing and for their support to *boeing.

*in past top management nights, we've always had a significant number of retirees in attendence. *this year, we're missing two retirees, *lee *atwood and *art *raymond. *as most of you know, *lee *atwood and *art *raymond were two of the early pioneers of *north *american and *douglas. *with both of them gone now it truly is the end of an era for many of us.

*as *i mentioned, *lee often came to these events and it was here that *i had my first opportunity to meet him. *he was *president and *c*e*o of *north *american *aviation, which was then part of *rockwell. *he had a 42-year career, which started with wooden-frame aircraft and wound up putting people on the moon. *he was the spearhead of designing the *p-51 *mustang, with which we shot down more enemy planes than any other in *w*w*i*i. *he was involved in *b-25, *f-100, the *x-15 and the *b-1. *his crowning achievement was putting together a 300,000-person enterprise that spanned the entire country and many, many companies in building the *apollo program and landing people on the moon. *he certainly will be missed.

*i think many of you knew *arthur *raymond personally. *he had a 35-year career with *douglas *aircraft. *he was the designer of the *d*c-3 in the '30s, which was the first reliable passenger airplane. *when *raymond designed the *d*c-3, he said it was "an airplane built in a time when product life was designed to be indefinite." *here we are, 60 years later and, of the 11,000 *d*c-3s that were built, 2,000 of those airplanes are still flying. *raymond was very involved early on with the development of the *ajax, *thor and *nike missiles. *thor led to the *delta family of rockets that we're still flying today, and we've progressed all the way to *delta *i*v as a result of his great leadership. *he helped found the *r*a*n*d *corporation in 1946, and he retired as the *vice *president of *engineering for *douglas. *we're going to miss those two great pioneers.

*it wouldn't be appropriate to continue without talking about the passing of "*t" *wilson who was a past *c*e*o of *the *boeing *company. *he led us through the bust and boom times of the '70s. *he passed away last *sunday. *he was responsible for having the courage to go forward in a very depressed airplane market with the 757 and 767 program. *earlier, he worked on the *b-52 and the *minuteman missile programs. *much of what we have today in *the *boeing *company, we owe to *mr. *wilson.

*now, *i want to talk about some of the challenges we have in the *boeing operating groups. *it's a great company we work for! *we've got great people, great technologies and a phenomenal potential in the road ahead. *it's up to us to maximize that potential.

*in the next 20 years, some 17,000 commercial airplanes will be built - that's a $1.5 trillion market. *what a great opportunity that represents for us.

*in the next 10 years, the *information and *communications market is going to grow from $15 billion a year to about $120 billion a year. *another great opportunity! *that's going to be an ever-expanding market we're pursuing.

*the challenge of competing in these markets is that many of our products compete only on price. *as a result, our ability to win competitions is going to have everything to do with becoming more competitive.

*most likely, you all saw the earnings announcement that came out today. *last year in the first quarter, we made .05 a share; for the first quarter of this year, we had .50 share. *all of the operating groups exceeded their projections. *and all of you in this room and thousands of others in *boeing just like you helped make this happen.

*while we saw great improvement in the first quarter, we still have great challenges ahead. *at *b*c*a*g, we have to reduce our cost structure. *already, *i see a real turnaround in the *boeing *commercial *airplane *group as *alan *mulally's leadership team continues to reduce the cost of doing business and improve competitiveness. *i look for great things coming from *alan and his team in the months ahead.

*at *aircraft and *missiles, in spite of the success of the *c-17 and other programs, we face a very flat market. *if we're going to continue to have the great returns coming out of *mike *sears' organization, we're going to have to focus more on global markets. *mike and his team are doing just that and *i'm sure they'll continue their great performance.

*in *space and *communications, our challenge is to identify the targets of opportunity we want to pursue and to manage risk as we get into these new areas. *with so many opportunities, we have to make sure we identify the right ones - projects that suit our capabilities and core competencies. *of course, the assignment we've been handed is to double sales in the next six or seven years, and to increase our return on sales to about 12% by the year 2002.

*clearly, we have to change; we have to move from being a technology-driven organization to one that's driven by business considerations.

*getting into more detail on *space and *communications, there are four markets that we serve. *i'm going to spend some time going through these markets, beginning with *launch *services. *last year, we had about 27% of the world's market. *it's our intent to grow that to about 40% or 50%. *the *space *shuttle is a signature product of *the *boeing *company; a signature product of the *united *states. *it is a statement to the world in terms of *american know-how, engineering and workmanship. *it's the world's only reusable launch vehicle and it's one that has used only about 25% of its useful life.

*working with *united *space *alliance, we've been able to reduce the cost of flying the shuttle by some 30% since 1992. *with prudent upgrades, we can reduce the cost even more. *we're going to have 45 launches of the *space *shuttle to the *international *space *station between now and the year 2004. *i don't see any replacement in sight.

*while many people are looking at new reusable launch vehicles, the shuttle is doing much more than merely getting payloads to space. *it's also a platform for doing experiments that can be reconfigured for different missions. *rick *stephens (*v*p & *general *manager, *reusable *space *systems) and *byron *wood (*v*p & *general *manager, *rocketdyne *propulsion & *power) and all the people that support the shuttle have done a terrific job maintaining world class performance.

*the *delta family is a phenomenal collection of vehicles with a great heritage. *delta *i*i is the world's most reliable vehicle; we had 12 launches last year. *we're going to have 13, maybe 14 launches this year. *we had a successful launch this morning. *we'll soon have the return to flight of *delta *i*i*i.

*what is really exciting, though, is what *gale *schluter (*v*p & *general *manager, *expendable *launch *systems) and *mike *kennedy and their team are doing on *delta *i*v. *delta *i*v is going to be a completely redesigned vehicle from the bottom up. *it's going to be the first vehicle designed with cost as an independent variable. *it's going to have a *l*o*x-hydrogen engine on it, courtesy of *rocketdyne, and it's going to cut the costs of going to space by about 50%. *we had a competition with *lockheed *martin last fall and we captured 70% of the market. *a year ago at this time, it was a paper rocket, but it's not a paper rocket anymore. *all the components are coming together, and we're now testing the *r*s-68 engine at *edwards *air *force *base.

*sea *launch has been a difficult program with a lot of technical challenges. *the real challenge, though, has been working through all the regulatory issues. *have you ever tried to get the permits necessary to get a *russian *i*c*b*m into *long *beach? *we had our first launch on *march 27 and it was flawless. *our customers are now very anxious to fly on it. *we're going to have a commercial launch later this year and possibly as many as five in the year 2000. *it's an exciting time for *sea *launch and for *launch *services.

*in *information and *communications we have a tremendous range of capabilities, maybe not to the depth of some companies, but certainly in breadth. *let me ask a question.. what was the first satellite constellation that was ever put into space? *i think you all know, it was the *g*p*s (*global *positioning *system) satellite, built in *anaheim and *seal *beach. *not many people outside of *boeing know that.

*the *airborne *warning and *control *system (*a*w*a*c*s) is a franchise that *boeing owns. *we've delivered some 66 *e-3 *a*w*a*c*s so far to our customer. *we've delivered four 767 *a*w*a*c*s to *japan over the past year. *we're also pursuing 737 *a*w*a*c*s that we're selling on the international market. *we just got down-selected to the final two in *turkey and we expect to win a competition in *australia this year. *we're counting on about $2.6 billion in sales coming from our *a*w*a*c*s products over the next couple of years. *these programs are fixed price and they have great returns.

*in the area of satellites, the people who work for *ken *medlin (*v*p & *general *manager, *information & *communications *systems) have taken existing resources - space, air and ground - and integrated them into systems that provide the ability to provide customer communications and to pinpoint locations. *it's a great example of our ability to do large-scale systems engineering.

*in the commercial satellite area, we're going to announce some commercial offerings this year: *just stay tuned in this area, it's going to be exciting.

*bob *paster (*v*p & *general *manager, *electronic *systems & *missile *defense), *john *peller (*v*p & *program *director, *national *missile *defense/*leads *system *integrator) and others are leading the *missile *defense team. *we are players in virtually all missile defense programs whether they're national missile defense, theater missile defense or directed energy. *we have two national-directed energy programs in the *airborne *laser and *space *based *laser programs.

*a year ago, we won the *lead *system *integrator role for *national *missile *defense because we were able to bring together the expertise of the three heritage companies. *we've got a $4-billion contract we believe we'll be able to double. *anyone who doubts you can hit a bullet with a bullet, should look at the footage of the *p*a*c-3 intercept. *we know how to do it.

*the *orbital *systems and *exploration area is primarily *n*a*s*a business. *boeing is the number one *n*a*s*a contractor and we will continue that support long after assembly of the *international *space *station, as we get into operation and utilization. *we're also working on a number of other programs for *n*a*s*a, such as the crew return vehicle, advanced tactical vehicle and the space-maneuvering vehicle (for the *air *force). *those aren't great programs from a profit standpoint, but they provide great technology leverage and we're going to maintain that position.

*our *subsystems and *support programs include enabling technologies that provide leverage in the large markets. *these include *guidance, *navigation and *control at *anaheim, and *propulsion and *power at *canoga *park.

*if you were to step back in time 30 years, you would find a time much like today, full of grand visions and great promise. *the *u.*s. space program was moving at full tilt. *we were in the midst of *apollo. *our heritage companies built the *saturn *v rocket - *boeing built the first stage, *north *american built the second stage and *mc*donnell *douglas built the third stage. *rocketdyne built all 34 engines on *saturn *v. **that* was a *boeing vehicle!

*in the *saturn *v facility at *cape *canaveral, there is a *saturn *v suspended in the air and it's very impressive to see. *from *october 1968 until *july 1969, in just 10 short months, we launched five *apollo missions. *we launched *apollo 7, the first *earth orbit with *apollo; we launched *apollo 8, the first orbit of the moon; then we launched *apollo 9 and 10, testing the lunar module. *two months later, we launched *apollo 11. *it's really hard to believe we were able to do five missions in just 10 months! *the fact that we were able to go from being tethered to *earth, to the moon and back in 10 short years - in just half a generation - is incredible.

*we are approaching the 30th anniversary of landing on the moon this summer. *i'm sure everyone can remember where they were 30 years ago. *walter *cronkite summed it up best when he said, of mankind's achievements in the 20th century, the one event that will dominate history books half a millennium from now will be our escape from our *earthly environment. *in hindsight, *i think it's amazing that the *apollo team accomplished the impossible without much of the technology we have today.

*what drove the innovation, the speed and daring of 30 years ago? *it was the *cold *war and the race to be the first people on the moon. *that became a national imperative for us and also for the *soviet *union. *thirty years later, we still stand on the accomplishments of *apollo in many ways. *however, we have moved beyond the international rivalries to a situation that involves international cooperation and collaboration, as opposed to competition. *we're in an age that's filled with strategic alliances and joint ventures we wouldn't have dreamed of 10 years ago, let alone 30 years ago, when we were working on *apollo.

*who would have thought the *u.*s. industry would be partnered with *russia and other countries on the *international *space *station and on *sea *launch, or with *lockheed *martin's *international *launch *services?

*i was over in *ukraine last *july visiting *yuzhnoye/*yuzhmash. *they built all of the *soviet *union's *i*c*b*ms and also the *zenit for the *sea *launch vehicle. *they were taking me through their museum, showing me their vehicles. *they pointed toward one and said, "this is the *boeing *rocket." *i said, "*why do you call it the *boeing *rocket?" *they replied, "*because this is the vehicle that was targeted on *seattle."

*it's funny, but it makes you pause. *just 10 years ago, these people were targeting us. *now were collaborating on a great program like *sea *launch.

*who would have thought in 1981, when we first launched the *space *shuttle, that a commercial company would be operating the *space *shuttle fleet? *and that commercial company, *united *space *alliance, is a 50-50 joint venture between *lockheed *martin and *the *boeing *company.

*who would have thought that *g*p*s would develop into a $12-billion-a-year commercial industry? *today, we couldn't fight a war without *g*p*s.. and many of us probably couldn't find our way to the airport without *g*p*s. *it's quite a program - and it's a *boeing program.

*who would have thought 30 years ago that commercial space would be a much larger share than the government space activity today?

*many things have changed and we've entered a whole new era in space utilization. *but *i'd like to make a couple of points about this new era. *it is more commercially driven than anything else. *our progress will continue to be dependent on factors such as specific impulse, mass fraction and bandwidth. *but to a much larger degree, our progress will be driven by the internal rates of return - return on sales, return on net assets and cash flows - generated from these new programs. *we've got to evaluate these new programs differently now to determine where we're going to invest our dollars.

*i see many commercial programs within *boeing, and at other places *i visit. *many of these programs do not have a solid business foundation. *in the launch area, we see start-up companies assume they're going to capture 70-80% of the market share. *regardless of their price, it's not going to happen. *in the satellite area - in communications and in remote sensing - there are many programs that assume a $200-300 million anchor order every year from the *department of *defense. *that's another assumption that will never be realized.

*we've got to come to some sobering realities about what makes a good business case. *all of us need to think about how we're going to embrace this new commercial era. *i'm leading up to our performance and how well we're doing in the areas of *r*o*n*a (return on net assets), return on sales and important areas like inventory turns. *because those are the things that are going to determine whether or not we're going to be competitive in the years to come and whether we'll continue to see the price go up in our stock.

*at an investors conference in *orlando, *fla., in the first week in *february, *debbie *hopkins, *alan *mulally, *mike *sears and *i talked about our businesses. *we also shared with the analysts how well we were performing on a number of these critical measures - measures that are essential as we go forward commercially. *when compared with our competition, companies such as *g*e, *allied *signal, *proctor and *gamble, *general *motors, *ford and *exxon, we were at the bottom of the list on *r*o*n*a. *i don't like that position. *there are many things we can do, working together, to raise this bar. *it's everyone's responsibility to chip in and improve this status.

*our assets, such as facilities, equipment, receivables and inventories, are all things we can influence every day in the decisions we make. *the stock went up the last couple of days for one reason: because our earnings went up. *if we can continue to increase our earnings and reduce our assets, we're going to have positive and meaningful results.

*in return on sales after tax, we were at 3.9% last year. *space and *communications was at 3.6%. *we can make a lot of excuses why *space and *communications was at 3.6%. *we invested heavily in new programs, about twice as much as we made. *we could have managed for the short term and gotten that number up, but we decided to go for the long term. *but the fact is, the analysts don't care how we invest in the future; they care about our earnings today. *and our earnings weren't very high.

*there are things we can do, all of us collectively, to improve that number. *we've got to reduce costs and improve efficiencies. *we need to think very hard about low margin businesses that we may need to exit. *inventory turnover is a simple measure - sales divided by assets - and, for the most part, it follows *r*o*n*a. *again, we need to go off and work on reducing our inventory, working on collectibles, eliminating assets that aren't being fully utilized. *we talked about some of the consolidations that are going on, and that's all about making sure the assets we have are put to use 100% of the time.

*our goals are pretty lofty at *space and *communications. *we want to double our sales by the year 2005. *we want to have a 12% operating margin by the year 2002. *we want to go from having some negative cash flow this year up to having a billion dollars of cash by the year 2001 that we can invest in new programs. *we want to be leaders in the markets we share.

*everyone can help as we go forward toward meeting these goals. *we have a very simple plan we've developed with three steps.

*the first step is to fix or eliminate value-destroying programs. *we have to understand how our programs are performing. *if they aren't performing up to the measures we want, we've got to put plans in place to fix those programs. *or, in the event that we can't get the margins up and we can't fix them, we need to think about exiting some of those businesses.

*the second step is to maximize the value creation in the profitable programs we have. *go off and work on assets and processes, get people in employee involvement and responsible for improving what they do each and every day. *by doing that, we can improve the margins on some of the profitable programs.

*the last step is all about growth; that is, adding new value-creating programs or activities to the portfolio. *we are working very hard to do that. *an example is *delta *i*v. *delta *i*v is a major investment on the part of *the *boeing *company to go after a bigger share of the launch market. *it's a program that *mc*donnell *douglas or *rockwell could never have sought. *we're able to do it because we've got the financial power of *the *boeing *company behind us.

*about three or four weeks ago, we took about 375 managers from *space and *communications to downtown *los *angeles for two-and-a-half days. *we discussed various ways to grow the business and do things radically different than before. *each of the businesses came back after two days and reported on the actions they were going to take to improve business performance. *huntington *beach, for instance, committed to reducing inventory by 50%. *rick *stephens and his organization committed to making a significant improvement in *r*o*n*a performance. *we're not talking about doing the same things better; we're talking about doing things differently. *over the next few weeks, *i'm sure some of those initiatives will flow down to all of you.

*let me talk about leadership expectations.. none of you would be here if you weren't leaders. *leadership isn't reserved for people who have corner offices or a title under their names. *leadership is something we all have to assume. *leadership is about determining where we're going, and then figuring out how we're going to get there. *it's about putting a plan together and making it happen. *it's about doing things differently tomorrow from how we're doing them today. *i don't care if you're in the mailroom or the corner office, you can improve your processes and become much more effective. *that's what *i'm asking the leadership team of *space and *communications to do. *we have to do this quickly, with a sense of urgency.

*i like what *i saw today in the stock market. *it certainly reinforced what *i've been saying lately ... that it's not about technology per share; it's about earnings per share.

*we can do it if we work the right things, measure our performance with the right metrics and execute to our plans. *it's all about blocking and tackling. *we've got to do the things we commit to. *and certainly, we've got to create an environment in which people feel comfortable talking about the issues they face so we can address the things that are important. *working together we can make it happen.

*it's going to take the leadership of everyone here to make that happen. *i love *boeing, *i love the programs we have and *i love the promise of space. *we've got a great future, a future we can influence and control. *the people in this room can make it happen. *we can make those dreams come true.

*thank you.

*fb.

<aut=albaught><autanmois=albaught199904><autan=albaught1999><anaut=1999albaught><anmois=199904><an=1999>

*space: *advancing our *world

*it's an honor for me to be here in *colorado *springs and participate in what has been a wonderful conference. *i want to congratulate the staff of the *u.*s. *space *foundation for putting together a world class event involving the right people discussing the right topics.

*over the last four days, we've heard great speeches and had hard-nosed business discussions. *the last session with *general *richard *myers (*u*s*a*f, *commander-in-*chief of *n*o*r*a*d and the *u.*s. *space *command, and *commander, *air *force *space *command), *daniel *goldin (*n*a*s*a *administrator) and *keith *hall (*director of the *national *reconnaissance *office) talked about how they are working together. *the three of them have truly been at the forefront of "reinventing government" and the commercialization of space.

*taken as a whole, the partnerships being worked by *gen. *myers, *dan and *keith will ensure that we meet the needs of the commercial, military and civil space communities for years to come.

*at *space *command, *general *myers, working with *general *ryan, has championed the *commercial *space *opportunities *study, chartered to identify areas that capitalize on the commercial space revolution. *i'm sure we all anxiously await the *c*o*r*o*n*a report out in *june.

*at *n*a*s*a, *dan has overseen the transformation of the agency into an organization that believes and operates under the vision of *faster - *better - *cheaper. *the fact that he has been *n*a*s*a administrator for seven years -- a period that has covered both *republican and *democratic administrations -- speaks to how effective he has been. *the vision that he painted this morning, certainly is one that *i find inspiring.

*at *n*r*o, *keith *hall has been bringing his agency out of the black world. *this has helped gain more efficient use of space resources by integrating where possible white and black operations. *as you've heard, *keith is also taking the next step by leveraging the commercial marketplace.

*this week we also heard about the commercialization of space from business people and entrepreneurs. *when it comes to commercialization of any kind, *i defer to *warren *buffet, who said: "*unlike the *lord -- the market never forgives."

*there's a lot a truth in that statement, certainly there are many examples of folks learning market realities the hard way. *i'll bet you can all think of a few.

*one that is well documented is *sony's *betamax. *sony was so enamored with the technology, they forgot about the marketplace. *the rest, of course, is history.

*another was the attempt to introduce a "new" *coca-*cola. *of course the market still wanted the "old" *coke.

*another that *i love is getting too far ahead of the market. *many of you may remember that at the time of the first *moon landing in 1969, *pan *american *airways began taking reservations for passenger flights to the moon. *they estimated that service would begin in the year 2000 and that a round-trip would cost about $28,000.

*in 1971, the airline quietly suspended taking reservations, despite the fact that they had more than 30,000 people signed up for trips. *the irony today is that passenger flights to the moon are probably more realistic than ever flying with *pan *american from *new *york to *paris again.

*over the years, the *u.*s. *space *foundation has gone to great lengths to ensure that this conference has a balance between defense, civil and commercial space. *this year, we're seeing a diminishing separation between the three and a pronounced shift away from stand-alone government sponsored programs.

*what *i would like to discuss with you are some observations on this so-called "commercialization." *let me say at the outset that the potential of space, like space itself, is limitless. *the challenge for all of us is to ensure this potential is fully realized.

*let's step back in time to a point nearly 30 years ago to a point much like today. *it was a time of great energy and grand visions.

*at this very moment, thirty years ago, the *u.*s. space program was at full-tilt. *from *october 1968 through *july 1969, 10 short months, we launched five *apollo missions: + *apollo 7, the first flight to *earth orbit. + *apollo 8, the first orbit of the moon. + *apollo 9 and 10 tested the *lunar *module. + *and, of course, two months after that, *apollo 11.

*five incredible missions in 10 months! *just think of it, in less than a decade...in less than half a generation...we went from being tethered to *earth...to the moon and back. *it's hard to believe the 30th anniversary of *apollo 11 is this *july.

*walter *cronkite summed it up this way, "*of all humankind's achievements in the twentieth century, the one event that will dominate the history books a half a millennium from now, will be our escape from our earthly environment and landing on the moon."

*in hindsight, it's amazing that the *apollo team accomplished the "impossible" without the technology that's available to us today. *so, what drove the innovation, speed and daring of 30 years ago?

*of course we all know it was the *cold *war and the national security implications of the space race. *to be the first to the moon became a national imperative. *thirty years later, we continue in many ways to stand on the shoulders of *apollo.

*as *dan (*goldin) reminded us this morning, it is not enough to live off the accomplishments of those who have gone before, but rather we must create our own future. *i believe we have begun doing that. *we have now moved beyond international rivalries into an age of global commercialization filled with alliances, joint ventures and, often, unthinkable bedfellows.

*we've come a long way in 30 years and now space activities are reaching such a level, their impact is felt by all. *what a difference from *apollo to now. *who would have thought that *u.*s. industry would be partnered with *russia and other countries on projects like the *international *space *station, *sea *launch and *international *launch *services?

*who would have thought that a commercial company would be operating the *space *shuttle fleet? *and that *lockheed *martin and *boeing would be fifty-fifty partners in this company? *who would have thought that the *g*p*s system would have developed into a $12-billion commercial industry? *today, we couldn't fight a war without it . . . *and many of us couldn't find the airport without it. *and who would have ever dreamed that *n*r*o would have a letterhead, a brochure and an external affairs office! *well, of course, all those things have happened and we've entered a whole new era. *a couple of points about this new era... *it's now clear that the utilization of space will be commercially driven. *while our progress will still depend on advances in specific impulse, mass fraction and bandwidth, it will be driven to a much larger degree by *internal *rates of *return, *return on *sales, *r*o*n*a (return on net assets) and the *cash *flows generated by new business opportunities. *however, as we all know, commercialization is not a panacea. *right now, *i see many commercial ideas and programs that are doomed to failure because of flawed business cases, just as some past programs were doomed to failure because of flawed technology. *there are many commercial proposals out there that just don't make sense. *i see them every day within *boeing-and *i'll bet many of you also see them at your businesses. *in the launch area, they all assume capturing 75-80% of the market -- an assumption that is fatally flawed regardless of the launch price. *in satellite communications or remote sensing they all assume the government as an anchor tenant to the tune of 100's of millions of dollars a year, with little or no revenues coming from the commercial marketplace. *my point is *i believe that many of the commercial activities we're hearing about are not supported by good business cases and will not succeed. *an example of a good business model and a government/industry partnership is the *e*e*l*v program. *as you all know the *e*e*l*v program had a minimum requirement of reducing the cost of placing a payload into orbit by 25% and a goal of 50%. *with the approaches of *boeing and *lockheed *martin, the final savings will be closer to the 50% goal than 25%. *as a result, the *air *force will save from $5*b to $10*b over the life of the program. *however, *e*e*l*v did not happen overnight. *if you look back, you will find that there were no less than 18 government launch vehicle related studies between 1986 and 1994. *each one was focused on developing the answer for space transportation. *the difference with *e*e*l*v was that the market was ready and it was commercially driven. *as *i often remind our team, "*it's not about technology per share, it's about earnings per share." *while we're on the subject of *launch, *i'd like to spend a minute on the effort to develop a next-generation *reusable *launch *vehicle. *as much as *i am an advocate of the *space *shuttle, and know it can fly for another two or three decades, *i also know a next-generation *r*l*v will be flying prior to that. *it is an absolute necessity to lower the cost of access to space. *the question is what will an operational *r*l*v look like and when? *as much as *i'd love to do a commercial *r*l*v right now, it's not about wanting to. *try as you might, if you assume a realistic market capture rate and acceptable *i*r*r's, it's my view that the business case just doesn't close for a commercial *r*l*v today, or in the near future. *as *i mentioned earlier...and to repeat *warren *buffett's wisdom, "the market will decide." *clearly, in order to achieve a next-generation *r*l*v, we must work with government to identify the technology required to make that business case close. *if we were limited to only one technology that we would invest in, in my mind it would be propulsion. *looking beyond launch services to the broader military uses of space, both the *air *force and *n*a*s*a have identified ways to leverage commercial programs and free up more funds for their core missions. *for instance, last *march, the *u.*s. *space *command issued its *long *range *plan and, in *november, the *air *force *scientific *advisory *board produced the *space *roadmap for the 21st *century. *both reports highlighted the fact that the commercial sector is now leading the expansion in space technology. *earlier, *i mentioned the *air *force's *commercial *space *opportunity *study. *that study is taking a hard look at commercializing some big-ticket items such as communications, navigation, remote sensing, satellite control, launch infrastructure. *the hard part of this analysis is determining what are the core military roles, and what can be handled by industry. *for the *d*o*d and *n*a*s*a to take true advantage of the boom in commercial space, just like the *air *force did on *e*e*l*v, in my mind they need to do three things: declare themselves as commercial customers; establish standards early; and quit competing with their contractors. *once these steps are taken, industry can incorporate those standards in their planning and make investments fully understanding what the total market is. *last month, *keith *hall spoke to the *senate *subcommittee on *strategic *forces and described how *u.*s. space assets are required for our global leadership, militarily and commercially. *i'd like to read a statement he made. *keith said, "*in this era of tightened budgets the nation can no longer afford -- nor should it accept -- completely separate domains for intelligence, military, civil and commercial space programs. *continued *u.*s. space dominance will rely on the successful collaboration between the *n*r*o, *air *force, *n*a*s*a and industry to deliver future space systems faster, better and cheaper." *there are a lot of powerful thoughts in that statement which *i think pretty well sum up where our industry/government partnership has to go. *there was one item in the *scientific *advisory *board report that truly demonstrates the transitional period we're in. *it said "commercial space services will have an aggregate capacity early in the next century...that is about 1,000 times that of even the most ambitious *m*i*l*s*a*t*c*o*m structure." *it urged that the *air *force phase out "non-core" military satellite communications in favor of commercial services as early as it can. *that statistic points out just how dynamic the commercial marketplace has become. *however, as we focus on commercial satellites, we should remember what a small part they play in the broader marketplace. *analysts estimate that satellite communications will supply only 2-3% of the overall telephony and data market. *any changes in that share will be driven by market requirements and cost. *in other words, space-based communications must be considered in light of the total communications market. *for instance, with today's technology, the cost of using installed fiber optics will always beat satellites for point-to-point communications. *in addition, the build-out of fiber has grown 16-fold over the last several years. *because of this, *i remain somewhat cautious on the *scientific *advisory *board's forecast on commercial satellite communications capacity. *certainly, *i have no crystal ball or superior insights here. *again, the marketplace will drive the answers based on demand and the cost trades between ground-based and satellite options. *in addition to the impact of fiber build-out... *from a strictly *american perspective, unless we collectively address the export control process, we will lose both satellite and launch vehicle market share overseas, limiting our ability to realize our full potential. *this is a topic that *i know has been widely discussed this week and which requires our serious attention and a prompt resolution. *one area though, that *i'm convinced will have dramatic growth is in the area of wideband, mobile satellite communications. *just look at what we're seeing today. *if one judges *internet traffic as a measure of the demand for wideband data, it is doubling every 100 days. *the number of global users is over 150 million. *if one looks at the demand for cell phones as a measure of the need for mobility, there are now over 250 million users. *of course, cell phones are great where you have a fiber backbone. *but how about the demand for wideband, mobile data where you don't have a fiber link? *that's where *i see some spectacular opportunities. *think about this, the next time you catch a plane going overseas -- or even to the *east *coast. *you'd love to fire up your laptop and get connected, but you can't get a data rate or bandwidth that makes you productive. *then consider that the estimate for commercial airplane passenger travel is 5.5 billion seat hours per year. *that's what *i call a captive market...and a real opportunity! *potential military uses are as exciting as commercial. *yesterday, *vice *admiral *herbert *browne, *deputy *commander in *chief of the *u.*s. *space *command, described the insatiable demand for bandwidth by the *navy. *another example would be an *a*w*a*c*s with loads of consoles and servicemen and women on board. *with wideband satcom you could get the data on and off the aircraft remotely. *this would allow you to reduce the crew size and keep them out of harms way. *it would also allow you to get real-time data to the commander in the field. *commercial uses, of course, are limitless. *you could do important things, like watch live football games from an airplane! *you could surf the *internet. *or, you could hook up to your office and catch up on work. *of course, that presents another good news/bad news scenario. *the good news is you can link up to the office from anywhere. *the bad news, of course, is that you can never leave the office again. *a final observation on commercialization before *i close... *the word "commercialization" and the word "free" are not interchangeable. *we must guard against some in government interpreting commercialization as an excuse not to pay for high risk *r&*d or to support the government infrastructure so important to sustaining a robust commercial industry. *i tried to cover a lot of ground tonight, and *i did try to keep it short. *too often at conferences like this we come and "preach to the choir." *but of course, it's not what we talked about here this week that's important... *it's about what we do when we get back to work tomorrow. *in my view, our success will depend on our ability to work together for the common good. *we did it on *apollo and *saturn *v. *we're doing it today on *e*e*l*v, *x-33 and the *international *space *station. *like everyone in this room, *i love working in the *space *industry. *i love the zoom and boom, and the potential of space that we all dream about. *i want to take that $28,000 ride to the moon and back. *yet, for there to be a flourishing space industry, it will be business considerations that drive us, much as technology drove us in the past. *the people in this room can make it happen. *by working together, we can literally "*create the *future." *thank you.

*fb.

<aut=albaught><autanmois=albaught199811><autan=albaught1998><anaut=1998albaught><anmois=199811><an=1998>

*partnerships in *space

*partnerships in *space is a good topic for today. *just the fact that all of us are here, industry and the *air *force working as partners, is a big change from where we were five or ten years ago. *if we were to be doing this ten years ago, all the watchdogs would have gotten very twitchy and *i'm sure we'd have 60 *minutes come barreling through the doors.

*partnership is all about trust and trusting each other. *one of the key roles of leadership is to create that trust and have a strong belief in one another.

*in recent years, there has been a massive increase in rules and procedures, across all levels of government and industry, that are designed to protect us from ourselves and from waste, fraud and abuse. *just last week, *i got a policy across my desk. *it was a 13-page policy on how to conduct bake sales in the workplace!

*the effect of all these rules has been a spiraling cycle of distrust and disempowerment. *fortunately, since *dr. *perry's initial thrust on acquisition reform back in 1994, we are seeing a tearing down of those rules and procedures and a build-up in trust and relationships. *companies like *boeing and *lockheed *martin have embraced these new reforms. *in fact, just as *do*d and the services are changing, the industry is changing as well.

*it used to be that *do*d would announce a specific need and we would go to the *pentagon and say, give us your money. *today, we ask you to invest your confidence in us. *now, don't get me wrong. *we still want your money. *but we are prepared to help achieve your goal of better, less expensive hardware developed in less time and we recognize that can happen only through partnering.

*let me tell you how that is happening in *the *boeing *company. *just last *tuesday, *i was in *st. *louis, attending the fifth meeting of the *boeing *leadership *council. *this council meets quarterly and includes representatives from the service acquisition executives, *n*a*s*a *headquarters, the operating group, on-sight customer leaders and the operating group presidents in *the *boeing *company. *it was attended by *alan *mulally, who heads up our *boeing *commercial *airplane *group; *mike *sears, who is in charge of our *military *aircraft and *missiles *systems *group; and myself. *mike, *alan and *i spent the entire day working together with our government customers to bring about change. *why did we do that? *because we think working together within *boeing and with our customer really provides us a competitive advantage.

*i'd like to discuss the *boeing model for how the joint *leadership *council works. *the customer comes to the table with their objectives for modernization and a list of ways to pay for that modernization. *we bring to the table what we think are the core competencies of *the *boeing *company, detailed customer focus, large scale, complex systems integration, and lean and efficient design and production systems. *together, we address how to make money for *the *boeing *company, how to save the customer money and how to improve reliability, operability and capability.

*here are some of the issues we talked about on *tuesday. *we went through how well our processes were working at *the *boeing *company. *we talked about what some of the new process thrusts should be. *and we talked about candidate projects for civil-military integration, such as the complete conversion of our *c-17 facility to commercial practices. *we also talked about how we could share paperless data, a subject that was discussed early this morning. *one of the concerns that we had was that all we would do is digitize what we have already. *we have to be very careful we don't fall into that trap.

*in the afternoon, *alan and *mike and *i talked about how we can help achieve commercial defense integration throughout *the *boeing *company. *in that area, *i think *boeing does have a real advantage in that we are 58-percent commercial and we are 42-percent government. *at *boeing, we believe the best way to get that integration is to move people back-and-forth between the different organizations. *certainly *alan *mulally and *mike *sears are two good examples of people who have moved back-and-forth between military and commercial. *in fact, many of you probably know that *alan recently left our defense business and has gone over to the commercial airplane group. *as a result, *alan is now introducing our commercial people to a concept we all know and love something called "earned value."

*we also spent several hours discussing common technology needs across all of the businesses. *airplanes don't know if they are commercial or if they are military. *we talked about technologies like composites, ceramics, propulsion, avionics, design codes and design tools. *george *muellner is helping us very much in trying to sort out some of those technology needs.

*the point *i am trying to make is that, within *boeing, we feel that working together is a real strength for us and our customers.

*partnership with our space customer has really paid off for us. *let me give you some examples. *on airborne laser, as a result of acquisition reform initiatives that we have worked on over the last several years, we are going to be able to bring the airborne laser to fruition in six years. *our original concept had it being brought to completion in 12 years.

*another positive result is that, after working very closely with our customer, we recently got an award piece score of 100 percent. *we have a customer who is happy with our performance and believe me, a customer who made our whole *boeing team happy with the score and recognition. *talk about a win-win!

*in our global positioning satellite program, the customer went from giving us a statement of work to giving us a statement of objectives. *they were able to help us reduce the *block 2*a to *block 2*f costs from $43-million per satellite down to $28-million per satellite. *in doing so, we are also going to be able to increase the on-orbit satellite life from six years to 13 years. *in addition, we believe there are some great applications for that satellite bus that we can leverage into the commercial area and *i would guess that *mike *henshaw is going to talk about that a little later. *relative to civil-military integration, the other thing we want to do with *g*p*s is to work with our commercial airplane people. *our goal is to figure out how we can land an airplane using *g*p*s alone.

*being a rocket guy, let me talk about what *i think is a classic success story of military-civil partnering. *it has already been discussed this morning, and that is the evolved expendable launch vehicle, or *e*e*l*v.

*prior to acquisition reform between 1986 and 1994, there were no less than 18 launch-related studies. *each one attempted to develop a future space transportation program. *with flexible acquisition reform, *e*e*l*v will be flying by 2001. *we are going to be able to develop the new *atlas and the new *delta in four years. *now, *i was reading the other day that it took *burger *king two years to develop their new french fry. *if we can do rocket science in four years and it takes them two years to develop a french fry, *i think we are on the right track!

*on *e*e*l*v, it was no easy challenge that we got from the *air *force. *they set a reduction target of 25-percent for the cost of a payload to orbit and they set a goal of 50-percent. *they also decided that, rather than having a winner-take-all procurement, they'd go with two suppliers. *this provided a big opportunity for *boeing and *lockheed *martin to get into the commercial launch business without having to go to *baikonur in order to launch *protons or, in the case of *boeing, having to go to *christmas *island to launch *zenits.

*to gain an appreciation of how this has worked, let me site an example that *i am most familiar with. *i was involved at *rocketdyne in the development of the *r-68 engine. *we decided on a lox-hydrogen solution to the *e*e*l*v problem because we could get a 30-percent increase in thrust by going with liquid hydrogen rather than kerosene. *we went back and looked at our models for developing a new engine and found it would cost $2 billion. *we knew, at that cost, that would never meet the design-to-cost goals the *air *force gave us. *we took a hard look at why it cost so much historically to develop lox-hydrogen engines and went back and looked at the *space *shuttle *main *engine. *what we found was, about 75-percent of the cost and time associated with engine development was tied up in the test, fail and fix loop that we got into once we got the engine at the test stand. *then we peeled the onion some more and found the reason for the test failures was that we were operating in a pump turbine environment we hadn't operated in before and, in addition, we were introducing new technologies.

*on the *r*s-68 engine, we decided to operate the turbine in an environment we knew a lot about from our experience on the *space *shuttle *main *engine. *we also decided to introduce no new technologies. *we focused on cost, and cost alone. *what we were able to do is reduce the number of parts by 93 percent, the number of welds by 95 percent and the amount of labor by 95 percent. *so, now we have an engine we are going to develop not in 10 years, but two-and-one-half years. *we are going to have an engine with 50 percent more thrust than the *space *shuttle *main *engine and we are going to build it for a fraction of the cost - and *i am not going to give that cost number away today.

*we have also seen major cost reductions on the rest of the vehicle and on its operations. *secretary *peters talked about what that is going to be worth to the *do*d - about $6 billion. *we think that is a great investment of the $1 billion they are giving to *lockheed *martin and *the *boeing *company. *it is also going to allow both companies to go out and compete internationally in the commercial area.

*i know *mike [*henshaw] will be talking about communications and information so *i won't say a lot about this area. *but *i would like to discuss the total demand for data by the military. *as you can see from the chart, there is quite a short fall. *clearly, the implication is that the *do*d is going to have to spend a lot of money or they are going to have to take advantage of the commercial constellations of the future. *if you look at the commercial satellite communications business, from satellites to launch to services, it is about $40 billion a year right now. *within 10 years, it will be $160 billion. *as a result, there is a great opportunity for the *do*d to leverage off what is going on in the commercial satellite area but they need to get involved early in the development phase.

*one thing very clear from the chart is that the *do*d can't afford to build up capacity for their peak surge demand. *the possibility exists though, that they could use commercial resources to meet these demands in the event of a future threat. *there is a good example of how this joint military-civil approach can work and it is called the *civil *reserve *air *fleet. *many of you are probably very aware of that. *the *do*d invests in strengthening, reinforcing and paying for the operation of commercial airplanes. *in return, these aircraft are available for heavy lift duty in the event of a sudden need of the *armed *forces. *that was used to quite an extent in the *persian *gulf *war. *this same kind of partnering can work in the area of satellites but we need to ensure that, as we work the systems of systems solutions, we get the *do*d and the military very involved in the up-front planning of new satellite constellations, like *iridium, *teledesic, *ellipso and others.

*before *i close, *general *lyles said *i was supposed to throw out something controversial so we could have some lively discussion. *i'd like to close by bringing up something that hopefully will help the discussion. *it has been touched on already this morning. *that is the national space policy. *we all know the objective of the space policy, for the *united *states to be a leader in space launch. *it also provides for the government to let industry use excess launch capacity on a non-interfering basis. *when written, our *u.*s. launch manifest was about 75-percent government and about 25-percent commercial. *in the future, that equation will flip-flop and we will be 75-commercial and 25-government. *commercial launches are now consuming all the excess capacity that is out there and are driving range costs. *on *iridium, we got a task from *mike to get the *iridium satellite constellation up in a hurry.

*at the range, we were working the government around the clock, seven days a week and they did a terrific job for us, but we drove up their cost structure.

*as a result of the need for increased government support for commercial launches, there is a lot of talk about how to share costs more equitably. *one approach that everybody talks about is to develop a spaceport after the airport model.

*i initially thought that was the right answer. *but my launch experts have convinced me that may not be the case.

*if you look at an airport, it really has a captive market. *if you are in *los *angeles and you want to fly to *new *york, you are going to go to *l*a*x. *you are not going to drive up to *san *francisco or drive down to *san *diego. *really, what we have with airports are captive markets.

*for satellites, though, people like *don *cromer at *hughes are not going from *l*a to space. *they are going from *earth-to-orbit. *it is a different model. *other than the constraints of launch mechanics, we can launch satellites from any place in the world. *we can launch them at *baikonur. *we can launch them at *kourou [*french *guiana]. *we can launch them in *china. *these are all locations that are heavily subsidized by their governments. *right now, our launch operations costs are about 10 percent and my guess is that *mike's are about 10 percent as well. *but if we take on more cost sharing, where will that number go to? 15 percent? 20 percent? *i don't know what that answer is. *the point is, if they go too high we could damage the *u.*s. commercial launch business and all commercial launches, including those from *boeing and *lockheed *martin, could wind up overseas. *once again, the government could be stuck with all the range costs. *again, *i don't have the answer, but *i think it is a bigger issue than *boeing or *lockheed *martin or the *air *force. *it really is all about national space policy and we need to work together to come up with the right answer. *the *air *force is taking a leadership role in this. *colonel *jeff *norton is working on a range economic model and *the *boeing *company will support him in the development of that model. *we intend to take this issue back to *washington to work it on *capitol *hill and drive it towards a conclusion. *i would like to close by saying a little about acquisition reform. *i hope this doesn't come across too much like a commercial, but it really is a commercial for what the *air *force has done. *we had a supplier conference in *seattle a couple of months ago. *we had some 400 suppliers there and we talked about partnering between *boeing and our customers and between *boeing and our suppliers. *we had an artist at the conference who took notes on our discussion of acquisition reform. *the result is this mural [displayed on wall at presentation]. *the mural takes us from *dr. *perry's message back in 1992 to where we are today and into the future. *i hope you'll enjoy looking at it. *thank you and *i look forward to the discussion.

*fb.

<aut=albaught><autanmois=albaught200007><autan=albaught2000><anaut=2000albaught><anmois=200007><an=2000>

*farnborough *press *conference

*today we serve five markets: launch services; human space flight and exploration; missile defense and space control; national intelligence, surveillance and reconnaissance (*i*s*r); and information and communications.

*launch *services: *we offer a range of launch service solutions including the *delta family and *sea *launch. *delta *i*i has had 279 successful launches, more than any other expendable launch vehicle. *delta *i*i*i problems have been addressed, and we return to flight soon. *on *sea *launch, we have determined cause of failure and return to flight this week. *delta *i*v is in testing with first launch in 2001. *and we have steady customer demand on the suite of vehicles.

*human *space *flight and *exploration: *we're *n*a*s*a's largest contractor; e.g., prime contractor for the *international *space *station, which is part of a 16-nation venture. *the *space *shuttle's 100th mission is in *october, and we're proud to build and maintain the world's only operational reusable launch vehicle.

*missile *defense and *space *control and *i*s*r: *we're developing the *future *imagery *architecture for the *national *reconnaissance *office, and we are the lead system integrator for the *national *missile *defense. *while we missed our target a few weeks ago, we know there are inherent technology risks in our work, especially at the beginning of a quest.

*in short, we are excited about our future, *phil, and our enormous business possibilities.

*our knowledge of highly mobile platforms, satellites, and space-based communication led to *connexion by *boeing. *it's a mobile, global service using phased-array antenna and satellite technology to bring two-way broadband, communication services to airline and business jet passengers. *so, soon when you can watch a soccer match, send an e-mail, or file a story from 40,000 feet, the airplane will begin to feel like your home or office and that will change the traveling experience and will turn downtime into productive time.

*satellite-based air-traffic management *c*n*s/*a*t*m is another big growth opportunity. *current systems are nearing capacity, and a projected 5- to 10-percent annual increase in use means major upgrades will be needed to avoid gridlock and ensure safety. *global architecture that transitions terrestrial infrastructure to satellite-based *a*t*m is a solution. *as a leading integrator of large-scale satellite-based communications systems, *boeing is uniquely qualified to design, build, and operate such a system.