##### Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended September 30, 2007

OR



| ̈ |  | 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.    Yes  x    No   ̈

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act). (Check one):

Large accelerated filer     ̈    Accelerated filer     ̈    Non-accelerated filer    x

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

No common stock is held by non-affiliates of the registrant. Common stock shares outstanding at October 19, 2007: 50,000 shares

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.





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Table of Contents



|                                          |  |                                                         |  |                                                                                   |  |     
|----------------------------------------- |  | ------------------------------------------------------- |  | --------------------------------------------------------------------------------- |  | ----
|                                          |  |                                                         |  |                                                                                   |  | Page
|Part I. Financial Information (Unaudited) |  |                                                        
|                                          |  |                                                         | 
|                                          |  | Item 1.                                                 |  | Financial Statements                                                              |  |     
|                                          |  |                                                         |  | Condensed Consolidated Balance Sheets                                             |  | 1   
|                                          |  |                                                         |  | Condensed Consolidated Statements of Operations                                   |  | 2   
|                                          |  |                                                         |  | Condensed Consolidated Statements of Shareholders Equity andComprehensive Income |  | 3   
|                                          |  |                                                         |  | Condensed Consolidated Statements of Cash Flows                                   |  | 4   
|                                          |  |                                                         |  | Notes to Condensed Consolidated Financial Statements                              |  | 5   
|                                          |  |                                                         | 
|                                          |  | Item 2.                                                 |  | Managements Narrative Analysis of the Results of Operations                      |  | 11  
|                                          |  |                                                         | 
|                                          |  | Item 4.                                                 |  | Controls and Procedures                                                           |  | 15  
|                                          | 
|Part II. Other Information                |  |                                                        
|                                          |  |                                                         | 
|                                          |  | Item 1.                                                 |  | Legal Proceedings                                                                 |  | 16  
|                                          |  |                                                         | 
|                                          |  | Item 1A.                                                |  | Risk Factors                                                                      |  | 16  
|                                          |  |                                                         | 
|                                          |  | Item 6.                                                 |  | Exhibits                                                                          |  | 16  
|                                          |  |                                                        
|                                          |  | Report of Independent Registered Public Accounting Firm |  | 17                                                                               
|                                          |  |                                                        
|                                          |  | Signatures                                              |  | 18                                                                               





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##### Table of Contents

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 30,2007 |       |   | December 31,2006 |  
|ASSETS                                                                                          |  |                   |       |   |                  |   |       |  
|Cash and cash equivalents                                                                       |  | $                 | 650   |   |                  | $ | 589   |  
|Receivables:                                                                                    |  |                   |       |   |                  |   |       |  
|Finance leases                                                                                  |  |                   | 2,488 |   |                  |   | 2,591 |  
|Notes and other                                                                                 |  |                   | 738   |   |                  |   | 1,679 |  
|                                                                                                |  |                   | 3,226 |   |                  |   | 4,270 |  
|Allowance for losses on receivables                                                             |  |                   | (78   | ) |                  |   | (102  | )
|                                                                                                |  |                   | 3,148 |   |                  |   | 4,168 |  
|Equipment under operating leases, net                                                           |  |                   | 3,320 |   |                  |   | 3,352 |  
|Investments                                                                                     |  |                   | 153   |   |                  |   | 153   |  
|Assets held for sale or re-lease, net                                                           |  |                   | 117   |   |                  |   | 259   |  
|Other assets                                                                                    |  |                   | 67    |   |                  |   | 63    |  
|                                                                                                |  | $                 | 7,455 |   |                  | $ | 8,584 |  
|                                                                                                | 
|LIABILITIES AND SHAREHOLDERS EQUITY                                                            |  |                   |       |   |                  |   |       |  
|Liabilities:                                                                                    |  |                   |       |   |                  |   |       |  
|Accounts payable and accrued expenses                                                           |  | $                 | 56    |   |                  | $ | 122   |  
|Other liabilities                                                                               |  |                   | 350   |   |                  |   | 372   |  
|Accounts with Boeing                                                                            |  |                   | 18    |   |                  |   | 31    |  
|Deferred income taxes                                                                           |  |                   | 1,428 |   |                  |   | 1,356 |  
|Debt                                                                                            |  |                   | 4,670 |   |                  |   | 5,590 |  
|                                                                                                |  |                   | 6,522 |   |                  |   | 7,471 |  
|Shareholders equity:                                                                           |  |                   |       |   |                  |   |       |  
|Common shares  $100 par value; authorized 100,000 shares; issued and outstanding 50,000 shares |  |                   | 5     |   |                  |   | 5     |  
|Additional paid-in capital                                                                      |  |                   | 927   |   |                  |   | 1,101 |  
|Accumulated other comprehensive income, net of tax                                              |  |                   | 1     |   |                  |   | 7     |  
|Retained earnings                                                                               |  |                   |      |   |                  |   |      |  
|                                                                                                |  |                   | 933   |   |                  |   | 1,113 |  
|                                                                                                |  | $                 | 7,455 |   |                  | $ | 8,584 |  
|                                                                                                | 

See Notes to Condensed Consolidated Financial Statements.



1



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##### Table of Contents

Boeing Capital Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)



|                                                                  |  |                                 |      |                                |  |   |      |  |   |      |   |  |   |     
|----------------------------------------------------------------- |  | ------------------------------- | ---- | ------------------------------ |  | - | ---- |  | - | ---- | - |  | - | ----
|                                                                  |  | Three Months EndedSeptember 30, |      | Nine Months EndedSeptember 30,
|(Dollars in millions)                                             |  |                                 | 2007 |                                |  |   | 2006 |  |   | 2007 |   |  |   | 2006
|REVENUE                                                           |  |                                 |      |                                |  |   |      |  |   |      |   |  |   |     
|Finance lease income                                              |  | $                               | 42   |                                |  | $ | 42   |  | $ | 134  |   |  | $ | 141 
|Interest income on notes receivable                               |  |                                 | 18   |                                |  |   | 41   |  |   | 91   |   |  |   | 134 
|Operating lease income                                            |  |                                 | 121  |                                |  |   | 123  |  |   | 351  |   |  |   | 378 
|Investment income                                                 |  |                                 | 5    |                                |  |   | 53   |  |   | 17   |   |  |   | 61  
|Net gain on disposal of assets                                    |  |                                 |     |                                |  |   | 37   |  |   |     |   |  |   | 47  
|Other income                                                      |  |                                 | 11   |                                |  |   | 8    |  |   | 26   |   |  |   | 23  
|                                                                  |  |                                 | 197  |                                |  |   | 304  |  |   | 619  |   |  |   | 784 
|EXPENSES                                                          |  |                                 |      |                                |  |   |      |  |   |      |   |  |   |     
|Interest expense                                                  |  |                                 | 72   |                                |  |   | 88   |  |   | 227  |   |  |   | 267 
|Depreciation expense                                              |  |                                 | 54   |                                |  |   | 59   |  |   | 162  |   |  |   | 184 
|Provision for (recovery of) losses                                |  |                                 | (4   | )                              |  |   | 3    |  |   | (22  | ) |  |   | 5   
|Operating expenses                                                |  |                                 | 13   |                                |  |   | 13   |  |   | 42   |   |  |   | 44  
|Asset impairment expense                                          |  |                                 |     |                                |  |   | 5    |  |   | 2    |   |  |   | 14  
|Other expense                                                     |  |                                 | 1    |                                |  |   | 14   |  |   | 4    |   |  |   | 16  
|                                                                  |  |                                 | 136  |                                |  |   | 182  |  |   | 415  |   |  |   | 530 
|Income from continuing operations before provision for income tax |  |                                 | 61   |                                |  |   | 122  |  |   | 204  |   |  |   | 254 
|Provision for income tax                                          |  |                                 | 23   |                                |  |   | 44   |  |   | 76   |   |  |   | 86  
|Income from continuing operations                                 |  |                                 | 38   |                                |  |   | 78   |  |   | 128  |   |  |   | 168 
|Net gain on disposal of discontinued operations, net of tax       |  |                                 | 5    |                                |  |   |     |  |   | 10   |   |  |   |    
|Net income                                                        |  | $                               | 43   |                                |  | $ | 78   |  | $ | 138  |   |  | $ | 168 
|                                                                 

See Notes to Condensed Consolidated Financial Statements.



2



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##### Table of Contents

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, 2006                                                 |  | $     | 1,256 |   |              | $ | 5                        |  | $ | 1,242                                      |   |  | $                | 9  |   |                     | $ |     |   |  |   |     |  
|Non-cash capital contributions from Boeing                                 |  |       | 7     |   |              |   |                         |  |   | 7                                          |   |  |                  |   |   |                     |   |     |   |  |   |     |  
|Cash dividends to Boeing (including return of capital)                     |  |       | (284  | ) |              |   |                         |  |   | (142                                       | ) |  |                  |   |   |                     |   | (142 | ) |  |   |     |  
|Net income                                                                 |  |       | 168   |   |              |   |                         |  |   |                                           |   |  |                  |   |   |                     |   | 168  |   |  | $ | 168 |  
|Unrealized loss on investments and reclassification adjustment, net of tax |  |       | (8    | ) |              |   |                         |  |   |                                           |   |  |                  | (8 | ) |                     |   |     |   |  |   | (8  | )
|Balance at September 30, 2006                                              |  | $     | 1,139 |   |              | $ | 5                        |  | $ | 1,107                                      |   |  | $                | 1  |   |                     | $ | 26   |   |  | $ | 160 |  
|                                                                           | 
|Balance at January 1, 2007                                                 |  | $     | 1,113 |   |              | $ | 5                        |  | $ | 1,101                                      |   |  | $                | 7  |   |                     | $ |     |   |  |   |     |  
|Non-cash capital contributions from Boeing                                 |  |       | 4     |   |              |   |                         |  |   | 4                                          |   |  |                  |   |   |                     |   |     |   |  |   |     |  
|Cash dividends to Boeing (including return of capital)                     |  |       | (316  | ) |              |   |                         |  |   | (178                                       | ) |  |                  |   |   |                     |   | (138 | ) |  |   |     |  
|Net income                                                                 |  |       | 138   |   |              |   |                         |  |   |                                           |   |  |                  |   |   |                     |   | 138  |   |  | $ | 138 |  
|Unrealized loss on derivative instruments, net of tax                      |  |       | (2    | ) |              |   |                         |  |   |                                           |   |  |                  | (2 | ) |                     |   |     |   |  |   | (2  | )
|Unrealized loss on investments, net of tax                                 |  |       | (4    | ) |              |   |                         |  |   |                                           |   |  |                  | (4 | ) |                     |   |     |   |  |   | (4  | )
|Balance at September 30, 2007                                              |  | $     | 933   |   |              | $ | 5                        |  | $ | 927                                        |   |  | $                | 1  |   |                     | $ |     |   |  | $ | 132 |  
|                                                                           | 

See Notes to Condensed Consolidated Financial Statements.



3



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Boeing Capital Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                  |  |                                 |        |   |      |   |      |  
|--------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ---- | - | ---- | -
|                                                                                  |  | Nine Months Ended September 30, |       
|(Dollars in millions)                                                             |  | 2007                            |        |   | 2006 |  
|OPERATING ACTIVITIES                                                              |  |                                 |        |   |      |   |      |  
|Net income                                                                        |  | $                               | 138    |   |      | $ | 168  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                 |        |   |      |   |      |  
|Depreciation and amortization expense                                             |  |                                 | 157    |   |      |   | 184  |  
|Net gain on disposal of assets                                                    |  |                                 |       |   |      |   | (47  | )
|Provision for (recovery of) losses                                                |  |                                 | (22    | ) |      |   | 5    |  
|Net gain on investments and derivative instruments                                |  |                                 |       |   |      |   | (54  | )
|Asset impairment expense                                                          |  |                                 | 2      |   |      |   | 14   |  
|Share-based plans expense                                                         |  |                                 | 4      |   |      |   | 7    |  
|Other non-cash adjustments related to discontinued operations                     |  |                                 | (10    | ) |      |   |     |  
|Change in deferred income taxes                                                   |  |                                 | 75     |   |      |   | (2   | )
|Change in assets and liabilities:                                                 |  |                                 |        |   |      |   |      |  
|Other assets                                                                      |  |                                 | 22     |   |      |   | 23   |  
|Accrued interest and rents                                                        |  |                                 | 12     |   |      |   | 4    |  
|Accounts payable and accrued expenses                                             |  |                                 | (66    | ) |      |   | (94  | )
|Other liabilities                                                                 |  |                                 | 7      |   |      |   | 23   |  
|Accounts with Boeing                                                              |  |                                 | (18    | ) |      |   | 27   |  
|Other                                                                             |  |                                 |       |   |      |   | (2   | )
|Net cash provided by operating activities                                         |  |                                 | 301    |   |      |   | 256  |  
|INVESTING ACTIVITIES                                                              |  |                                 |        |   |      |   |      |  
|Proceeds from available-for-sale investments                                      |  |                                 |       |   |      |   | 207  |  
|Purchase of equipment for operating leases                                        |  |                                 |       |   |      |   | (92  | )
|Change in capitalizable costs in process                                          |  |                                 | (22    | ) |      |   | (18  | )
|Proceeds from disposition of equipment and receivables                            |  |                                 | 19     |   |      |   | 553  |  
|Principal payments of leases, notes and other receivables                         |  |                                 | 1,036  |   |      |   | 293  |  
|Origination of leases, notes and other receivables                                |  |                                 | (20    | ) |      |   | (71  | )
|Net cash provided by investing activities                                         |  |                                 | 1,013  |   |      |   | 872  |  
|FINANCING ACTIVITIES                                                              |  |                                 |        |   |      |   |      |  
|Repayment of debt                                                                 |  |                                 | (937   | ) |      |   | (583 | )
|Payment of cash dividends (including return of capital)                           |  |                                 | (316   | ) |      |   | (284 | )
|Repayment of note payable with Boeing Capital Services Corporation                |  |                                 |       |   |      |   | (20  | )
|Net cash used in financing activities                                             |  |                                 | (1,253 | ) |      |   | (887 | )
|Net increase in cash and cash equivalents                                         |  |                                 | 61     |   |      |   | 241  |  
|Cash and cash equivalents at beginning of year                                    |  |                                 | 589    |   |      |   | 297  |  
|Cash and cash equivalents at end of period                                        |  | $                               | 650    |   |      | $ | 538  |  
|                                                                                  | 
|NON-CASH INVESTING AND FINANCING ACTIVITIES:                                      |  |                                 |        |   |      |   |      |  
|Net transfer to (from) assets held for sale or re-lease                           |  | $                               | (133   | ) |      | $ | 761  |  
|                                                                                  | 
|Net transfer from notes receivable                                                |  | $                               | (1     | ) |      | $ | (284 | )
|                                                                                  | 
|Net transfer to (from) equipment under operating leases                           |  | $                               | 128    |   |      | $ | (425 | )
|                                                                                  | 
|Net transfer to (from) finance leases                                             |  | $                               | 6      |   |      | $ | (15  | )
|                                                                                  | 
|Transfer from other assets                                                        |  | $                               |       |   |      | $ | (37  | )
|                                                                                  | 
|Offsetting changes in fair value hedge derivatives                                |  | $                               | (16    | ) |      | $ | 14   |  
|                                                                                  | 

See Notes to Condensed Consolidated Financial Statements.



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##### Table of Contents

Boeing Capital Corporation and Subsidiaries

Notes to 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 an indirect 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 30, 2007 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 2006 Annual Report on Form 10-K.

Note 2 Standards Issued and Not Yet Implemented

In February 2007, Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115(SFAS No. 159). SFAS No. 159
permits us to choose to measure certain financial assets and liabilities at fair value that are not currently required to be measured at fair value (the Fair Value Option). SFAS No. 159 is effective as of January 1, 2008. We currently do
not plan to elect the Fair Value Option for any financial assets or liabilities within the scope of SFAS No. 159 existing as of January 1, 2008.

Note 3
Transactions with Boeing

As an indirect 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 agreements allowing us to borrow under Boeings committed revolving line of credit. We also
have an uncommitted intercompany borrowing arrangement with Boeing under which we had no amounts outstanding at September 30, 2007.

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 our intercompany agreements and arrangements will not be terminated or modified by us and 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 3 of our 2006 Annual Report on Form 10-K.

At September 30, 2007, we were the beneficiary under $2,414 of guarantees from Boeing which mitigates our risk with respect to portfolio assets totaling
$3,151.

Intercompany guarantee amounts by aircraft type are summarized as follows:



|                                        |  |                    |       |                   |   |                  |  |                |       |  |   |      
|--------------------------------------- |  | ------------------ | ----- | ----------------- | - | ---------------- |  | -------------- | ----- |  | - | -----
|                                        |  | September 30, 2007 |       | December 31, 2006
|                                        |  | Guarantee Amount   |       | Carrying Value    |   | Guarantee Amount |  | Carrying Value
|717 (out of production)                 |  | $                  | 1,811 |                   | $ | 2,420            |  | $              | 1,859 |  | $ | 2,489
|Out of production twin-aisle aircraft   |  |                    | 271   |                   |   | 353              |  |                | 285   |  |   | 370  
|Out of production single-aisle aircraft |  |                    | 268   |                   |   | 268              |  |                | 280   |  |   | 280  
|Other, including other Boeing aircraft  |  |                    | 64    |                   |   | 110              |  |                | 239   |  |   | 285  
|                                        |  | $                  | 2,414 |                   | $ | 3,151            |  | $              | 2,663 |  | $ | 3,424
|                                       



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##### Table of Contents

At September 30, 2007 and December 31, 2006, Accounts with Boeing included $111 and $141 for deferred
revenue associated with guarantee and subsidy settlements and terminations.

We recorded the following activity under the intercompany guarantee and
subsidy agreements for the nine months ended September 30:



|                                                                      |  |      |     |   |      |   |    
|--------------------------------------------------------------------- |  | ---- | --- | - | ---- | - | ---
|                                                                      |  | 2007 |     |   | 2006
|Applied to income                                                     |  | $    | 48  |   |      | $ | 54 
|Net change in finance lease receivables                               |  |      |    |   |      |   | 96 
|Net change in deferred revenue                                        |  |      | (30 | ) |      |   | 51 
|Guarantees receivable from Boeing                                     |  |      | (16 | ) |      |   |   
|Net cash received under intercompany guarantee and subsidy agreements |  | $    | 2   |   |      | $ | 201
|                                                                     

For the nine months ended September 30, 2007 and 2006, we recorded operating lease income from Boeing,
exclusive of guarantees and subsidies, of $27 and $39.

For the nine months ended September 30, 2007 and 2006, we recorded new business volume
of $20 and $158 related to aircraft and equipment manufactured by Boeing.

Note 4 Allowance for Losses on Receivables

The following table reconciles the allowance for losses on receivables for the nine months ended September 30:



|                                                           |  |      |      |      |   |     
|---------------------------------------------------------- |  | ---- | ---- | ---- | - | ----
|                                                           |  | 2007 |      | 2006
|Allowance for losses on receivables at beginning of period |  | $    | 102  |      | $ | 101 
|Provision for (recovery of) losses                         |  |      | (22) |      |   | 5   
|Net write-offs                                             |  |      | (2)  |      |   | (5) 
|Allowance for losses on receivables at end of period       |  | $    | 78   |      | $ | 101 
|                                                          
|Allowance as a percentage of total receivables             |  |      | 2.4% |      |   | 2.3%

The carrying value of impaired receivables consisted of the following:



|                                                        |  |                   |     |                  |   |      
|------------------------------------------------------- |  | ----------------- | --- | ---------------- | - | -----
|                                                        |  | September 30,2007 |     | December 31,2006
|Impaired receivables with specific impairment allowance |  | $                 | 59  |                  | $ | 74   
|Impaired receivables with no specific allowance         |  |                   | 179 |                  |   | 1,032
|Carrying value of impaired receivables                  |  | $                 | 238 |                  | $ | 1,106
|                                                       

During the nine months ended September 30, 2007, we received customer pre-payments in full of $837 on
notes receivable previously reported as impaired.

At September 30, 2007 and December 31, 2006, allowance for losses on impaired
receivables was $12 and $20.



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Non-Performing Assets

Non-performing assets (assets either not earning income on an accrual basis or equipment without a purchase commitment or current contractual lease revenue) consisted of the following:



|                                                           |  |                   |     |   |                  |   |     |  
|---------------------------------------------------------- |  | ----------------- | --- | - | ---------------- | - | --- | -
|                                                           |  | September 30,2007 |     |   | December 31,2006 |  
|Assets placed on non-accrual status:                       |  |                   |     |   |                  |   |     |  
|Receivables                                                |  | $                 | 57  |   |                  | $ | 100 |  
|Equipment under operating leases, net                      |  |                   | 188 |   |                  |   | 161 |  
|                                                           |  |                   | 245 |   |                  |   | 261 |  
|Assets held for sale or re-lease, net                      |  |                   | 1   |   |                  |   | 6   |  
|                                                           |  | $                 | 246 |   |                  | $ | 267 |  
|                                                           | 
|Percent of non-performing receivables to total receivables |  |                   | 1.8 | % |                  |   | 2.3 | %
|Percent of total non-performing assets to total portfolio  |  |                   | 3.6 | % |                  |   | 3.3 | %

For the portfolio assets that were non-performing as of and during the nine months ended September 30,
2007 and 2006, we recorded income of $21 and $15 based on cash received of $25 and $22.

Note 5 Income Tax

Effective January 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 prescribes a
more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition of income tax assets and liabilities,
classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. The cumulative effect of
applying this interpretation did not result in any adjustment to retained earnings as of January 1, 2007.

In conjunction with the adoption of
FIN 48, we began recording income tax related interest expense and interest income in the Provision for income tax in our Condensed Consolidated Statements of Operations. In prior periods, such interest income or expense was recorded in Operating
expenses. Penalties, if any, will be recorded as a component of income tax expense. We did not incur any income tax related interest income, interest expense or penalties for the nine months ended September 30, 2007 and 2006.

As of September 30, 2007 and January 1, 2007, we did not have any unrecognized tax benefits.

As of September 30, 2007 and January 31, 2007, we, as a subsidiary of Boeing, are subject to examination in the United States federal tax jurisdiction for the 2002-2006 tax years. We, either as a
subsidiary of Boeing or as a separate filing entity, are also subject to examination in various state and foreign jurisdictions for the years 2001-2006.

Note 6
Debt

Debt, including the net effects of interest rate swap revaluation adjustments and unamortized deferred debt
costs, consisted of the following:



|                                                             |  |                   |       |                  |   |      
|------------------------------------------------------------ |  | ----------------- | ----- | ---------------- | - | -----
|                                                             |  | September 30,2007 |       | December 31,2006
|3.25% - 7.58% fixed rate notes due through 2017              |  | $                 | 4,377 |                  | $ | 5,263
|6.81% - 6.92% floating rate notes due through 2023 (1)       |  |                   | 120   |                  |   | 119  
|4.84% - 8.13% non-recourse notes due through 2013 (1)        |  |                   | 72    |                  |   | 76   
|5.53% - 8.25% capital lease obligations due through 2015 (1) |  |                   | 101   |                  |   | 132  
|                                                             |  | $                 | 4,670 |                  | $ | 5,590
|                                                            



|(1) |  | Interest rates on floating rate debt are the contractual interest rates at September 30, 2007.
|--- |  | ----------------------------------------------------------------------------------------------

At September 30, 2007 and December 31, 2006, we had interest rate swaps, which effectively convert debt of $1,520
and $1,545 from fixed rate to floating rate and $92 from floating rate to fixed rate.



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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. As of and during the nine months ended September 30, 2007 we were in compliance with these covenants.

Note 7 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 adverse effect on our earnings,
cash flows and/or financial position.

Restructurings and Restructuring Requests

From time to time, certain of our customers request a restructuring of their transactions with us. We have not reached agreement on any restructuring requests that would have a material adverse effect on our earnings, cash
flows and/or financial position.

Commitments

At
September 30, 2007, we and Boeing had unfunded financing commitments of $8,650, consisting of both firm and contingent contracts. 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. Based on historical experience and anticipated capital market acceptance of Boeing aircraft covered by Boeings and our current commitments, we anticipate that a significant portion of these
commitments will not be exercised by the customer or will expire without being fully drawn upon. 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 and our commitments, the timing in which these commitments may be funded (based on estimated earliest funding dates) is as follows:



|                              |  |       |      
|----------------------------- |  | ----- | -----
|                              |  | Total
|October through December 2007 |  | $     | 150  
|2008                          |  |       | 1,300
|2009                          |  |       | 800  
|2010                          |  |       | 1,700
|2011                          |  |       | 2,250
|Thereafter                    |  |       | 2,450
|                              |  | $     | 8,650
|                             

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.



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##### Table of Contents

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



|            |  |                    |       |                      |      
|----------- |  | ------------------ | ----- | -------------------- | -----
|            |  | September 30, 2007
|            |  | Carrying Value     |       | % of Total Portfolio
|AirTran     |  | $                  | 1,542 |                      | 22.6%
|American    |  |                    | 635   |                      | 9.3  
|Midwest     |  |                    | 598   |                      | 8.8  
|Hawaiian    |  |                    | 428   |                      | 6.3  
|Continental |  |                    | 411   |                      | 6.0  
|            |  | $                  | 3,614 |                      | 53.0%
|           



|         |  |                   |       |                      |      
|-------- |  | ----------------- | ----- | -------------------- | -----
|         |  | December 31, 2006
|         |  | Carrying Value    |       | % of Total Portfolio
|AirTran  |  | $                 | 1,592 |                      | 19.8%
|United   |  |                   | 749   |                      | 9.3  
|American |  |                   | 678   |                      | 8.4  
|Midwest  |  |                   | 617   |                      | 7.7  
|Hawaiian |  |                   | 434   |                      | 5.4  
|         |  | $                 | 4,070 |                      | 50.6%
|        

For the nine months ended September 30, 2007 and 2006, AirTran Holdings, Inc. accounted for 16% and 13%
of our revenue.

Portfolio carrying values were represented in the following regions:



|                  |  |                    |       |                     |        |                |   |                     |  |       
|----------------- |  | ------------------ | ----- | ------------------- | ------ | -------------- | - | ------------------- |  | ------
|                  |  | September 30, 2007 |       | December 31, 2006  
|                  |  | Carrying Value     |       | % of TotalPortfolio |        | Carrying Value |   | % of TotalPortfolio
|United States (1) |  | $                  | 4,960 |                     | 72.8%  |                | $ | 6,165               |  | 76.7% 
|Europe            |  |                    | 1,067 |                     | 15.6   |                |   | 1,092               |  | 13.6  
|Asia/Australia    |  |                    | 401   |                     | 5.9    |                |   | 471                 |  | 5.9   
|Latin America     |  |                    | 315   |                     | 4.6    |                |   | 191                 |  | 2.4   
|Other             |  |                    | 73    |                     | 1.1    |                |   | 115                 |  | 1.4   
|                  |  | $                  | 6,816 |                     | 100.0% |                | $ | 8,034               |  | 100.0%
|                 



|(1) |  | United States includes all assets held for sale or re-lease even though such assets may be
physically located in another region.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------



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Portfolio carrying values were represented by the following product types:



|          |  |                   |       |                  |   |      
|--------- |  | ----------------- | ----- | ---------------- | - | -----
|          |  | September 30,2007 |       | December 31,2006
|717       |  | $                 | 2,513 |                  | $ | 2,590
|757       |  |                   | 1,104 |                  |   | 1,171
|MD-11     |  |                   | 632   |                  |   | 660  
|767       |  |                   | 625   |                  |   | 739  
|737       |  |                   | 551   |                  |   | 588  
|747       |  |                   | 428   |                  |   | 454  
|MD-80     |  |                   | 361   |                  |   | 382  
|777       |  |                   | 102   |                  |   | 718  
|Other (1) |  |                   | 500   |                  |   | 732  
|          |  | $                 | 6,816 |                  | $ | 8,034
|         



|(1) |  | Other includes aircraft, equipment 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 30,2007 |   |  | December 31,2006
|2002 and newer |  | 41.7              | % |  | 38.7%           
|1997  2001    |  | 36.2              |   |  | 39.8            
|1992  1996    |  | 12.8              |   |  | 12.0            
|1991 and older |  | 9.3               |   |  | 9.5             
|               |  | 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 on 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 as certain events of default and repossession.
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 30, 2007, our maximum exposure to loss associated
with the loss sharing arrangement was $223, for which we have accrued a liability of $67.

The reserve under the loss sharing arrangement, which is
included in Other liabilities, was as follows:



|                                |  |                                    |     |   |                                    |   |   
|------------------------------- |  | ---------------------------------- | --- | - | ---------------------------------- | - | --
|                                |  | Nine MonthsEnded September 30,2007 |     |   | Nine MonthsEnded September 30,2006
|Reserve at beginning of period  |  | $                                  | 78  |   |                                    | $ | 81
|Increase (reduction) in reserve |  |                                    | (15 | ) |                                    |   | 4 
|Payments received from GECC     |  |                                    | 4   |   |                                    |   | 8 
|Reserve at end of period        |  | $                                  | 67  |   |                                    | $ | 93
|                               



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##### Table of Contents

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

Forward-Looking Information is Subject
to Risk and Uncertainty

Certain statements in this report may constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Words such as expects, intends, plans, projects, believes, estimates, and similar expressions are used to identify these
forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may
not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. As a result, these statements speak only as of the date they were made and we undertake no
obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Our actual results and future trends may differ materially depending on a variety of factors, including:



| |  |  | general economic conditions, which includes changes to fuel prices and business trends, particularly those affecting the airline industry (including air traffic growth
rates, the impact of bankruptcies or restructurings on certain commercial airline customers, and 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 provided to support the sale of Boeing products, transactional or
other support made available to us by Boeing and the ending of production of certain aircraft programs;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to meet our current contractual obligations, including outstanding financing commitments;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | reduced lease rates as a result of competition in the used aircraft market;
| | - |  | ---------------------------------------------------------------------------



| |  |  | 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;
| | - |  | --------------------------------------------------------------------



| |  |  | volatility in our earnings due to the timing of asset sales, other risk mitigation activities, and fluctuations in our portfolio size; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | other risk factors listed from time to time in our filings with the Securities and Exchange Commission (SEC).
| | - |  | -------------------------------------------------------------------------------------------------------------

Please see 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, 2006, for a description of risks and uncertainties that could cause our actual results to differ materially from the expectations reflected in our forward-looking statements.

Overview

During the nine months ended September 30, 2007, we
continued to focus on supporting Boeings major businesses and managing our overall financial exposures.

At September 30, 2007, our
portfolio consisted of equipment under operating leases, finance leases, notes and other receivables, investments, and assets held for sale or re-lease. At September 30, 2007, we owned 298 commercial aircraft and four C-40 aircraft and had
partial ownership or security interest in an additional 57 aircraft, including those owned in Enhanced Equipment Trust Certificates (EETC) and other financing structures.



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##### Table of Contents

Our portfolio at September 30, 2007 decreased to $6.8 billion from $8.0 billion at December 31, 2006. The
following table summarizes the net change in our total portfolio:



|                                      |  |                                     |        |   |                            |   |        |  
|------------------------------------- |  | ----------------------------------- | ------ | - | -------------------------- | - | ------ | -
|(Dollars in millions)                 |  | Nine Months EndedSeptember 30, 2007 |        |   | Year EndedDecember 31,2006 |  
|New business volume                   |  | $                                   | 20     |   |                            | $ | 250    |  
|Net write-offs                        |  |                                     | (2     | ) |                            |   | (9     | )
|Transfer of assets                    |  |                                     |       |   |                            |   | 43     |  
|Asset impairment                      |  |                                     | (2     | ) |                            |   | (53    | )
|Asset run off and pre-payments        |  |                                     | (1,059 | ) |                            |   | (632   | )
|Asset dispositions                    |  |                                     | (18    | ) |                            |   | (531   | )
|Depreciation and amortization expense |  |                                     | (157   | ) |                            |   | (240   | )
|Net change in portfolio balance       |  | $                                   | (1,218 | ) |                            | $ | (1,172 | )
|                                      | 

At September 30, 2007 and December 31, 2006, we had $117 million and $259 million of assets that
were held for sale or re-lease, of which $116 million and $253 million had firm contracts to be sold or placed on lease. Additionally, leases with a carrying value of approximately $339 million are scheduled to terminate in the next 12 months. The
related aircraft are being remarketed or the leases are being extended and $314 million were committed at September 30, 2007.

Our net income
was $138 million for the nine months ended September 30, 2007 compared with $168 million for the same period in 2006, a decrease of $30 million.

Consolidated Results of Operations

Revenue

Revenue for the nine months ended September 30, 2007 decreased $165 million, a decrease of 21% compared with the same period in 2006.

Interest income on notes receivable was $91 million for the nine months ended September 30, 2007, a decrease of 32% compared with the same period in 2006 primarily due to a decrease in the weighted average balance of our notes
receivable as a result of the pre-payment of certain notes in 2007.

Operating lease income was $351 million for the nine months ended
September 30, 2007, a decrease of 7% compared with the same period in 2006 primarily due to a decrease in the weighted average balance of equipment under operating leases as a result of run off.

Investment income was $17 million for the nine months ended September 30, 2007, a decrease of 72% compared with the same period in 2006. During the nine
months ended September 30, 2006 we recognized $54 million of nonrecurring income realized on sale or repayment at maturity of certain investments which had been previously written down and accounted for on a cost recovery method. For the nine
months ended September 30, 2007, we had an increase of $14 million as a result of placing certain of our investments on accrual status.

Net
gain on disposal of assets was $47 million for the nine months ended September 30, 2006 primarily due to the sale of certain aircraft and notes in 2006.

Expenses

Expenses decreased $115 million for the nine months ended September 30, 2007, a decrease of 22% compared with the same
period in 2006.

Interest expense was $227 million for the nine months ended September 30, 2007, a decrease of 15% compared with the same period
in 2006 primarily due to a decrease in the balance of debt outstanding as a result of scheduled debt repayments.

Depreciation expense was $162
million for the nine months ended September 30, 2007, a decrease of 12% compared with the same period in 2006 primarily due to a decrease of $13 million resulting from a lower depreciable balance of equipment under operating leases and a
decrease of $9 million resulting from the change in our intention to hold or sell equipment before the end of its economic useful life.



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##### Table of Contents

Provision for (recovery of) losses reflected a recovery of $22 million for the nine months ended September 30,
2007 compared with a provision of $5 million for the same period in 2006. During the nine months ended September 30, 2007 and 2006, we adjusted the allowance for losses on notes and finance lease receivables to a level we deemed adequate to
cover probable losses. The increase in recovery of losses was primarily due to asset run off in 2007.

Provision for income tax was $76 million for
the nine months ended September 30, 2007, a decrease of 12% compared with the same period in 2006, primarily due to a decrease in pre-tax income. This decrease was partially offset by an increase in the effective income tax rate as a result of
the repeal of Foreign Sales Corporation and Extraterritorial Income Benefits and a benefit from Boeing under our intercompany tax sharing agreement in the first nine months of 2006 which did not occur in the first nine months of 2007.

Gain on disposal of discontinued operations, net of tax, was $10 million for the nine months ended September 30, 2007, due to a reduction in our expected
losses under our loss sharing arrangement 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 total cash and cash equivalents were $650 million at September 30, 2007, an
increase from $589 million at December 31, 2006. The following is a summary of the change in our cash and cash equivalents for the nine months ended September 30:



|                                          |  |      |        |   |      |   |      |  
|----------------------------------------- |  | ---- | ------ | - | ---- | - | ---- | -
|(Dollars in millions)                     |  | 2007 |        |   | 2006 |  
|Net cash provided by operating activities |  | $    | 301    |   |      | $ | 256  |  
|Net cash provided by investing activities |  |      | 1,013  |   |      |   | 872  |  
|Net cash used in financing activities     |  |      | (1,253 | ) |      |   | (887 | )
|Net increase in cash and cash equivalents |  | $    | 61     |   |      | $ | 241  |  
|                                          | 

Operating activities

During the nine months ended September 30, 2007, net cash provided by operating activities included net income from operations of $138 million. We had net adjustments for non-cash items of $206 million which primarily related to
depreciation expense and deferred income taxes. We also had a net decrease in our net operating assets and liabilities of $43 million primarily due to a decrease in accrued interest payable.

During the nine months ended September 30, 2006, net cash provided by operating activities included net income from operations of $168 million. We had adjustments for non-cash items of $107 million
which primarily related to depreciation expense, partially offset by realized income from the sale or repayment at maturity of investments and gain on disposal of assets. We also had a decrease in our net operating assets and liabilities of $19
million.

Investing activities

During the nine months
ended September 30, 2007, net cash provided by investing activities included $1.0 billion relating to customer pre-payments of certain notes receivable and asset run off.

During the nine months ended September 30, 2006, net cash provided by investing activities included $297 million from the sale of certain notes receivable, $256 million from the sale of certain
aircraft and $207 million primarily from the sale or scheduled repayment of certain of our investments. Net cash provided by investing activities also included $96 million received from Boeing associated with the net change in finance lease
receivables and a partial settlement of a guarantee on 24 717 aircraft.

Financing activities

During the nine months ended September 30, 2007, net cash used for financing activities included scheduled debt repayments of $937 million and cash dividends (including return of capital) to Boeing of
$316 million.

During the nine months ended September 30, 2006, we made scheduled debt repayments of $583 million and paid cash dividends
(including return of capital) to Boeing of $284 million.

Outstanding debt at September 30, 2007 and December 31, 2006 was $4.7 billion and
$5.6 billion. During the nine months ended September 30, 2007, we had no commercial paper borrowings outstanding. Our leverage (ratio of debt to equity) at September 30, 2007 and December 31, 2006 was 5.0-to-1.



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##### Table of Contents

We have liquidity requirements, primarily to fund financing commitments, meet debt obligations and fund our
operating expenses. In the near term, we believe our cash from operations and other receipts from our portfolio, which may include asset sales and securitizations, will be sufficient to satisfy existing commitments and plans. To the extent we
require financial flexibility to meet potential business funding requirements we also have the ability to issue commercial paper and other debt, obtain funding from Boeing or limit new business volume.

We believe we have adequate borrowing capacity. We have $1.5 billion available under Boeings committed revolving bank credit line agreements that serve as a
back-up liquidity for the issuance of commercial paper and general corporate purposes. In addition, we have a Support Agreement with Boeing that includes a liquidity maintenance provision. Under this provision, 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 severe or prolonged downturn in the economy,
| | - |  | ----------------------------------------------

| |  |  | significant restructurings, defaults or bankruptcies by airlines,
| | - |  | -----------------------------------------------------------------

| |  |  | disruptions or declines 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 equity ratio, in light of the risks in our business. These risks include, among others, the exposure to our portfolio from unfavorable market
conditions affecting our customers.

Credit Ratings

Our
access to capital at rates that allow for a reasonable return on new business can be affected by ratings of our debt by credit rating agencies. As a wholly owned finance company, our credit ratings are closely tied to those of Boeing due to the
Support Agreement entered into between Boeing and us in December 2003 and transactional support and guarantees. Our ratings and spreads could be impacted positively or negatively by changing perceptions of Boeing, the airline industry, the defense
industry or of Boeings competitive positions in them. It is possible that these changes could affect our access to the capital markets. We believe our access to the capital markets is adequate.

We have the following credit ratings as of the filing date of this report:



|           |  |                   |  |                          |  |              
|---------- |  | ----------------- |  | ------------------------ |  | -------------
|Debt       |  | Standard & Poors |  | Moodys InvestorsService |  | Fitch Ratings
|Short-term |  | A-1               |  | P-1                      |  | F1           
|Senior     |  | A+                |  | A2                       |  | A+           

On September 12, 2007, Fitch Ratings revised its outlook for us and Boeing to positive from stable. The
ratings were reaffirmed at A+ for senior borrowings and F1 for short-term borrowings.



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##### Table of Contents

Additional Disclosures Regarding Allowance for Losses on Receivables

The following table reconciles the changes in the allowance for losses on receivables for the nine months ended September 30, 2007 and 2006. Column 3 presents this information, calculated in
accordance with our accounting policies, if the impact of intercompany guarantees from Boeing were to be excluded. The exclusion of intercompany guarantees would increase the applicable exposure for various receivables and would reduce the allowance
for certain of our finance leases classified as operating leases by Boeing. Management believes that the presentation of this information excluding the impact of intercompany guarantees from Boeing provides investors and other readers with more
complete information on the effect of intercompany guarantees provided by Boeing.



|                                                           |  |                     |     |   |                                            |   |     |                                          |  |   |     
|---------------------------------------------------------- |  | ------------------- | --- | - | ------------------------------------------ | - | --- | ---------------------------------------- |  | - | ----
|                                                           |  | (1)                 |     |   | (2)                                        |   |     | (3)                                     
|2007                                                       |  | Allowancefor losses |     |   | Impact ofintercompanyguaranteesfrom Boeing |   |     | Allowanceexcludingintercompanyguarantees
|Allowance for losses on receivables at beginning of period |  | $                   | 102 |   |                                            | $ | 152 |                                          |  | $ | 254 
|Recovery of losses                                         |  |                     | (22 | ) |                                            |   | (30 | )                                        |  |   | (52)
|Net write-offs                                             |  |                     | (2  | ) |                                            |   | 2   |                                          |  |   |    
|Allowance for losses on receivables at end of period       |  | $                   | 78  |   |                                            | $ | 124 |                                          |  | $ | 202 
|                                                          
|Allowance as a percentage of total receivables             |  |                     | 2.4 | % |                                            |   |     |                                          |  |   | 6.3%
|                                                           |  |                     |    
|2006                                                       |  |                     |     |   |                                            |   |     |                                         
|Allowance for losses on receivables at beginning of period |  | $                   | 101 |   |                                            | $ | 173 |                                          |  | $ | 274 
|Provision for losses                                       |  |                     | 5   |   |                                            |   | 14  |                                          |  |   | 19  
|Net write-offs                                             |  |                     | (5  | ) |                                            |   | (16 | )                                        |  |   | (21)
|Allowance for losses on receivables at end of period       |  | $                   | 101 |   |                                            | $ | 171 |                                          |  | $ | 272 
|                                                          
|Allowance as a percentage of total receivables             |  |                     | 2.3 | % |                                            |   |     |                                          |  |   | 6.2%

Standards Issued and Not Yet Implemented

See Note 2 for discussion of Standards Issued and Not Yet Implemented.

Item 4. Controls and Procedures



|(a) |  | Evaluation of Disclosure Controls and Procedures
|--- |  | ------------------------------------------------

Our
principal executive officer and principal financial officer, based on their evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report
on Form 10-Q, have concluded that our disclosure controls and procedures are effective for ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms.



|(b) |  | Changes in Internal Control over Financial Reporting
|--- |  | ----------------------------------------------------

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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 adverse effect on our earnings, cash flows and/or financial position.

Item 1A. Risk Factors

We may act to mitigate certain risk in our portfolio assets.

When market conditions permit, we may consider asset sales or other risk reduction initiatives which may involve adjustments in our capital structure, portfolio
size and portfolio risk. In the event we pursue any such actions our future earnings could be impacted.

Item 6. Exhibits



|A. |  | Exhibits
|-- |  | --------



|             |  |                                                                                                                                                                                                                                                                             
|------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 15   |  | Letter From Independent Registered Public Accounting Firm Regarding Unaudited Interim Financial Information.                                                                                                                                                                
|             | 
|Exhibit 31.1 |  | Certification of President pursuant to Rules 13a-15(e) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                                        
|             | 
|Exhibit 31.2 |  | Certification of Chief Financial Officer pursuant to Rules 13a-15(e) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                          
|             | 
|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.              
|             | 
|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.



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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 30, 2007, and the related condensed consolidated statements of operations for the three-month and nine-month periods ended September 30, 2007 and 2006, and of shareholders equity and comprehensive income, and of cash flows
for the nine-month periods ended September 30, 2007 and 2006. 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, 2006, 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 15, 2007, 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, 2006 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 23, 2007



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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 24, 2007 |  | /s/ RUSSELL A. EVANS                                                                                        
|                 |  | Russell A. Evans                                                                                            
|                 |  | Vice President and Chief Financial Officer (Principal Financial Officer) and Registrants Authorized Officer
|                 | 
|October 24, 2007 |  | /s/ KEVIN J. MURPHY                                                                                         
|                 |  | Kevin J. Murphy                                                                                             
|                 |  | Controller (Principal Accounting Officer)                                                                   



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