UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2011~~2012

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-10795

BOEING CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)


Delaware				95-2564584
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)


500 Naches Ave. SW, 3rd Floor • Renton, Washington		98057
(Address of principal executive offices)		(Zip Code)

(425) 965-4000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x (Do not check if a smaller reporting company ) Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

Common stock shares outstanding at ~~October 26~~April 25, ~~2011~~2012: 50,000 shares, all of which were owned by The Boeing Company.

Registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

Table of Contents

			Page
Part I. Financial Information (Unaudited)
	Item 1.	Financial Statements	1	1
		Condensed Consolidated Balance Sheets	1	1
		Condensed Consolidated Statements of Operations		2
		Condensed Consolidated Statements of Comprehensive Income	2
		Condensed Consolidated Statements of Shareholder’s Equity and Comprehensive Income		3
		Condensed Consolidated Statements of Shareholder’s Equity	3
		Condensed Consolidated Statements of Cash Flows	4	4
		Notes to Condensed Consolidated Financial Statements	5	5
		Review Report of Independent Registered Public Accounting Firm	15	14
	Forward-Looking Statements		16	15
	Item 2.	Management’s Narrative Analysis of the Results of Operations	17	15
	Item 4.	Controls and Procedures		20
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Part II. Other Information
	Item 4.	Controls and Procedures	20
	Item 1.	Legal Proceedings		21
Part II. Other Information
	Item 1A.	Risk Factors		21
	Item 1.	Legal Proceedings	22
	Item 6.	Exhibits		21
	Item 1A.	Risk Factors	22
	Signatures			22
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
	Item 3.	Defaults Upon Senior Securities	22
	Item 4.	Mine Safety Disclosures	22
	Item 5.	Other Information	22
	Item 6.	Exhibits	24
	Signatures		25

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Boeing Capital Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(Dollars in millions, except par value)	~~September~~March 3031,~~2011~~2012			December 31,~~2010~~2011
ASSETS
Cash and cash equivalents	$	~~746~~399		$	~~425~~941
Short-term investments		~~600~~100			~~900~~300
Receivables:
Finance leases		1,~~779~~677			1,~~907~~727
Notes and other		~~540~~577			~~375~~621
		2,319			2,282
		2,254			2,348
Allowance for losses on receivables		(5650	)		(8753	)
		2,263			2,195
		2,204			2,295
Equipment under operating leases, net		1,~~476~~400			1,~~821~~439
Investments		610			87
Assets held for sale or re-lease, net		~~541~~510			~~583~~521
Other assets		6157			5463
	$	54,~~693~~680		$	5,~~986~~566
LIABILITIES AND SHAREHOLDER’S EQUITY
Liabilities:
Accounts payable and accrued expenses	$	4741		$	8865
Other liabilities		~~283~~220			~~328~~256
Accounts with Boeing		~~130~~62			6676
Deferred income taxes		1,~~278~~219			1,~~371~~232
Debt		32,~~407~~622			3,~~446~~400
		5,145			5,299
		4,164			5,029
Shareholder’s equity:
Common shares – $100 par value; authorized 100,000 shares; issued and outstanding 50,000 shares		5			5
Additional paid-in capital		~~523~~510			~~682~~523
Accumulated other comprehensive income (loss), net of tax		–1			–1
Retained earnings		20–			–8
		548			687
		516			537
	$	54,~~693~~680		$	5,~~986~~566

See Notes to the Condensed Consolidated Financial Statements.

Boeing Capital Corporation and Subsidiaries

Condensed Consolidated Statements of ~~Operations~~Comprehensive Income

(Unaudited)

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	Three Months EndedMarch 31,
(Dollars in millions)	~~2011~~2012			~~2010~~2011			~~2011~~			~~2010~~
REVENUE
Finance lease income	$	3221		$	3635		$	~~101~~		$	~~109~~
Interest income on notes receivable		911			278			25			61
Operating lease income		7869			9990			~~259~~			~~294~~
Net gain (loss) on disposal of assets		3			(4	)		18			2
Net gain on disposal of assets		–			5
Other income		424			125			13			28
		126			170			416			494
		125			143
EXPENSES
Interest expense		3228			4233			94			~~124~~
Depreciation expense		34			5242			~~117~~			~~153~~
Provision for (recovery of) losses		(11	)		9			(20	)		11
Recovery of losses		(3	)		(6	)
Operating expenses		1213			11			35			34
Asset impairment expense		3914			109			53			20
Other expense		1			12			4			6
		107			125			283			348
		87			91
Income from continuing operations before provision for income tax		1938			4552			~~133~~			~~146~~
Provision for income tax		814			1719			49			54
Income from continuing operations		1124			2833			84			92
Net gain (loss) on disposal of discontinued operations, net of tax		7			–			4			(2	)
Net loss on disposal of discontinued operations, net of tax		–			(2	)
Net income	$	1824		$	2831		$	88		$	90
OTHER COMPREHENSIVE INCOME, NET OF TAX
Other comprehensive income		–			–
Comprehensive income	$	24		$	31

See Notes to the Condensed Consolidated Financial Statements.

Boeing Capital Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholder’s Equity ~~and Comprehensive Income~~

(Unaudited)

(Dollars in millions)	Total			CommonShares		AdditionalPaid-InCapital			AccumulatedOtherComprehensiveIncome (Loss)			RetainedEarnings			~~ComprehensiveIncome~~
Balance at January 1, 2010	$	699		$	5	$	696		$	(2	)	$	–
Balance at January 1, 2011	$	687		$	5	$	682		$	–		$	–
Non-cash capital contributions from Boeing		1			–		1			–			–
Cash dividends to Boeing (including return of capital)		(191	)		–		(160	)		–			(31	)
Cash dividends to Boeing		(90	)		–		–			–			(90	)
Net income		31			–		–			–			31
Net income		90			–		–			–			90		$	90
Balance at March 31, 2011	$	527		$	5	$	522		$	–		$	–
Unrealized gain on investments, net of tax		5			–		–			5			–			5
Balance at January 1, 2012	$	537		$	5	$	523		$	1		$	8
Balance at September 30, 2010	$	705		$	5	$	697		$	3		$	–		$	95
Cash dividends to Boeing (including return of capital)		(45	)		–		(13	)		–			(32	)
Balance at January 1, 2011	$	687		$	5	$	682		$	–		$	–
Net income		24			–		–			–			24
Non-cash capital contributions from Boeing		1			–		1			–			–
Balance at March 31, 2012	$	516		$	5	$	510		$	1		$	–
Cash dividends to Boeing (including return of capital)		(228	)		–		(160	)		–			(68	)
Net income		88			–		–			–			88		$	88
Balance at September 30, 2011	$	548		$	5	$	523		$	–		$	20		$	88

See Notes to the Condensed Consolidated Financial Statements.

Boeing Capital Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended September 30,
	Three Months Ended March 31,
(Dollars in millions)	~~2011~~2012			~~2010~~2011
OPERATING ACTIVITIES
Net income	$	8824		$	9031
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Non-cash items:
Depreciation and amortization expense		~~112~~33			~~148~~39
Net gain on disposal of assets		~~(18~~–	)		(25	)
Provision for (recovery of) losses		(20	)		11
Recovery of losses		(3	)		(6	)
Asset impairment expense and other charges		5315			329
Share-based plans expense		1			1
Net loss on disposal of discontinued operations, net of tax		–			2
Adjustments related to discontinued operations, net of tax		(4	)		2
Decrease in deferred income taxes		(13	)		(17	)
Change in deferred income taxes		(93	)		(48	)
Change in assets and liabilities:
Other assets		14–			223
Accrued interest and rents		9–			(1	)
Accounts payable and accrued expenses		(3924	)		(2438	)
Other liabilities		(2935	)		(2611	)
Accounts with Boeing		64(15	)		~~(21~~17	)
Net cash provided by operating activities		138			184
Net cash provided by (used in) operating activities		(18	)		25
INVESTING ACTIVITIES
Purchase of short-term investments		(1,000	)		(1,100	)
Purchase of investments		(3	)		–
Proceeds from maturities of short-term investments		1,300			700
Purchase of short-term investments		(100	)		(300	)
Proceeds from available-for-sale investments		2			1
Proceeds from maturities of short-term investments		300			900
Payment for capitalizable costs in process		(5	)		(43	)
Proceeds from available-for-sale investments		–			1
Proceeds from disposition of equipment		62			94
Payment for capitalizable costs in process		(3	)		–
Payments of leases, notes and other receivables		206			486
Proceeds from disposition of equipment		9			24
Origination of leases, notes and other receivables		(105	)		–
Payments of leases, notes and other receivables		92			82
Net cash provided by investing activities		~~460~~295			~~138~~707
FINANCING ACTIVITIES
Proceeds from issuance of debt		745			–
Repayment of debt		(774	)		(786	)
Repayment of debt		(794	)		(621	)
Payment of dividends (including return of capital)		(45	)		(191	)
Payment of dividends (including return of capital)		(228	)		(90	)
Net cash used in financing activities		(819	)		(977	)
Net cash used in financing activities		(277	)		(711	)
Net decrease in cash and cash equivalents		(542	)		(245	)
Net increase (decrease) in cash and cash equivalents		321			(389	)
Cash and cash equivalents at beginning of year		941			425
Cash and cash equivalents at beginning of year		425			596
Cash and cash equivalents at end of period	$	399		$	180
Cash and cash equivalents at end of period	$	746		$	207
NON-CASH INVESTING AND FINANCING ACTIVITIES
Net transfer to (from) assets held for sale or re-lease	$	~~(16~~10	)	$	~~321~~(13	)
Net transfer to notes receivable	$	193		$	24
Net transfer to (from) equipment under operating leases	$	(4	)	$	13
Net transfer from equipment under operating leases	$	(164	)	$	(292	)
Transfer from other assets	$	(6	)	$	–
Net transfer to (from) finance leases	$	(40	)	$	6
Decrease in debt due to fair value hedge derivatives	$	3		$	8
Transfer from other assets	$	–		$	(59	)
Transfer to allowance for losses on receivables	$	11		$	–
Transfer to accounts with Boeing	$	2		$	–
Transfer to other liabilities	$	12		$	–
Transfer to accounts payable and accrued expenses	$	2		$	–
Increase in debt due to fair value hedge derivatives	$	(16	)	$	(51	)

See Notes to the Condensed Consolidated Financial Statements.

Boeing Capital Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(Dollars in millions)

Note 1 – Basis of Presentation

Boeing Capital Corporation (together with its subsidiaries, referred to as “us,” “we,” “our” or the “Company”) is a wholly owned subsidiary of The Boeing Company (Boeing). We prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In our opinion all normal recurring adjustments necessary for a fair presentation are reflected in the condensed consolidated financial statements. Operating results for the period ended ~~September~~March 3031, ~~2011~~2012 are not necessarily indicative of the results for the full year. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2011 ~~2010~~ Annual Report on Form 10-K.

Immaterial Restatement

Subsequent to the issuance of our consolidated balance sheet as of December 31, 2011 we determined that it should have reflected Finance lease receivables of $1,727, as compared to the $1,739 reported, and the difference of $12 should have been reflected as a reduction in Finance lease income for the year ended December 31, 2011. In connection with the November 2011 bankruptcy filing by American Airlines, Inc. (American Airlines), certain lease payments by American Airlines beginning in May 2012, the first scheduled payments under the relevant leases since the bankruptcy filing, are required to be allocated exclusively to various non-recourse debt holders, at higher interest rates, until all such holders are paid in full, and only thereafter to us. The reallocation of payments required us to recalculate our investment in leveraged leases for the year ended December 31, 2011. This reallocation of payments does not affect amounts payable under these leases by American Airlines. The reallocation of payments also does not alter our expectation that we will not incur any losses related to American Airlines receivables as a result of the bankruptcy.

Management believes that the effect of this recalculation is not material to our previously issued consolidated financial statements for the year ended December 31, 2011. The impact on specific line items in the December 31, 2011 consolidated balance sheet is presented below:


	As of December 31, 2011
Balance Sheet Items:		As Previously Reported	Restated
Finance leases		$1,739	$1,727
Total receivables, gross of allowance		2,360	2,348
Total receivables, net of allowance		2,307	2,295
Total assets		5,578	5,566
Accounts with Boeing		77	76
Deferred income taxes		1,236	1,232
Total liabilities		5,034	5,029
Retained earnings		15	8
Shareholder’s equity		544	537
Total liabilities and shareholder’s equity		$5,578	$5,566

Note 2 – Transactions with Boeing

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

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

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

There can be no assurances that these intercompany agreements and arrangements will not be terminated or modified by us or Boeing. However, our and Boeing’s ability to terminate or modify the support agreement is subject to certain conditions. See Item 8. Financial Statements and Supplementary Data, Note 2 of our ~~2010~~2011 Annual Report on Form 10-K.

~~During~~At March 31, 2012, we were the beneficiary ~~third~~of ~~quarter~~up to a maximum of ~~2011~~$1,556 under our guarantees from Boeing ~~sold~~which usmitigates aour ~~100%~~risk ~~participation~~with inrespect ato ~~$105~~portfolio ~~note~~assets ~~receivable~~totaling $1,901.

At September 30, 2011, we were the beneficiary under $1,659 of guarantees from Boeing which mitigates our risk with respect to portfolio assets totaling $2,038.

Intercompany guarantee amounts by aircraft type are summarized as follows:

	September 30, 2011				December 31, 2010
	March 31, 2012				December 31, 2011
	Guarantee Amount		Carrying Value		Guarantee Amount		Carrying Value
717 (out of production)	$	1,~~510~~464	$	1,~~830~~766	$	1,~~586~~481	$	21,~~099~~790
Out of production single-aisle aircraft		5852		5852		6655		6655
Out of production twin-aisle aircraft		49		66		51		71
Other, including other Boeing aircraft		40		83		41		83
Other, including other Boeing aircraft		42		84		46		90
	$	1,556	$	1,901	$	1,577	$	1,928
	$	1,659	$	2,038	$	1,749	$	2,326

At ~~September~~March 3031, ~~2011~~2012 and December 31, ~~2010~~2011, Accounts with Boeing included $4136 and $4738 for deferred ~~revenue~~ revenue associated with guarantee and subsidy settlements and terminations.

5We recorded the following activity under the intercompany guarantee and subsidy agreements for the three months ended March 31:


	2012		2011
Operating lease income	$	12	$	16

WeFor ~~recorded~~ the ~~following~~three ~~activity~~months ~~under~~ended ~~the~~March 31, ~~intercompany~~2012 ~~guarantee~~ and ~~subsidy~~2011, ~~agreements~~we ~~for~~recorded ~~the~~no new business volume related to Boeing ~~nine~~aircraft, ~~months~~equipment ~~ended~~or ~~September 30:~~services we purchased or financed.

	2011			2010
Finance lease income (1)	$	(2	)	$	5
Interest income on notes receivable		1			12
Operating lease income		49			34
Net gain on disposal of assets		2			9
Asset impairment expense		–			6
	$	50		$	66

(1) For the nine months ended September 30, 2011 and 2010, finance lease income included $(2) and $(2) for fees paid to Boeing related to guarantee agreements.

For the nine months ended September 30, 2010, we recorded operating lease income from Boeing, exclusive of guarantees and subsidies, of $6.

For the nine months ended September 30, 2011 and 2010, we recorded new business volume of $105 and $39 related to Boeing aircraft, equipment or services we purchased or financed.

Note 3 – Portfolio Quality

Allowance for Losses on Receivables

The following table reconciles the activity in the allowance for losses on receivables for the ~~nine~~three months ended ~~September~~March 3031:

	2011			2010
	2012			2011
Allowance for losses on receivables at beginning of period	$	8753		$	7187
Provision for (recovery of) losses		(20	)		11
Recovery of losses		(3	)		(6	)
Write-offs		(11	)		(1	)
Allowance for losses on receivables at end of period	$	50		$	81
Allowance for losses on receivables at end of period	$	56		$	81
Allowance as a percentage of total receivables		2.2	%		3.7	%
Allowance as a percentage of total receivables		2.4	%		3.3	%
Allowance for losses on receivables collectively evaluated for impairment	$	50		$	81
Allowance for losses on receivables collectively evaluated for impairment	$	56		$	81

~~Credit~~Of ~~Quality~~the $322 of financing receivables individually evaluated for impairment at March 31, 2012, $182 was classified as impaired. We recorded no allowance for losses on these impaired receivables.

We assign internal credit ratings for all customers and determine the creditworthiness of each customer based upon public information and information obtained directly from our customers. We utilize these credit ratings as one of the factors in assessing the adequacy of our allowance for losses on receivables. Our rating categories are comparable to those used by the major credit rating agencies.

Credit Quality

The following table details our receivable balances by the internal rating category which was used as a factor in determining our allowance for losses on receivables:

	September 30, 2011						December 31, 2010
	March 31, 2012						December 31, 2011
Rating categories	Out-of-ProductionAircraft		In-ProductionAircraft/Other		Total		Out-of-ProductionAircraft		In-ProductionAircraft/Other		Total
BBB	$	~~121~~1,277	$	–	$	~~121~~1,277	$	–1,316	$	–	$	–1,316
BB		~~1,231~~–		6760		~~1,298~~60		–		–67		–67
B		~~107~~61		–		~~107~~61		~~135~~103		72–		~~207~~103
CCC		~~382~~227		~~411~~307		~~793~~534		~~1,658~~194		~~417~~318		~~2,075~~512
Total carrying value	$	1,841	$	478	$	2,319	$	1,793	$	489	$	2,282
D		171		151		322		171		179		350
Total carrying value	$	1,736	$	518	$	2,254	$	1,784	$	564	$	2,348

At ~~September~~March 3031, ~~2011~~2012, our recorded allowance primarily related to receivables with ~~ratings~~rating of ~~BB and~~ CCC in the ~~preceding~~ preceding table, and we applied default rates that averaged 1147% ~~and 49%~~ to exposure associated with those receivables. On May 2, 2011, Southwest Airlines Co. (Southwest) completed its acquisition of AirTran Holdings, Inc. and AirTran Holdings, Inc. became a wholly owned subsidiary of Southwest. AirTran Holdings, LLC (AirTran) became the successor to AirTran Holdings, Inc. We concluded that AirTran’s subsidiary relationship with Southwest warranted an increased weighting in determining the internal rating category. As of September 30, 2011, we assigned the internal rating category of BB to the receivables with AirTran for the purpose of assigning default rates discussed above. We had previously assigned an internal rating category of CCC as of December 31, 2010, and CCC+ as of June 30, 2011. As a result of the improved rating, the allowance for losses on receivables was reduced by $13 and $16 for the three-month and nine-month periods ended September 30, 2011.

At ~~September~~March 3031, ~~2011~~2012 and December 31, ~~2010~~2011, ~~our~~ receivables ~~were~~of ~~primarily~~$977 and $1,032 were related to customers we believe have less than investment-grade credit.

Impaired Receivables

At ~~September~~March 3031, ~~2011~~2012 we had impaired receivables with a carrying value and unpaid principal balance of $182, all of which related to out-of-production aircraft on lease to American Airlines. At December 31, ~~2010,~~2011 we had impaired receivables with a carrying value and unpaid principal balance of $182, all of which related to out-of-production aircraft. We recorded no allowance for losses on these impaired receivables.

~~For~~In the ~~nine months~~fourth ~~ended~~quarter ~~September 30,~~of ~~2010~~2011, American Airlines filed for Chapter 11 bankruptcy protection. We believe that our ~~average~~receivables ~~recorded~~from ~~investment,~~American ~~interest~~Airlines ~~income~~of ~~recognized~~$322 ~~and~~are ~~cash~~sufficiently ~~received~~collateralized onsuch ~~the~~that ~~income~~we ~~recognized~~have ~~related~~not torecorded ~~the~~an ~~impaired~~allowance ~~receivables,~~for ~~all~~losses as of ~~which~~March 31, ~~related~~2012 toas ~~out-~~a result of~~-production~~ ~~aircraft,~~the ~~were~~bankruptcy. ~~$117,~~Our receivables from American Airlines include leveraged leases with a carrying value of $8127 ~~and~~ net of $8269 non-recourse debt at March 31, ~~respectively~~2012.

The following table details our average recorded investment and the related income recognized in the period of impairment on the impaired receivables for the three months ended March 31:


2012	Average Carrying Value		Income Recognized
Out-of-production aircraft	$	182	$	–

At March 31, 2011, we had no impaired receivables.

Past Due Receivables

AtThe ~~September 30,~~aging ~~2011~~analysis ~~and~~of ~~December 31,~~receivables ~~2010,~~past wedue ~~had~~consisted noof ~~past~~the ~~due~~following ~~receivables.~~at:


March 31, 2012	31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days		Total Past Due > 30 Days		Related Carrying Value		Carrying Amount > 90 Days and Accruing
Out-of-production	$	2	$	–	$	2	$	4	$	54	$	–
Total	$	2	$	–	$	2	$	4	$	54	$	–


December 31, 2011
In-production/other aircraft	$	1	$	–	$	–	$	1	$	46	$	–
Total	$	1	$	–	$	–	$	1	$	46	$	–

Non-Performing Assets

Non-performing assets (assets not earning income on an accrual basis) consisted of the following:

	September 30,2011			December 31,2010
	March 31,2012			December 31,2011
Assets placed on non-accrual status:
Equipment under operating leases, net	$	14		$	29
Receivables:
Assets held for sale or re-lease, net (1)		20			43	(2)
Out-of-production aircraft	$	171		$	171
	$	34		$	72
Equipment under operating leases, net(1)		9			14
Percent of total non-performing assets to total portfolio		0.8	%		1.5	%
Assets held for sale or re-lease, net(1)		120	(2)		50
	$	300		$	235
Percent of total non-performing assets to total portfolio		7.2	%		5.4	%

(1) At ~~September~~March 3031, 2012 and December 31, 2011, equipment under operating leases of $57 and $23 are not included in non-performing assets due to intercompany guarantees provided by Boeing. At March 31, 2012 and December 31, ~~2010~~2011, assets held for sale or re-lease of $~~521~~390 and $~~540~~471 are not included in non-performing assets due to intercompany guarantees provided by Boeing.

(2) At ~~December~~March 31, ~~2010~~2012, non-performing assets held for sale or re-lease of $2812 had either a purchase or lease commitment.

Note 4 – Debt

The carrying value of debt, including the net effect of interest rate swap revaluation adjustments and unamortized deferred debt costs, consisted of the following:

(Interest rates are the contractual rates at September 30, 2011)	September 30,2011		December 31,2010
(Interest rates are the contractual rates at March 31, 2012)	March 31,2012		December 31,2011
2.125% - 7.58% fixed rate notes due through 2019	$	3,286	$	3,314
2.13% - 7.58% fixed rate notes due through 2019	$	2,509	$	3,283
1.58% floating rate note due in 2023		25		25
1.70% floating rate note due in 2023		25		25
1.32% - 5.79% non-recourse notes due through 2013		51		55
1.34% - 5.79% non-recourse notes due through 2013		48		49
0.98% capital lease obligation due through 2015		45		52
1.09% capital lease obligation due through 2015		40		43
	$	32,~~407~~622	$	3,~~446~~400

At ~~September~~March 3031, ~~2011~~2012, and December 31, ~~2010~~2011, we had interest rate swaps which effectively convert debt of of $388 and $~~875~~388 from fixed rates to floating rates. During the first nine months of 2011 we terminated $187 of interest rate swaps in order to improve our expected alignment between fixed and floating rate assets and liabilities. An additional $300 of swaps matured as scheduled concurrently with corresponding debt maturities.

On8 August 1, 2011, we issued notes totaling $750, which included $500 bearing an interest rate of 2.125% due August 15, 2016 and $250 bearing an interest rate of 2.90% due August 15, 2018. The net proceeds after deducting the discount, underwriting fees and issuance costs were $745. The notes are unsecured senior obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated indebtedness.

TheTable most restrictive covenants in our debt agreements require us to (a) limit the payment of cash dividends to the extent that our consolidated assets would be less than 115% of our consolidated liabilities (excluding deferred taxes) after dividend payments and (b) restrict the amount of liens on our property to secure indebtedness to 15% or less of consolidated assets, other than liens specifically excluded. At September 30, 2011, we were in compliance with these covenants. Contents

The most restrictive covenants in our debt agreements require us to (a) limit the payment of cash dividends to the extent that our consolidated assets would be less than 115% of our consolidated liabilities (excluding deferred taxes) after dividend payments and (b) restrict the amount of liens on our property to secure indebtedness to 15% or less of consolidated assets, other than liens specifically excluded. At March 31, 2012, we were in compliance with these covenants.

Note 5 – Derivative Financial Instruments

We primarily use derivative instruments to manage exposures to interest rate risk. We enter into interest rate swap contracts to hedge interest rate risk associated with our debt obligations. These interest rate swap contracts are designated as cash flow hedges or fair value hedges. Our contracts entered into as of ~~September~~March 3031, ~~2011~~2012 do not require collateral or other security from either party.

The fair values of derivative instruments included in the Consolidated Balance Sheets were as follows:

September 30, 2011	Other Assets		Other Liabilities
March 31, 2012	Other Assets		Other Liabilities
Derivatives designated as fair value hedging instruments - Interest rate swaps	$	31	$	–
Derivatives designated as hedging instruments - Interest rate swaps	$	27	$	–
December 31, 2010
December 31, 2011
Derivatives designated as fair value hedging instruments - Interest rate swaps	$	24	$	–
Derivatives designated as hedging instruments - Interest rate swaps	$	29	$	–

The notional amount of our interest rate swaps is disclosed in Note 4 – Debt.

For our fair value hedges that qualify for hedge accounting treatment we use the ~~short-cut~~shortcut method and thus there are no gains or losses recognized due to hedge ineffectiveness. Under ~~short-cut~~shortcut hedge accounting treatment, the change in fair value of the interest rate swap is assumed to perfectly offset the change in fair value of the hedged debt. For the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~ 2012 and ~~2010~~2011 ~~gains~~losses from changes in the fair value of $16(3) and $51(8) were recognized in interest expense with a corresponding offset due to changes in the fair value of the hedged underlying debt, resulting in ~~zero~~no ~~net~~ impact to interest expense.

Note 6 – Commitments and Contingencies

Litigation

Various legal proceedings and claims are pending or have been asserted against us. We believe that the final outcome of these proceedings and claims will not have a material effect on our earnings, cash flows and/or financial position.

Bankruptcies

On November 29, 2011, American Airlines filed for Chapter 11 bankruptcy protection. American Airlines retains certain rights by operating under Chapter 11 bankruptcy protection, including the right to reject executory contracts, such as aircraft leases. American Airlines has not rejected any of the leases related to our aircraft. At March 31, 2012 and December 31, 2011, American Airlines accounted for $322 and $350 of our total assets. We believe that our receivables from American Airlines are sufficiently collateralized such that we do not expect to incur losses related to those receivables as a result of the bankruptcy. Some possible outcomes that may occur as a result of the bankruptcy could cause a significant amount of deferred taxes to be accelerated which may impact our near-term cash requirements. We continue to monitor the American Airlines bankruptcy for potential impacts to our business.

Restructurings and Restructuring Requests

From time to time, certain customers have requested a restructuring of their transactions with us. AsSince ~~of September~~December 3031, 2011, we have not reached agreement on any restructuring requests that would have a material effect on our earnings, cash flows and/or financial position.

Commitments

As of September 30, 2011, we and Boeing had unfunded financing commitments of $15,624, primarily resulting from firm contracts, options for deliveries or proposals as part of sales campaigns. These commitments are provided to give Boeing customers reasonable assurance of financing in connection with orders of Boeing products in advance of delivery. However, customers typically seek lower cost financing from other sources prior to actual delivery. In addition, we continue to work with third party financiers to provide alternative financing to customers and eliminate the need for our financing. We anticipate that we will not be required to fund a significant portion of our financing commitments as we continue to work with third party financiers to provide alternative financing to customers. However, there can be no assurances that we will not be required to fund greater amounts than historically required. To the extent we are obligated to provide financing, such financing generally includes participation by engine manufacturers which further reduces our obligation. Therefore, the reported amount of commitments does not necessarily represent a future net cash requirement. However, we expect to ultimately provide funding for those commitments which are exercised, whether they are Boeing’s or our commitments. If there were requirements to fund all Boeing’s and our commitments, the timing in which these commitments may be funded (based on estimated earliest potential funding dates as of September 30, 2011) is as follows:

	Total
October through December 2011	$	202
2012		1,483
2013		1,786
2014		2,872
2015		3,319
Thereafter		5,962
	$	15,624

Commitments

At March 31, 2012, we and Boeing had unfunded financing commitments of $19,607, primarily related to aircraft on order including options and those proposed in sales campaigns. These commitments are provided to give Boeing customers reasonable assurance of financing in connection with orders of Boeing products in advance of delivery. However, customers typically seek lower cost financing from other sources prior to actual delivery. In addition, we continue to work with third party financiers to provide alternative financing to customers and eliminate the need for our financing. We anticipate that we will not be required to fund a significant portion of our financing commitments as we continue to work with third party financiers to provide alternative financing to customers. However, there can be no assurance that we will not be required to fund greater amounts than historically required. To the extent we are obligated to provide financing, such financing generally includes participation by engine manufacturers which further reduces our obligation. Therefore, the reported amount of commitments does not necessarily represent a future net cash requirement. However, we expect to ultimately provide funding for those commitments which are exercised, whether they are Boeing’s or our commitments. If there were requirements to fund all Boeing’s and our commitments, the timing in which these commitments may be funded (based on estimated earliest potential funding dates as of March 31, 2012) is as follows:


	Total
April through December 2012	$	1,688
2013		1,280
2014		2,525
2015		3,813
2016		3,294
Thereafter		7,007
	$	19,607

Note 7 – Fair Value Measurements

The following tables present our assets ~~and liabilities~~ that are measured at fair value on a recurring basis and are categorized using the three levels of fair value hierarchy.:

September 30, 2011	Total		Quoted Prices inActive Markets forIdentical Assets (Level 1)		Significant OtherObservableInputs (Level 2)		SignificantUnobservableInputs(Level 3)
March 31, 2012	Total		Quoted Prices inActive Markets forIdentical Assets (Level 1)		Significant OtherObservableInputs (Level 2)		SignificantUnobservableInputs(Level 3)
Assets
Money market funds	$	284	$	284	$	–	$	–
Available-for-sale investments:
EETC	$	4	$	–	$	–	$	4
Interest rate swaps		31		–		31		–
Total	$	35	$	–	$	31	$	4
December 31, 2010
Assets
Available-for-sale investments:
Marketable equity securities	$	1	$	1	$	–	$	–
EETC		5		–		–		5
Interest rate swaps		2427		–		2427		–
Total	$	30316	$	1284	$	2427	$	5

Marketable equity securities. The fair value of our marketable equity securities is determined using quoted prices in active markets for identical assets. Unrealized gains (losses) are recorded in Accumulated Other Comprehensive Income (AOCI).


December 31, 2011	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Money market funds	$	218	$	218	$	–	$	–
Available-for-sale investments:
EETC		5		–		–		5
Interest rate swaps		29		–		29		–
Total	$	252	$	218	$	29	$	5

~~Enhanced~~Money ~~Equipment~~market ~~Trust Certificate (EETC)~~funds. ~~The~~Money ~~fair~~market ~~value~~funds ofare ~~our~~valued ~~EETC is derived~~ using ~~discounted~~a ~~cash flows at~~ market ~~yield~~approach based on ~~estimated~~ ~~trading~~the ~~prices~~quoted ~~for~~market ~~comparable~~prices of ~~debt~~identical ~~securities~~instruments. ~~Unrealized gains (losses) are recorded in AOCI.~~

Interest rate swaps. The fair values of our interest rate swaps are determined using cash flows discounted at market interest rates in effect at the period close.

The following tables present a reconciliation of Level 3 assets measured at fair value on a recurring basis for the nine months ended September 30:

2011	Fair ValueBeginningof Year		UnrealizedGainsIncludedin Income		AccumulatedOtherComprehensiveIncome/(Loss)		Purchases,Sales, andSettlements			TransfersIn/(Out)		Fair Valueat End ofPeriod
Assets
EETC	$	5	$	–	$	–	$	(1	)	$	–	$	4
Total	$	5	$	–	$	–	$	(1	)	$	–	$	4
2010
Assets
EETC	$	5	$	–	$	1	$	(1	)	$	–	$	5
Total	$	5	$	–	$	1	$	(1	)	$	–	$	5

~~Certain~~Enhanced ~~assets~~Equipment ~~are~~Trust ~~measured~~Certificate at(EETC). The fair value onof aour ~~non-recurring~~EETC ~~basis~~is derived using ~~significant unobservable~~cash ~~inputs~~flows ~~(Level 3).~~discounted ~~The~~at ~~table~~market ~~below~~yield ~~presents~~derived ~~the~~from ~~non-recurring~~trading ~~losses~~prices ~~recognized~~ for ~~the~~comparable ~~nine~~debt ~~months~~securities. ~~ended~~Unrealized ~~September 30,~~gains ~~and~~(losses) ~~the~~are ~~carrying~~recorded ~~value~~in ~~and~~Accumulated ~~asset~~Other ~~classification~~Comprehensive ofIncome ~~the~~(AOCI). ~~related assets still held as of September 30:~~

	2011					2010
	CarryingValue		TotalLosses			CarryingValue		TotalLosses
Assets
Equipment under operating leases (1)	$	55	$	(49	)	$	105	$	(22	)
Assets held for sale or re-lease (1)		15		(4	)		22		(4	)
Total	$	70	$	(53	)	$	127	$	(26	)

Interest rate swaps. The fair values of our interest rate swaps are determined using cash flows discounted at market interest rates in effect at the period close.

~~(1)~~The ~~Represents~~following ~~carrying~~tables ~~value~~present ~~and~~a ~~related~~reconciliation ~~write~~of ~~downs~~Level ~~which~~3 ~~were~~assets ~~based~~measured onat ~~the~~ fair value ~~for~~on ~~the~~a ~~related~~recurring ~~aircraft.~~basis for ~~For~~ the ~~nine~~three months ended ~~September~~March 31: ~~30, 2010, losses on equipment under operating leases includes $6 which were offset by intercompany guarantees.~~


2012	Fair Value Beginning of Year		Realized Gains Included in Income		Accumulated Other Comprehensive Income/(Loss)		Settlements		Transfers In/(Out)		Fair Value at End of Period
Assets
EETC	$	5	$	–	$	–	$	–	$	–	$	5


Total	$	5	$	–	$	–	$	–	$	–	$	5


2011


Assets
EETC	$	5	$	–	$	–	$	–	$	–	$	5


Total	$	5	$	–	$	–	$	–	$	–	$	5

We value the EETC on a recurring basis using a valuation technique of contractual cash flows discounted using the bond yield of a debt security with similar coupon and maturity, which is considered an unobservable input. As of March 31, 2012 the yield of 2.99% was used, having an inverse relationship to the fair value of the EETC.

Certain assets are measured at fair value on a non-recurring basis using significant unobservable inputs (Level 3). The table below presents the non-recurring losses recognized for the three months ended March 31, and the fair value and asset classification of the related assets as of the impairment date:

2012

2011

Fair
Value

Total
Losses

Fair
Value

Total
Losses

Assets

Equipment under operating leases

$12

$(2)

$43

$(5)

Assets held for sale or re-lease

(12)

(4)

Total

$25

$(14)

$51

$(9)

When an asset is determined to be impaired, the amount of the asset impairment expense recorded is the excess of the carrying value less the fair value of the asset reduced by the consideration of asset value guarantees we hold, if applicable. The fair value of the impaired asset is derived by calculating a median collateral value from a consistent group of third party aircraft value publications. The values provided by the third party aircraft value publications are derived from their knowledge of market trades or other market factors taking into account estimated revenues and costs to operate the aircraft. Management reviews the publications quarterly to assess their continued appropriateness and consistency with market trends. The responsibility of these reviews resides principally within our risk management group. Under certain circumstances, we adjust values based on the attributes and condition of the specific aircraft or equipment, usually when the features or use of the aircraft vary significantly from the more generic aircraft attributes covered by outside publications, or based on the expected net sales price for the aircraft.

For level 3 assets that were measured at fair value on a non-recurring basis during the three months ended March 31, 2012, the following table presents the fair value of those assets as of the measurement date, valuation techniques and related unobservable inputs of those assets.

Fair Value

Valuation
Techniques

Unobservable
Input

Quantitative
Inputs Used

Equipment under operating leases & Assets held for sale or re-lease

$25

Market approach

Aircraft value
publications

$24 - $53⁽¹⁾

Median $35

Aircraft condition
adjustments

$(10) - $0⁽²⁾
Net $(10)

⁽¹⁾

The range represents the sum of the highest and lowest values for all aircraft subject to fair value measurement, according to the third party aircraft valuation publications that we use in our valuation process.

⁽²⁾

The negative amount represents the sum for all aircraft subject to fair value measurement, of all downward adjustments based on consideration of individual aircraft attributes and condition. The positive amount represents the sum of all such upward adjustments.

The following table presents the carrying values and estimated fair values of our financial instruments for which we did not elect the fair value option:

	September 30, 2011						December 31, 2010
	March 31, 2012									December 31, 2011
	Carrying Value			Fair Value			Carrying Value			Fair Value
		Carrying			Fair Value						Carrying			Fair
Assets
		Value			Level1			Level 2			Value			Value
Notes and other	$	540		$	567		$	375		$	395
Assets
Liabilities
Notes and other		$ 552	(1)	$	–			$ 611			$ 594(1)		$	639
Debt, excluding capital lease obligations	$	(3,362	)	$	(3,491	)	$	(3,394	)	$	(3,528	)
Liabilities
Debt, excluding capital lease obligations		$(2,582)		$	–			$(2,717	)		$(3,357)		$	(3,497	)

~~Items~~(1) ~~not~~At ~~included~~March in31, ~~the~~2012 ~~above disclosures are Cash~~ and ~~cash~~December ~~equivalents and Short-term investments. The carrying value of those items approximate their fair value at September 30~~31, 2011 ~~and December 31~~, ~~2010~~net asof ~~reflected~~allowance infor ~~the~~losses ~~Consolidated~~of ~~Balance~~$25 ~~Sheets.~~and $27.

Items not included in the above disclosure are cash (Level 1), time deposits (Level 2), and accounts payable (Level 2). The carrying value of those items approximate their fair value at March 31, 2012 and December 31, 2011 as reflected in the Consolidated Balance Sheets.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Notes and other. The fair value of our variable rate notes that reprice frequently approximate their carrying values. The fair ~~values~~value of fixed rate notes ~~are~~is estimated using discounted cash flows analysis using interest rates currently offered on loans with similar terms to borrowers of similar credit quality.

Debt. The fair value of our debt that is actively traded in the secondary market is classified as a level 2 valuation and is based on current market yields. ~~for~~For our debt that is not actively traded in the secondary market, the fair value is classified as a level 2 valuation and is estimated using discounted cash flows analysis using our indicative borrowing cost derived from dealer quotes.

Financing commitments. It is not practicable to estimate the fair value of future financing commitments because the amount and timing of funding those commitments are uncertain.

Note 8 – Concentrations

A significant portion of our portfolio is concentrated among a few customers and in distinct geographic regions, particularly in the United States. Our portfolio is also concentrated by varying degrees across aircraft product types and vintages. Our concentration risk is mitigated in part by intercompany guarantees from Boeing with respect to certain portfolio assets, which primarily relate to 717 aircraft.

Portfolio carrying values for our five largest customers were as follows:

	September 30, 2011					December 31, 2010
	March 31, 2012					December 31, 2011
	CarryingValue		% of TotalPortfolio			CarryingValue		% of TotalPortfolio
AirTran	$	1,294		29.8	%	$	1,364		29.0%
AirTran/Southwest		$1,245		29.8	%	$	1,261		29.2%
Continental		~~423~~408		9.8			~~447~~415		9.56
American		362		8.3			426		9.1
Hawaiian		406		9.7			374		8.7
Hawaiian		357		8.2			422		9.0
American		322		7.7			350		8.1
Korean		~~162~~155		3.78			~~172~~159		3.7
	$	2,598		59.8	%	$	2,831		60.3%
		$2,536		60.8	%	$	2,559		59.3%

For the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012 and ~~2010~~2011, AirTran Holdings, Inc., a wholly owned subsidiary of Southwest Airlines Co., accounted for 2217% and 2021% of our revenue.

Portfolio carrying values were represented in the following regions:

	September 30, 2011					December 31, 2010
	March 31, 2012					December 31, 2011
	~~CarryingValue~~	CarryingValue	~~% of TotalPortfolio~~	% of TotalPortfolio		~~CarryingValue~~	CarryingValue	~~% of TotalPortfolio~~	% of TotalPortfolio
United States (1)	$	3,288		75.7	%	$	3,604		76.8%
United States(1)		$3,083		73.9	%		$3,186		73.8%
Europe		~~630~~672		1416.51			~~619~~693		1316.21
Asia/Australia		~~260~~228		65.05			~~280~~241		5.96
Latin America		8177		1.98			8979		1.98
Other		83114		12.97			~~102~~116		2.27
	$	4,342		100.0	%	$	4,694		100.0%
		$4,174		100.0	%		$4,315		100.0%

⁽¹⁾

United States includes assets held for sale or re-lease that may be physically located in another region.

Portfolio carrying values were represented by the following product types:

	September 30,2011		December 31,2010
	March 31,2012		December 31,2011
717	$	21,~~041~~974	$	2,~~163~~001
757		~~659~~598		~~720~~631
767		329		383
737		383		408
737		328		386
MD-11		303		311
MD-11 (1)		311		359
767		292		316
747		~~231~~219		~~256~~225
MD-80		~~184~~171		~~200~~171
777		~~138~~125		47134
Other (2)		121		180
Other(1)		109		118
	$	4,~~342~~174	$	4,~~694~~315

(1) ~~MD-11~~Other includes aircraft, ~~are~~equipment, ~~currently~~notes inand ~~freighter~~stock. ~~configuration~~Some orof these aircraft are ~~committed~~out toof beproduction, ~~modified~~but ~~into~~are ~~freighter~~supported ~~configuration~~by the manufacturer or other third party parts and service providers.

~~(2)~~13 ~~Other includes aircraft, equipment, notes and stock. Some of these aircraft are out of production, but are supported by the manufacturer or other third party parts and service providers.~~

Our aircraft portfolio by vintage, based on carrying value (excluding investments and pooled assets), are categorized as follows:

	September 30,2011			December 31,2010
	March 31,2012			December 31,2011
2006 and newer		6.3	%		3.8%
2007 and newer		3.5	%		3.5%
2001 – 2005		63.3			64.1
2002 – 2006		45.5			45.3
1996 – 2000		19.5			20.0
1997 – 2001		39.3			38.8
1995 and older		10.9			12.1
1996 and older		11.7			12.4
		100.0	%		100.0%

Note 9 – Discontinued Operations

On May 24, 2004, we entered into a purchase and sale agreement with General Electric Capital Corporation (GECC) to sell substantially all of the assets related to our Commercial Financial Services business. The final asset sale closed December 27, 2004.

Part of the purchase and sale agreement with GECC includes a loss sharing arrangement for losses that may exist at the end of the initial and subsequent financing periods of the transferred portfolio assets, or in some instances, prior to the end of the financing period. Such losses may result from asset sales, provisions for loss or asset impairment charges offset by gains from asset sales. The loss sharing arrangement provides that cumulative net losses (if any) are to be shared between us and GECC. The provisions effectively limit our exposure to any losses to $245. At ~~September~~March 3031, ~~2011~~2012, our maximum future cash exposure to loss associated with the loss sharing arrangement was $~~224~~205, for which we ~~have~~ have accrued a liability of $6946.

The following table reconciles the reserve under the loss sharing arrangement, which is included in ~~Other~~ Other liabilities for the ~~nine~~three months ended ~~September~~March 3031:

	2011			2010
	2012			2011
Reserve at beginning of period	$	8253		$	7782
Increase (decrease) in reserve		(5	)		3
Increase in reserve		–			3
Payments to GECC		(87	)		–
Reserve at end of period	$	6946		$	8085

1314

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

Boeing Capital Corporation

Renton, Washington

We have reviewed the accompanying condensed consolidated balance sheet of Boeing Capital Corporation and subsidiaries (the “Company”) as of ~~September~~March 3031, ~~2011~~2012, and the related condensed consolidated statements of ~~operations~~comprehensive ~~for the three-month and nine-month periods ended September 30~~income, ~~2011 and 2010, and of~~ shareholder’s equity ~~and comprehensive income~~, and cash flows for the ~~nine~~three-month periods ended ~~September~~March 3031, ~~2011~~2012 and ~~2010~~2011. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Boeing Capital Corporation and subsidiaries as of December 31, ~~2010~~2011, and the related consolidated statements of operations, shareholder’s equity and comprehensive income, and cash flows for the year then ended (not presented herein); and in our report dated February 9, ~~2011~~2012, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2010~~2011 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

Seattle, Washington

~~October~~April 2625, 2012 ~~2011~~

1415

Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “should,” “expects,” “intends,” “projects,”, “plans,” “believes,” “estimates,” “targets,” “anticipates” and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include statements relating to our future financial condition and operating results, future portfolio size, amounts of new aircraft financing, future levels of indebtedness and debt-to-equity ratios, the outcome of contingencies as well as any other statement that does not directly relate to any historical or current fact.

Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are risks related to:

–

the financial condition of the airline industry, which could be adversely affected by changes in general economic conditions, credit ratings, increases in fuel-related costs, the liquidity of the global financial markets, responses to increasing environmental concerns, as well as events such as war, terrorist attacks or a serious health epidemic;

–

the impact of bankruptcies, restructurings or mergers and acquisitions on commercial airline customers;

–

the impact of changes in aircraft valuations;

–

the sufficiency of our liquidity, including access to capital markets;

–

the impact on us of strategic decisions by The Boeing Company (Boeing), including the amount of financing necessary to support the sale of Boeing products, the level and types of transactional or other support made available to us by Boeing and the ending of production of certain aircraft programs;

–

the market acceptance of Boeing products;

–

a decline in Boeing’s or our financial performance, outlook or credit ratings;

– the availability of commercial and governmental financing, ~~and~~which ~~the~~can ~~extent~~be toaffected ~~which~~by wea ~~are~~number ~~called~~of ~~upon~~factors, toincluding ~~fund~~global ~~Boeing’s~~economic conditions, economic and ~~our~~monetary ~~outstanding~~crises, ~~financing~~legislative ~~commitments~~and orregulatory ~~satisfy~~changes, ~~other~~and ~~financing~~availability ~~requests,~~of and ~~our~~policies ~~ability~~regarding togovernmental ~~satisfy~~export ~~those~~finance ~~requirements~~support;

–

the extent to which we are called upon to fund Boeing’s and our outstanding financing commitments or satisfy other financing requests, and our ability to satisfy those requirements;

–

reduced lease rates as a result of competition in the used aircraft market, or the inability to maintain aircraft on lease at satisfactory lease rates;

–

financial, legal, tax, regulatory, legislative and accounting changes or actions that may affect the overall performance of our business;

–

the adequacy of coverage of our allowance for losses on receivables; and

–

volatility in our earnings due to the timing of asset sales, other risk mitigation activities, fluctuations in our portfolio size and changes in interest rates.

Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission (SEC), including the “Risk Factors” on pages 3 through 5 of our most recent Annual Report on Form 10-K, Item 1A. “Risk Factors”,” “Management’s Narrative Analysis of the Results of Operations” and Note 6 to our condensed Financial Statements included in this report and our Current Reports on Form 8-K. Any forward-looking statement herein speaks only as of the date on which it is made, and we assume no obligation to update or revise any forward-looking statement whether as a result of new information, future events or otherwise, except as required by law.

Item 2. Management’s Narrative Analysis of the Results of Operations

Overview

During the ~~nine~~ three months ended ~~September~~March 3031, ~~2011~~2012, we continued to focus on supporting Boeing’s major businesses and managing our overall financial exposures.

15Sources of financing continued to be sufficient for aircraft deliveries and as a result we provided no financing for Boeing aircraft deliveries during the first quarter of 2012.

~~Table~~At March 31, 2012, our portfolio consisted of ~~Contents~~equipment under operating leases, finance leases, notes and other receivables, assets held for sale or re-lease and investments. At March 31, 2012, we owned 225 commercial aircraft and had partial ownership or security interest in an additional 50 aircraft. Our portfolio at March 31, 2012 decreased to $4.2 billion from $4.3 billion at December 31, 2011. The following table summarizes the net change in our total portfolio:

While sources of financing continue to be available for aircraft deliveries we did provide financing for new Boeing aircraft during the third quarter of 2011.


(Dollars in millions)	Three Months Ended March 31, 2012			Year Ended December 31, 2011
New business volume	$	3		$	239
Write-offs		–			(11	)
Transfer of assets		6			–
Asset impairment and other charges		(15	)		(117	)
Asset run off and prepayments		(92	)		(257	)
Asset dispositions		(9	)		(82	)
Depreciation and amortization expense		(34	)		(151	)
Net change in portfolio balance	$	(141	)	$	(379	)

OnAt ~~May~~March 231, ~~2011,~~2012 ~~Southwest~~and ~~Airlines~~December 31, ~~Co.~~2011, ~~(Southwest)~~we ~~completed~~had ~~its acquisition~~$510 ofmillion ~~AirTran~~and ~~Holdings,~~$521 ~~Inc.,~~million ~~and~~of ~~AirTran~~assets ~~Holdings,~~that ~~Inc.~~were ~~became~~held for asale ~~wholly~~or ~~owned~~re-lease, ~~subsidiary~~ of ~~Southwest.~~which As$402 ~~disclosed~~million inand ~~Item 1.~~$476 ~~Financial~~million ~~Statements,~~had ~~Note~~either 8executed –term ~~Concentrations,~~sheets ~~AirTran~~with ~~Holdings,~~deposits ~~LLC~~or ~~(AirTran),~~firm ~~the successor~~contracts to ~~AirTran~~be ~~Holdings,~~sold ~~Inc.,~~or ~~together~~placed ~~with~~on ~~its~~lease. ~~subsidiaries~~Additionally, isaircraft ~~our~~subject ~~largest~~to ~~customer~~leases inwith ~~terms~~a carrying value of ~~revenue~~approximately ~~and~~$89 ~~portfolio~~million are ~~carrying~~scheduled ~~value.~~to Webe ~~continue~~returned tooff ~~evaluate~~lease in the ~~impact~~next of12 ~~the~~months. ~~AirTran/Southwest~~These ~~merger,~~aircraft ~~and~~are ~~Southwest’s~~being ~~continuing efforts~~remarketed toor ~~integrate~~we ~~the~~are ~~two~~seeking ~~operations,~~to onhave ~~our~~the ~~business~~leases extended.

AtOur ~~September 30,~~net ~~2011,~~income ~~our~~was ~~portfolio~~$24 ~~consisted~~million ~~of equipment under operating leases, finance leases, notes and other receivables, assets held~~ for ~~sale~~the orthree ~~re-lease~~months ~~and~~ended ~~investments. At September~~March 3031, ~~2011,~~2012 wecompared ~~owned~~with ~~234~~$31 ~~commercial~~million ~~aircraft~~for ~~and~~the ~~had~~same ~~partial~~period ~~ownership or security interest~~ in ~~an additional 42 aircraft. Our portfolio at September 30~~2011, ~~2011~~a ~~decreased~~decrease toof $~~4.3 billion from $4.~~7 ~~billion at December 31, 2010~~million. ~~The following table summarizes the net change in our total portfolio:~~

(Dollars in millions)	Nine Months EndedSeptember 30, 2011			Year EndedDecember 31,2010
New business volume	$	105		$	72
Write-offs		(11	)		(1	)
Recovery of write-offs		–			1
Asset impairment and other charges		(53	)		(85	)
Asset run off and prepayments		(204	)		(605	)
Asset dispositions		(71	)		(153	)
Depreciation and amortization expense		(118	)		(201	)
Net change in portfolio balance	$	(352	)	$	(972	)

At September 30, 2011 and December 31, 2010, we had $541 million and $583 million of assets that were held for sale or re-lease, of which $485 million and $28 million had either executed term sheets with deposits or firm contracts to be sold or placed on lease. Additionally, aircraft subject to leases with a carrying value of approximately $105 million are scheduled to be returned off lease in the next 12 months. These aircraft are being remarketed or we are seeking to have the leases extended.

Our net income was $88 million for the nine months ended September 30, 2011 compared with $90 million for the same period in 2010, a decrease of $2 million.

Consolidated Results of Operations

Revenue

Revenue was $~~416~~125 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012 compared with $~~494~~143 million for the same period in ~~2010~~2011, a decrease of $7818 million.

Finance lease income was $~~101~~21 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012, a decrease of $~~8 million~~14 million compared with the same period in ~~2010~~2011, primarily due to alower ~~decrease~~negotiated inrents ~~the~~on ~~weighted~~certain ~~average balance of~~ finance leases ~~as a result of the sale of aircraft previously accounted for as Finance leases, which was partially financed by us through notes receivable, and normal run-off~~.

Interest income on notes receivables was $2511 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~ 2012, aan ~~decrease~~increase of $363 million compared with the same period in ~~2010~~2011, primarily due to ~~lower~~higher weighted average notes receivable balance ~~and~~partially offset by a decrease in the weighted average ~~annual~~ effective interest rate during the ~~nine~~three months ended ~~September~~ March 3031, ~~2011~~2012.

Operating lease income was $~~259~~69 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012, a decrease of $35 21 million compared with the same period in ~~2010~~2011, primarily due to a decrease in the equipment under operating leases as a result of the return of aircraft. ~~and~~Without ~~lower~~the support from Boeing in the form of intercompany guarantees our Operating lease ~~rates~~income, onwhich includes income applied to assets classified as held for re-~~leased~~lease, ~~aircraft.~~would ~~Without~~have been $12 million and $16 million less than reported, for the ~~support~~three ~~from~~months ended March 31, 2012 and 2011. For a discussion of our relationship with Boeing, see Item 1. Financial Statements, Note 2 – Transactions with Boeing.

1617

~~Boeing~~Other inincome ~~the~~was ~~form~~$24 ofmillion ~~intercompany~~for ~~guarantees~~the ~~our~~three ~~Operating~~months ~~lease~~ended ~~income~~March 31, ~~which includes income applied to assets classified as held for re-lease~~2012, ~~would~~an ~~have~~increase ~~been~~of $49 19 million ~~and~~compared ~~$34~~with ~~million less than reported, for~~ the ~~nine~~same ~~months~~period ~~ended~~in ~~September 30~~2011, ~~2011~~primarily ~~and~~due ~~2010.~~to ~~For~~higher aaircraft ~~discussion~~maintenance ofreserves ~~our~~taken ~~relationship~~to ~~with~~income ~~Boeing,~~from ~~see~~expired ~~Item 1~~leases. ~~Financial Statements, Note 2 – Transactions with Boeing.~~

Net gain on disposal of assets was $18 million for the nine months ended September 30, 2011, an increase of $16 million compared with the same period in 2010, primarily due to a gain recognized upon signing a sales type lease agreement for aircraft previously held as Equipment under operating leases.

Other income was $13 million for the nine months ended September 30, 2011, a decrease of $15 million compared with the same period in 2010, primarily due to higher aircraft maintenance reserves taken to income from expired leases, income from a bankruptcy settlement and residual value guarantee fees earned during the nine months ended September 30, 2010.

Expenses

Expenses were $~~283~~87 million for the ~~nine~~ three months ended ~~September~~March 3031, ~~2011~~2012 compared with $~~348~~91 million for the same period in ~~2010~~2011, a decrease of $654 million.

Interest expense was $9428 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012, a decrease of $305 million compared with the same period in ~~2010~~2011, primarily due to a decrease in the weighted average effective interest rate and in the weighted average balance of debt outstanding as a result of scheduled debt repayments.

Depreciation expense was $~~117~~34 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012, a decrease of $368 million compared with the same period in ~~2010~~ 2011, primarily due to a lower depreciable balance of equipment ~~under operating leases~~ as a result of ~~a change in our intention to hold or sell equipment and~~ asset dispositions.

The recovery of losses was $20 3 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012, compared with a ~~provision~~recovery of $116 ~~million~~ for the same period in ~~2010~~2011. The decrease in our allowance through a recovery of losses for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012 was ~~primarily~~ due to athe ~~$16~~effect ~~million~~of run-off ~~recovery~~ of ~~losses~~our ~~which~~finance ~~was~~leases ~~caused~~offset by adeclines ~~decrease~~ in ~~default~~aircraft ~~rates~~collateral ~~resulting from a change in the internal rating category to BB at September 30, 2011 from CCC at December 31, 2010 associated with our receivables with AirTran~~value.

Asset impairment expense was $5314 million for the ~~nine~~ three months ended ~~September~~March 3031, ~~2011~~2012, an increase of $335 million compared with the same period in ~~2010~~2011. The asset impairment expense during the first ~~nine~~three months of ~~2011~~2012 was primarily due to ~~reduced expected~~a ~~undiscounted~~reduction ~~cash~~in ~~flows~~expected onsales price of certain aircraft.

Provision for income tax

Provision for income tax was $4914 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012, a decrease of $5 million compared with the same period in ~~2010~~in 2011, primarily due to a decrease in pre-tax income.

~~Gain~~Loss on disposal of discontinued operations

~~Gain~~Loss on disposal of discontinued operations, net of tax, was $42 million for the ~~nine~~three months ended ~~September~~March 3031, 2011 due to aan ~~decrease~~increase in our expected losses from claims associated with specific assets subject to the loss sharing agreement with General Electric Capital Corporation related to the sale of certain assets of our Commercial Financial Services business in 2004.

Liquidity and Capital Resources

Our cash and cash equivalents balance was $~~746~~399 million at ~~September~~March 3031, ~~2011~~2012, ana ~~increase~~decrease from $~~425~~941 million at December 31, ~~2010~~2011. The following is a summary of the change in our cash and cash equivalents for the ~~nine~~three months ended ~~September~~March 3031:

(Dollars in millions)	~~2011~~2012			~~2010~~2011
Net cash provided by operating activities	$	138		$	184
Net cash provided by (used in) operating activities	$	(18	)	$	25
Net cash provided by investing activities		~~460~~295			~~138~~707
Net cash used in financing activities		(~~277~~819	)		(~~711~~977	)
Net increase (decrease) in cash and cash equivalents	$	321		$	(389	)
Net decrease in cash and cash equivalents	$	(542	)	$	(245	)

Operating activities

During the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012, net cash ~~provided~~used byin operating activities included net income from operations of $8824 million. We had net adjustments for non-cash items of $3132 million, which ~~primarily~~ primarily related to depreciation expense and asset impairment expense, partially offset by a reduction in deferred income taxes. We also had a net ~~increase~~decrease in cash due to changes in assets and liabilities of $1974 million.

~~During~~18 the nine months ended September 30, 2010, net cash provided by operating activities included net income from operations of $90 million. We had net adjustments for non-cash items of $144 million, which primarily related to depreciation expense. We also had a net decrease in cash due to changes in assets and liabilities of $50 million.

During the three months ended March 31, 2011, net cash provided by operating activities included net income from operations of $31 million. We had net adjustments for non-cash items of $22 million, which primarily related to depreciation expense. We also had a net decrease in cash due to changes in assets and liabilities of $28 million.

Investing activities

During the three ~~nine~~ months ended ~~September~~March 3031, ~~2011~~2012, net cash provided by investing activities primarily included net proceeds of $~~300~~200 million from short-term investment maturities and payments of leases, notes and other receivables of $~~206~~92 million~~, partially offset by a decrease in cash of $105 million related to the origination of notes receivable~~.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2010~~2011, net cash provided by investing activities primarily included ~~payments~~net ofproceeds ~~leases, notes and other receivables~~ of $~~486~~600 million ~~and proceeds~~ from short-term ~~sale~~investment ofmaturities ~~aircraft~~and payments of ~~$94 million~~leases, ~~primarily~~notes ~~offset~~and byother ~~the~~receivables ~~net purchase~~ of $~~400~~82 million ~~in short-term investments~~.

Financing activities

During the ~~nine~~ three months ended ~~September~~March 3031, 2012 and 2011, ~~net~~we ~~cash~~made ~~used~~debt inrepayments ~~financing~~of ~~activities included~~ $~~745~~774 million ofand ~~net proceeds from our debt issuances offset by scheduled debt repayments of~~ $~~794~~786 million and ~~cash~~paid dividends (including return of capital) ~~to Boeing~~ of $~~228~~45 million and $191 million.

Outstanding debt at March 31, 2012 and December 31, 2011 was $2.6 billion and $3.4 billion, of which $708 million will be due in the next 12 months. During the ~~nine~~three months ended ~~September~~March 3031, ~~2010~~ 2012, ~~net~~we ~~cash~~had ~~used~~no incommercial ~~financing~~paper ~~activities~~borrowings ~~included scheduled~~outstanding. ~~debt~~Our ~~repayments~~leverage (ratio of ~~$621~~Debt ~~million~~to ~~and~~Shareholder’s ~~cash~~equity) ~~dividends~~at March 31, to2012 ~~Boeing~~and ofDecember 31, ~~$90~~2011 ~~million~~was 5.1-to-1 and 6.3-to-1.

~~Outstanding~~We ~~debt~~require ~~at September 30~~liquidity, ~~2011~~primarily ~~and~~to fund financing ~~December 31~~commitments, ~~2010~~meet ~~was~~debt $3obligations and fund our operating expenses.4 ~~billion~~Financing commitments made by us and Boeing totaled $319.46 billion, as of ~~which~~March 31, ~~$834~~2012. ~~million~~We anticipate that we will not be ~~due~~required into ~~the~~fund ~~next~~a 12significant ~~months.~~portion ~~During~~of ~~the~~our financing ~~nine~~commitments ~~months~~as ~~ended~~we ~~September 30,~~continue ~~2011,~~to wework ~~had~~with nothird ~~commercial~~party ~~paper~~financiers ~~borrowings~~to ~~outstanding~~provide alternative financing to customers. ~~Our~~However, ~~leverage~~there ~~(ratio~~can ofbe ~~Debt~~ no assurances that we will not be required to ~~Shareholder’s~~fund ~~equity)~~greater atamounts ~~September 30,~~than ~~2011~~historically ~~and~~required. ~~December 31~~In addition, many ~~2010~~of ~~was~~Boeing’s 6non-U.2S. customers finance aircraft purchases through the Export-~~to-1~~Import ~~and~~Bank 5of the United States.~~0-to-1.~~ The ~~increase~~bank’s incharter ~~our~~is ~~leverage~~set ~~resulted~~to ~~from~~expire ~~our~~on ~~issuance~~May 31, of2012 ~~debt~~and inits ~~the~~authorized ~~third~~funding ~~quarter~~limit ofmay ~~2011,~~be areached ~~significant~~prior ~~portion~~to ofthat date. If the ~~proceeds~~bank’s ~~of which~~charter weis ~~intend~~not torenewed ~~use~~or toif ~~repay~~the ~~our~~bank’s ~~debt~~existing ~~maturing~~or infuture ~~2012.~~funding Weauthority ~~expect~~is ~~our~~insufficient ~~leverage~~ to ~~return~~meet toour ~~approximately~~customers’ ~~5.0-to-1~~needs, bywe ~~the~~may ~~end~~fund ofadditional ~~the~~commitments ~~first~~and/or ~~quarter~~enter ofinto ~~2012.~~new financing arrangements with customers.

WeOn ~~require liquidity~~November 29, ~~primarily to fund financing commitments~~2011, ~~meet~~American ~~debt~~Airlines ~~obligations~~filed ~~and~~for ~~fund~~Chapter ~~our~~11 ~~operating~~bankruptcy ~~expenses~~protection. ~~Financing~~Some ~~commitments~~possible ~~made~~outcomes bythat usmay occur ~~and~~as ~~Boeing~~a ~~totaled~~result ~~$15.6 billion as~~ of ~~September 30,~~the ~~2011. We~~bankruptcy ~~anticipate~~could ~~that~~cause ~~we will not be required to fund~~ a significant ~~portion~~amount of ~~our~~deferred ~~financing~~taxes ~~commitments as we continue~~ to ~~work with third party financiers to provide alternative financing to customers. However, there can~~ be noaccelerated ~~assurances~~which ~~that~~may weimpact ~~will not~~our ~~be required to fund greater amounts than historically required. We expect that any future liquidity needs would be met by issuing commercial paper or~~ near-term ~~debt,~~cash ~~or obtaining funding from Boeing~~requirements. ~~There can be no assurance that the cost or availability of funding sources to us will not be adversely impacted in the future.~~

AsWe ofexpect ~~September 30,~~that ~~2011,~~any wefuture ~~have~~liquidity ~~$3.25 billion~~needs ~~remaining~~would ~~under~~be ~~our~~met ~~$5.0~~by ~~billion~~issuing ~~Securities~~commercial ~~and~~paper ~~Exchange~~or ~~Commission~~term ~~(SEC)~~debt, ~~shelf~~or ~~registration~~obtaining ~~statement~~funding ~~for~~from ~~issuance~~Boeing. ofThere ~~debt~~can ~~securities.~~be ~~The~~no ~~availability~~assurance ofthat ~~funding~~the ~~pursuant~~cost toor ~~our~~availability ~~SEC~~of ~~registration~~funding ~~statement~~sources to us will ~~depend~~not onbe ~~investor~~adversely ~~demand~~impacted ~~and market~~in ~~conditions~~the future.

WeAs ~~believe~~of March 31, 2012, we have ~~adequate~~a ~~borrowing~~Securities ~~capacity.~~and WeExchange ~~have~~Commission ~~$1.5~~(SEC) ~~billion~~shelf registration ~~available~~statement ~~exclusively~~ for usissuance ~~under Boeing’s~~of ~~committed~~debt ~~revolving~~securities. ~~credit~~During ~~line~~the ~~agreements~~first ~~for~~quarter ~~general~~of ~~corporate~~2012, ~~purposes.~~we Inestablished ~~addition,~~under wethe ~~have~~registration statement a ~~support~~$1 ~~agreement~~billion ~~with~~medium-term ~~Boeing~~notes ~~under~~program. ~~which~~We ~~Boeing~~have ~~has~~not ~~committed~~issued toany ~~make~~securities ~~contributions~~under tothat usprogram. ifThe ~~our~~availability of ~~fixed~~funding pursuant to the medium-~~charge~~term ~~coverage~~note ~~ratio,~~program asotherwise ~~defined in~~under ~~the~~our ~~support~~SEC ~~agreement,~~registration ~~falls~~statement ~~below~~will ~~1.05-to-1~~depend on ainvestor ~~four-quarter~~demand ~~rolling~~and ~~basis~~market conditions.

18We believe we have adequate borrowing capacity. We have a commercial paper program that continues to serve as a potential source of short-term liquidity. We have $1.5 billion available exclusively for us under Boeing’s committed revolving credit line agreements for general corporate purposes. We anticipate that these credit lines will primarily serve as backup liquidity to support possible commercial paper borrowings. In addition, we have a support agreement with Boeing under which Boeing has committed to make contributions to us if our fixed-charge coverage ratio, as defined in the support agreement, falls below 1.05-to-1 on a four-quarter rolling basis.

Risks that could affect our sources of liquidity include, among others;

–

a downturn in the economy,

–

significant restructurings, defaults or bankruptcies by airlines,

–

disruptions in the global capital markets, and

–

a decrease in our and/or Boeing’s credit ratings and/or financial performance.

We continually assess our leverage, as measured by our Debt to Shareholder’s equity ratio, in light of the risks in our business, including those set forth in Item 1A. Risk Factors ~~in this report and Item 1A. Risk Factors~~ of our Annual Report on Form 10-K for the year ended December 31, ~~2010~~2011.

Additional Disclosures Regarding Allowance for Losses on Receivables and Asset Impairment Expense

The following tables reconcile the changes in the allowance for losses on receivables and asset impairment expense for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012 and ~~2010~~2011. Column 3 presents this information, calculated in accordance with our accounting policy, if the impact of intercompany guarantees from Boeing were excluded. The exclusion of the net impact of intercompany guarantees shown in Column 2 would increase the applicable exposure for various receivables and would increase asset impairment expense. Management believes that the presentation of this information provides more complete information on the effect of intercompany guarantees provided by Boeing.

(Dollars in millions)	(1)			(2)			(3)
2011	Allowancefor losses			Impact ofintercompanyguaranteesfrom Boeing			Allowanceexcludingintercompanyguarantees
2012	Allowancefor losses			Impact ofintercompanyguaranteesfrom Boeing			Allowanceexcludingintercompanyguarantees
Allowance for losses on receivables at beginning of period	$	53		$	19		$	72
Recovery of losses		(3	)		–			(3	)
Allowance for losses on receivables at end of period	$	50		$	19		$	69
Allowance as a percentage of total receivables		2.2	%					3.1	%
2011
Allowance for losses on receivables at beginning of period	$	87		$	266		$	353
Recovery of losses		(206	)		(~~200~~9	)		(~~220~~15	)
Write-offs		(11	)		(3	)		(14	)
Allowance for losses on receivables at end of period	$	81		$	257		$	338
Allowance for losses on receivables at end of period	$	56		$	63		$	119
Allowance as a percentage of total receivables		3.7	%					15.4	%
Allowance as a percentage of total receivables		2.4	%					5.1	%
2010
Allowance for losses on receivables at beginning of period	$	71		$	231		$	302
Provision for losses		11			13			24
Write-offs		(1	)		–			(1	)
Allowance for losses on receivables at end of period	$	81		$	244		$	325
Allowance as a percentage of total receivables		3.3	%					13.4	%

(Dollars in millions)	(1)		(2)		(3)
2011	Assetimpairmentexpense		Impact ofintercompanyguaranteesfrom Boeing		Impairmentexcludingintercompanyguarantees
2012	Assetimpairmentexpense		Impact ofintercompanyguaranteesfrom Boeing		Impairmentexcludingintercompanyguarantees
Asset impairment expense	$	5314	$	–	$	5314
2010
2011
Asset impairment expense	$	209	$	91–	$	~~111~~9

19Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~Table~~Not ofapplicable. ~~Contents~~

Item 4. Controls and Procedures

(a)

Disclosure Controls and Procedures

Our principal executive officer and principal financial officer have evaluated our disclosure controls and procedures as of September 30, 2011 and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to our management, including the President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the third quarter of 2011 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Our principal executive officer and principal financial officer have evaluated our disclosure controls and procedures as of March 31, 2012 and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to our management, including the President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b)

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the first quarter of 2012 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2010,~~2011. ~~except for the addition of the following:~~

~~Our~~Item 2. ~~portfolio~~Unregistered ~~and~~Sales ~~indebtedness~~of ~~may~~Equity ~~significantly~~Securities ~~increase~~and ifUse weof ~~are~~Proceeds ~~required to fund greater amounts than historically required.~~

~~Boeing’s~~Not ~~and BCC’s outstanding financing commitments have increased in 2011~~applicable. Financing commitments may continue to increase in future periods as a result of general market conditions, customer requirements or as a result of competition in the marketplace. While we work with third party financiers to provide alternative financing to customers, there can be no assurances that we will not be required to fund greater amounts than historically required. Such requirements could significantly increase our capital requirements and level of indebtedness.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Immaterial Restatement

Subsequent to the issuance of our consolidated balance sheet as of December 31, 2011 we determined that it should have reflected Finance lease receivables of $1,727 million, as compared to the $1,739 million reported, and the difference of $12 million should have been reflected as a reduction in Finance lease income for the year ended December 31, 2011. In connection with the November 2011 bankruptcy filing by American Airlines, Inc. (American Airlines), certain lease payments by American Airlines beginning in May 2012, the first scheduled payments under the relevant leases since the bankruptcy filing, are required to be allocated exclusively to various non-recourse debt holders, at higher interest rates, until all such holders are paid in full, and only thereafter to us. The reallocation of payments required us to recalculate our investment in leveraged leases for the year ended December 31, 2011. This reallocation of payments does not affect amounts payable under these leases by American Airlines. The reallocation of payments also does not alter our expectation that we will not incur any losses related to American Airlines receivables as a result of the bankruptcy.

Management believes that the effect of this recalculation is not material to our previously issued consolidated financial statements for the year ended December 31, 2011. We will prospectively correct in our 2012 Annual Report on Form 10-K the previously presented consolidated balance sheet as of December 31, 2011 and the consolidated statement of operations, shareholder’s equity and comprehensive income, and cash flows for the year ended December 31, 2011.

The impact on specific line items in the December 31, 2011 balance sheet, and the consolidated statement of operations and statement of cash flows for the year ended December 31, 2011 and certain disclosures in Note 3 of our Annual Report on Form 10-K are presented below (in millions):


	As of December 31, 2011
Balance Sheet Items:	As Previously Reported		Restated
Finance leases	$	1,739	$	1,727
Total receivables, gross of allowance		2,360		2,348
Total receivables, net of allowance		2,307		2,295
Total assets		5,578		5,566
Accounts with Boeing		77		76
Deferred income taxes		1,236		1,232
Total liabilities		5,034		5,029
Retained earnings		15		8
Shareholder’s equity		544		537
Total liabilities and shareholder’s equity	$	5,578	$	5,566


	Year ended December 31, 2011
Statement of Operations Items:	As Previously Reported		Restated
Finance lease income	$	125	$	113
Total revenue		532		520
Income from continuing operations before provision for income tax		123		111
Provision for income tax		45		40
Income from continuing operations		78		71
Net income	$	83	$	76


	Year ended December 31, 2011
Statement of Cash Flows Items:	As Previously Reported			Restated
OPERATING ACTIVITIES
Net income	$	83		$	76
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash items:
Asset impairment expense and other charges		105			117
Decrease in deferred income taxes		(135	)		(139	)
Changes in assets and liabilities:
Accounts with Boeing	$	9		$	8

Scheduled minimum lease payments on Finance leases as previously reported in Note 3 of our 2011 Annual Report on Form 10-K and as restated are as follows for the years ended December 31:


As Previously Reported	2012		2013		2014		2015		2016		Thereafter
Finance leases⁽¹⁾	$	292	$	244	$	178	$	172	$	174	$	837
Restated	2012		2013		2014		2015		2016		Thereafter
Finance leases⁽¹⁾	$	266	$	229	$	170	$	170	$	170	$	910

⁽¹⁾

Includes both direct finance leases and leveraged leases (less principal and interest payable on non-recourse debt).

Item 6. Exhibits

A. Exhibits

~~Exhibit 12~~	Exhibit 12	~~Computation of Ratio of Earnings to Fixed Charges.~~	Computation of Ratio of Earnings to Fixed Charges.
~~Exhibit 15~~	Exhibit 15	~~Letter From Independent Registered Public Accounting Firm Regarding Unaudited Interim Financial Information.~~	Letter From Independent Registered Public Accounting Firm Regarding Unaudited Interim Financial Information.
~~Exhibit 31.1~~	Exhibit 31.1	~~Certification of President pursuant to Rules 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~	Certification of President pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
~~Exhibit 31.2~~	Exhibit 31.2	~~Certification of Chief Financial Officer pursuant to Rules 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~	Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
~~Exhibit 32.1~~	Exhibit 32.1	Certification of President pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This document is being furnished in accordance with Securities and Exchange Commission Release Nos. 33-8212 and 34-47551.	Certification of President pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This document is being furnished in accordance with Securities and Exchange Commission Release Nos. 33-8212 and 34-47551.
~~Exhibit 32.2~~	Exhibit 32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This document is being furnished in accordance with Securities and Exchange Commission Release Nos. 33-8212 and 34-47551.	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This document is being furnished in accordance with Securities and Exchange Commission Release Nos. 33-8212 and 34-47551.
~~Exhibit 101.INS~~	Exhibit 101.INS	~~XBRL Instance Document~~	XBRL Instance Document
~~Exhibit 101.SCH~~	Exhibit 101.SCH	~~XBRL Taxonomy Extension Schema Document~~	XBRL Taxonomy Extension Schema Document
~~Exhibit 101.CAL~~	Exhibit 101.CAL	~~XBRL Taxonomy Extension Calculation Linkbase Document~~	XBRL Taxonomy Extension Calculation Linkbase Document
~~Exhibit 101.DEF~~	Exhibit 101.DEF	~~XBRL Taxonomy Extension Definition Linkbase Document~~	XBRL Taxonomy Extension Definition Linkbase Document
~~Exhibit 101.LAB~~	Exhibit 101.LAB	~~XBRL Taxonomy Extension Label Linkbase Document~~	XBRL Taxonomy Extension Label Linkbase Document
~~Exhibit 101.PRE~~	Exhibit 101.PRE	~~XBRL Taxonomy Extension Presentation Linkbase Document~~	XBRL Taxonomy Extension Presentation Linkbase Document

In accordance with Item 601(b)(4)(iii) of Regulation S-K, we are not filing certain instruments with respect to our debt, as the total amount of securities currently provided for under each of the instruments does not exceed 10 percent of our total assets on a consolidated basis. We hereby agree to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.

2124

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Boeing Capital Corporation
October 26, 2011		/s/ KELVIN E. COUNCIL
April 25, 2012		/s/ KELVIN E. COUNCIL
		Kelvin E. Council Vice President and Chief Financial Officer (Principal Financial Officer) and Registrant’s Authorized Officer
October 26, 2011		/s/ KEVIN J. MURPHY
April 25, 2012		/s/ KEVIN J. MURPHY
		Kevin J. Murphy Controller (Principal Accounting Officer)

2225

Filing Compare · BOEING CAPITAL CORP