14




                                                   United States
                                        Securities and Exchange Commission
                                              Washington, D.C. 20549

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                                                     Form 10-Q



|X|      Quarterly Report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

         For the quarterly period ended June 30, 1998

                                                        OR

|_|   Transition Report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

      For the transition period from ________________ to _________________


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                          BOEING CAPITAL CORPORATION
           (Exact name of registrant as specified in its charter)

---------------------------------------------------------------------------

             Delaware                95-2564584                 0-10795
 (State or other jurisdiction of   (I.R.S. Employer        (Commission File No.)
  Incorporation or Organization)   Identification No.)

    4060 Lakewood Boulevard, 6th Floor-Long Beach, California 90808-1700
                   (Address of principal executive offices)

                                (562) 627-3000
             (Registrant's telephone number, including area code)


---------------------------------------------------------------------------

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,  and (2) has been subject to such filing  requirements
for the past 90 days. Yes |X| No |_|


Common shares outstanding at August 12, 1998:             50,000 shares

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


<PAGE>


                                                      Part I

Item 1.       Financial Statements

Boeing Capital Corporation and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                                                             June 30,         December 31,
(Dollars in millions, except stated value and par value)                       1998               1997
--------------------------------------------------------------------------------------------------------------
                                                                            (Unaudited)
ASSETS
    Financing receivables:
<S>                                                                      <C>               <C>            
      Investment in finance leases                                       $       1,456.6   $       1,509.1
      Notes receivable                                                             411.1             269.0
                                                                         ------------------------------------
                                                                                 1,867.7           1,778.1
      Allowance for losses on financing receivables                                (61.2)            (55.9)
                                                                         ------------------------------------
                                                                                 1,806.5           1,722.2
    Cash and cash equivalents                                                       12.3              39.1
    Equipment under operating leases, net                                          852.3             922.2
    Equipment held for sale or re-lease                                             26.7               0.7
    Other assets                                                                    42.1              38.6
                                                                         ------------------------------------
                                                                         $       2,739.9   $       2,722.8
                                                                         ====================================

LIABILITIES AND SHAREHOLDER'S EQUITY
    Short-term notes payable                                             $         162.3   $         149.0
    Accounts payable and accrued expenses                                           34.2              49.1
    Accounts with Boeing, McDonnell Douglas and BCSC                                49.2              37.2
    Other liabilities                                                              106.1              97.2
    Deferred income taxes                                                          401.9             388.3
    Long-term debt:
       Senior                                                                    1,543.7           1,579.0
       Subordinated                                                                 69.9              69.9
                                                                         ------------------------------------
                                                                                 2,367.3           2,369.7
                                                                         ------------------------------------

    Commitments and contingencies - Note 3

    Shareholder's equity:
       Preferred stock - no par value; authorized 100,000 shares:
         Series A; $5,000 stated value; authorized, issued and
           outstanding 10,000 shares                                                50.0              50.0
       Common stock - $100 par value; authorized 100,000 shares;
         issued and outstanding 50,000 shares                                        5.0               5.0
       Capital in excess of par value                                               89.5              89.5
       Income retained for growth                                                  228.1             208.6
                                                                         ------------------------------------
                                                                                   372.6             353.1
                                                                         ------------------------------------
                                                                         $       2,739.9   $       2,722.8


                                                                         ====================================
</TABLE>

See notes to consolidated financial statements.




<PAGE>


Boeing Capital Corporation and Subsidiaries
Consolidated Statements of Income and Income Retained for Growth
(Unaudited)
<TABLE>
<CAPTION>


                                                                  Three months ended               Six months ended
                                                                       June 30,                        June 30,
(Dollars in millions)                                            1998            1997            1998            1997
===========================================================================================================================

OPERATING INCOME
<S>                                                         <C>             <C>            <C>             <C>          
    Finance lease income                                    $        31.5   $        35.0   $       63.4   $        70.6
    Interest income on notes receivable                               8.2             6.6           14.9            13.6
    Operating lease income, net of depreciation expense              17.2            14.0           34.8            27.7
    Net gain on disposal or re-lease of assets                       10.4             1.3           15.2             4.1
    Other                                                             0.3             1.3            0.8             2.9
                                                            ---------------------------------------------------------------
                                                                     67.6            58.2          129.1           118.9
                                                            ---------------------------------------------------------------

EXPENSES
    Interest expense                                                 32.2            31.0           64.7            64.2
    Provision for losses                                              2.6             2.3            5.3             5.8
    Operating expenses                                                2.6             2.6            5.2             5.7
    Other                                                             0.8             2.3            3.8             3.3
                                                            ---------------------------------------------------------------
                                                                     38.2            38.2           79.0            79.0
                                                            ---------------------------------------------------------------
Income before provision for income taxes                             29.4            20.0           50.1            39.9
Provision for income taxes                                           10.9             7.3           18.5            14.5
                                                            ---------------------------------------------------------------
Net income                                                           18.5            12.7           31.6            25.4
Income retained for growth at beginning of period                   210.5           192.9          208.6           181.0
Dividends                                                            (0.9)           (0.9)         (12.1)           (1.7)
                                                            ---------------------------------------------------------------
Income retained for growth at end of period                 $       228.1   $       204.7  $       228.1   $       204.7
                                                            ===============================================================
</TABLE>

See notes to consolidated financial statements.



<PAGE>


Boeing Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>

                                                                                      Six months ended
                                                                                          June 30,
(Dollars in millions)                                                             1998                 1997
--------------------------------------------------------------------------------------------------------------------

OPERATING ACTIVITIES
<S>                                                                           <C>                  <C>          
    Net income                                                                $        31.6        $        25.4
    Adjustments to reconcile net income to net cash provided by
       operating activities:
         Depreciation expense - equipment under operating leases                       36.0                 29.2
         Net gain on disposal or re-lease of assets                                   (15.2)                (4.1)
         Provision for losses                                                           5.3                  5.8
         Change in assets and liabilities:
           Accounts with Boeing, McDonnell Douglas and BCSC                            12.0                  8.1
           Other assets                                                                (3.5)               (14.4)
           Accounts payable and accrued expenses                                      (14.9)               (13.7)
           Other liabilities                                                            8.9                 10.9
           Deferred income taxes                                                       13.6                 24.0
         Other, net                                                                     0.3                 (0.3)
                                                                          ------------------------------------------
                                                                                       74.1                 70.9
                                                                          ------------------------------------------
INVESTING ACTIVITIES
    Net change in short-term notes and leases receivable                               (3.2)                (0.1)
    Purchase of equipment for operating leases                                        (13.5)               (62.0)
    Proceeds from disposition of equipment, notes and leases receivable                82.9                 23.7
    Collection of notes and leases receivable                                          88.3                147.9
    Acquisition of notes and leases receivable                                       (220.4)               (63.5)
                                                                          ------------------------------------------
                                                                                      (65.9)                46.0
                                                                          ------------------------------------------

FINANCING ACTIVITIES
    Net change in short-term borrowings                                                13.3                 12.4
    Debt having maturities more than 90 days:
       Proceeds                                                                        85.0                 60.0
       Repayments                                                                    (121.2)              (190.6)
    Payment of cash dividends                                                         (12.1)                (1.7)
                                                                          ------------------------------------------
                                                                                      (35.0)              (119.9)
                                                                          ------------------------------------------
Net decrease in cash and cash equivalents                                             (26.8)                (3.0)
Cash and cash equivalents at beginning of year                                         39.1                 16.9
                                                                          ==========================================
Cash and cash equivalents at end of period                                    $        12.3        $        13.9
                                                                          ==========================================
</TABLE>

See notes to consolidated financial statements.


<PAGE>


Boeing Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1998
(Unaudited)


Note 1 -- Basis of Presentation

Boeing Capital Corporation (formerly McDonnell Douglas Finance Corporation) (the
"Company") is a wholly-owned  subsidiary of Boeing Capital Services  Corporation
("BCSC"), a wholly-owned subsidiary of McDonnell Douglas Corporation ("McDonnell
Douglas"),  which in turn is wholly-owned by The Boeing Company ("Boeing").  The
accompanying  unaudited  consolidated financial statements have been prepared by
the Company in accordance  with  generally  accepted  accounting  principles 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 footnotes required by generally accepted accounting  principles for complete
financial  statements.  In  the  opinion  of  management  of  the  Company,  the
accompanying   consolidated   financial   statements   reflect  all  adjustments
(consisting of normal recurring  accruals) which are necessary to present fairly
the  consolidated  balance  sheets and the related  consolidated  statements  of
income and income  retained  for growth and cash flows for the  interim  periods
presented.  Operating  results for the six-month period ended June 30, 1998, are
not  necessarily  indicative  of the results  that may be expected  for the year
ended December 31, 1998. The statements  should be read in conjunction  with the
notes to the consolidated  financial  statements  included in the Company's Form
10-K for the year ended December 31, 1997.


Note 2 -- Credit Agreements and Long-Term Debt

The  provisions  of various  credit and debt  agreements  require the Company to
maintain a minimum net worth,  restrict  indebtedness,  and limit cash dividends
and other distributions.  Under the most restrictive provision, $92.0 million of
the Company's income retained for growth was available for dividends at June 30,
1998.


Note 3 -- Commitments and Contingencies

On November 1, 1996, The Allen Austin Harris Group, Inc. (the "Plaintiff") filed
a complaint in the Superior Court of the State of California, County of Alameda,
against the Company,  McDonnell  Douglas,  McDonnell  Douglas Aerospace - Middle
East Limited and the Selah Group, Inc. (the "Defendants").  The Plaintiff, which
had hoped to establish a manufacturing plant abroad with various assistance from
the  Defendants,  seeks more than $57.0  million in alleged  damages  (primarily
consisting of lost profits) based on various  theories.  The Company believes it
has meritorious  defenses to all of the allegations,  but is unable to determine
at this stage of  discovery  if the  litigation  will have any  future  material
adverse effect on the Company's earnings, cash flow or financial position.

The  Company is a party to  litigation  in the  United  States  District  Court,
Southern District of Florida,  entitled  McDonnell  Douglas Finance  Corporation
adv. Aviaco International Leasing, Inc., Aviaco Traders International,  Inc. and
Craig  L.  Dobbin  with  Related  Counter-Claims  (collectively  referred  to as
"Aviaco").  The  foregoing  litigation  arose  out of an action  brought  by the
Company  in July 1991  seeking  remedies  on account  of  defaults  by the other
parties to the  litigation  under loan and related  documents  involving a $17.9
million loan made by the Company.  In January 1994, in response to the Company's
foreclosure  of two aircraft and a related  aircraft lease  agreement  which had
been collateral for the loan, Aviaco filed a counter-claim  against the Company,
asserting nine claims for alleged  damages based on various tort and contractual
theories relating to the Company's foreclosure.

The case  proceeded to jury trial on the three of nine claims which survived the
Company's  Motion for Summary  Judgment.  The case was  submitted to the jury on
October 16, 1997.  On October 17, 1997,  the jury returned a verdict in favor of
Aviaco awarding  aggregate  damages of  approximately  $12.2 million,  including
damages of  approximately  $10.0 million for the failure to exercise  reasonable
care with regard to the related lease agreement.

In December  1997,  the Company  filed a Motion for Judgment as a Matter of Law,
arguing, inter alia, to set aside the $10.0 million award as not being supported
by the record  evidence or by  applicable  law. On February 13, 1998,  the Judge
ruled in favor of the Company and set aside the $10.0 million award.

On March 2, 1998, the Judge entered a Final Judgment  against the Company in the
aggregate amount,  including prejudgment interest, of approximately $2.8 million
with post judgment  interest thereon at the rate of 5.42% per annum. Both Aviaco
and the Company have appealed from the Final Judgment to the United States Court
of Appeals for the Eleventh  Circuit.  Taking into account amounts  reserved for
this litigation,  the Company does not expect such litigation to have any future
material adverse effect on its earnings, cash flow or financial position.

A number of legal  proceedings  and  claims are  pending  or have been  asserted
against the Company.  A substantial  number of such legal proceedings and claims
are  covered  by third  parties,  including  insurance  companies.  The  Company
believes that the final outcome of such  proceedings  and claims will not have a
material adverse effect on its earnings, cash flow, or financial position.

On June 26,  1998,  Federal  Express  Corporation  ("Fedex")  gave notice to the
Company of its intention to terminate early (in late 1999) two lease  agreements
covering MD-11 aircraft which Fedex leases from the Company.  Even if the leases
are in fact  terminated  early,  the Company  does not  anticipate  any material
adverse  effect on its  earnings,  cash flow or financial  position  taking into
account current demand for the aircraft,  a guaranty from McDonnell  Douglas and
certain  other  contractual  rights  including  payments due to the Company upon
early  termination  as well as a commitment  from  another  airline to lease the
aircraft for a pre-determined rental amount.

Trans World Airlines,  Inc. ("TWA")  accounted for $169.9 million (6.2% of total
Company  portfolio) and $196.6 million (7.3% of total Company portfolio) at June
30, 1998, and December 31, 1997, respectively.  TWA continues to operate under a
reorganization  plan,  confirmed by the United States  Bankruptcy Court in 1995,
that  restructured its indebtedness and leasehold  obligations to its creditors.
In  addition,  TWA  continues  to face  financial  and  operational  challenges.
McDonnell Douglas provides  guaranties to the Company for certain obligations of
TWA under the various lease agreements  between the Company and TWA. At June 30,
1998, the maximum aggregate coverage under such guaranties was $33.6 million. As
of the date  hereof,  TWA is  current on its  obligations  to the  Company.  If,
however, TWA were to default on its obligations to the Company,  this could have
a material  adverse  effect on the  Company's  earnings,  cash flow or financial
position.

The Company's lease agreements with P.T. Garuda Indonesia ("Garuda") relating to
two MD-11 aircraft have been terminated and the aircraft, which were returned by
Garuda  in July  1998,  are  being  remarketed.  Taking  into  account a partial
guarantee  of Garuda's  lease  obligations  from  McDonnell  Douglas and certain
security  deposits and other payments under the leases held by the Company,  the
early  termination  of the leases is not  expected  to have a  material  adverse
effect on the Company's earnings, cash flow or financial position.

In July 1998, the Company  terminated early a lease agreement  covering one used
DC-10-30  aircraft.  The Company is in the process of repossessing such aircraft
and calling on a bank  guaranty.  Taking into  account the bank  guaranty  and a
guaranty from  McDonnell  Douglas,  this  transaction  is not expected to have a
material  adverse  effect on the  Company's  earnings,  cash  flow or  financial
position.

The Company had leased six Embraer EMB-120  aircraft to Westair.  As a result of
Westair's  cessation of operations at the end of May 1998, the lease  agreements
for such  aircraft have been  terminated  and the aircraft have been returned to
the Company.  The Company is preparing  to remarket  the  aircraft.  Taking into
account an amount  expected to be collected by the Company  from  Westair,  this
transaction  is not expected to have a material  adverse effect on the Company's
earnings, cash flow or financial position.

The $100.0 million used aircraft  purchase bridge facility made available by the
Company to AirTran Airlines  ("AirTran"),  formerly ValuJet  Airlines,  Inc., in
1995, was reduced in maximum scope to $50.0 million by mutual  agreement  during
the third quarter of 1996. This facility expires upon delivery to AirTran of the
first scheduled new Boeing 717-200 (formerly MD-95) aircraft, presently expected
to occur in 1999. Borrowings under this agreement must be repaid within 180 days
and the interest rate is based on the London Interbank  Offering Rate ("LIBOR").
There  were no amounts  outstanding  under this  agreement  at June 30,  1998 or
December 31, 1997.

At June 30,  1998,  the Company  had  commitments  to provide  leasing and other
financing totaling $167.4 million.

In conjunction with prior asset dispositions and certain guaranties, at June 30,
1998, the Company was subject to a maximum  recourse of $56.3 million.  Based on
trends to date,  the Company's  losses related to such exposure are not expected
by the Company to be significant.

The Company  leases  aircraft  under capital leases which have been subleased to
others.  At June 30,  1998,  the Company had  guaranteed  the  repayment of $5.4
million in capital lease obligations associated with a 50% partner.


Item 2.       Management's Analysis of Results of Operations

-------------------------------------------------------------------------------
Forward-Looking Information Is Subject to Risk and Uncertainty

   
From  time to  time,  the  Company  may make  certain  statements  that  contain
projections  or  "forward-looking"   information  (as  defined  in  the  Private
Securities  Litigation  Reform Act of 1995) that involve  risk and  uncertainty.
Certain statements in this Form 10-Q,  particularly those in Note 3 of the Notes
to Consolidated Financial Statements, Item 2 of Part I and Items 1 and 5 of Part
II,  may  contain  forward-looking  information.  The  subject  matter  of  such
statements may include, but not be limited to, the effects on the Company of the
Boeing-McDonnell   Douglas   merger,   as  well  as  future   earnings,   costs,
expenditures,  losses,  residual values and various business environment trends.
In  addition  to  those  contained   herein,   forward-looking   statements  and
projections  may be made by  management  of the  Company  orally  or in  writing
including,  but not limited to, various  sections of the Company's  filings with
the Securities and Exchange  Commission under the Securities Act of 1933 and the
Securities Exchange Act of 1934.

Actual results and trends in the future may differ  materially from  projections
depending on a variety of factors including,  but not limited to, the effects on
the  Company  of  the   Boeing-McDonnell   Douglas   merger  and  the  Company's
relationship with Boeing, as well as strategic decisions relating to the Company
to be made by Boeing,  the capital  equipment  requirements of United States and
foreign  businesses,  capital  availability  and  cost,  changes  in law and tax
benefits,  the tax  position  of  Boeing  (including  the  applicability  of the
alternative  minimum tax),  competition from other financial  institutions,  the
Company's  successful  execution of internal  operating plans and Year 2000 date
conversion  plans,  defaults by customers,  regulatory  uncertainties  and legal
proceedings.
    
-------------------------------------------------------------------------------


Finance lease income decreased $7.2 million (10.2%) from the first six months of
1997,  primarily  attributable  to the sale of an MD-11 aircraft in September of
1997 and the sale of three MD-82 aircraft in December of 1997.

Operating lease income  increased $7.1 million (25.6%) from the first six months
of 1997,  primarily  attributable  to the operating lease financing of four used
Boeing aircraft during the last four months of 1997.

Gain on disposal or re-lease of assets increased $11.1 million (270.7%) from the
first six months of 1997, primarily  attributable to $4.9 million of income from
the sale of two TWA  aircraft  in June of  1998,  with  the  remaining  increase
attributable  to other  sales  within the  commercial  aircraft  and  commercial
equipment leasing portfolios.

Other income  decreased $2.1 million  (72.4%) from the first six months of 1997,
primarily  attributable to commercial equipment leasing residual value guarantee
fees of $1.0 million received in the first quarter of 1997.

Other expenses increased $0.5 million (15.2%) from the first six months of 1997,
primarily  attributable to maintenance expenses of approximately $2.1 million on
an aircraft that was repossessed in March of 1997.

Year 2000 Date Conversion

The Company has  assessed  and  continues  to assess the impact of the Year 2000
issue on its  reporting  systems  and  operations.  The Year 2000  issue  exists
because many computer  systems and  applications  use  two-digit  date fields to
designate a year. As the century date change occurs,  date-sensitive systems may
recognize the year 2000 as 1900,  or not at all. This  inability to recognize or
properly  treat  the year  2000 may  cause  systems  to  process  financial  and
operational information incorrectly. In 1996, the Company initiated a conversion
from its existing  lease  administrative  system to programs  that are Year 2000
compliant.  Although  the  Company  does not  consider  it likely that Year 2000
problems  inherent  within  its  computer  system  will  result  in  significant
operational  problems,  the possibility of such problems cannot be discounted at
this time.  The Company has decided to retain  outside  consultants to assist in
its ongoing  assessment  of its  computer  system's  vulnerability  to Year 2000
problems.  Also,  the Company's  preliminary  estimate that it will complete its
Year 2000  project by the third  quarter of 1999 is subject to the  findings  of
such outside consultants.

The  Company  has and will  continue  to  utilize  both  internal  and  external
resources to replace and test the software for Year 2000 compliance.

The total cost of the Year 2000 project is being funded  through  operating cash
flows, and based on the Company's  assessment to date, is not expected to have a
material  adverse  effect on the  Company's  earnings,  cash  flow or  financial
position.

No assurance can be given,  however,  that Year 2000 problems of unrelated third
parties  (such as other  financial  institutions  with  which the  Company  does
business) will not materially impact operations or operating results.


                                                      Part II

Item 1.       Legal Proceedings

On November 1, 1996, The Allen Austin Harris Group, Inc. (the "Plaintiff") filed
a complaint in the Superior Court of the State of California, County of Alameda,
against the Company,  McDonnell  Douglas,  McDonnell  Douglas Aerospace - Middle
East Limited and the Selah Group, Inc. (the "Defendants").  The Plaintiff, which
had hoped to establish a manufacturing plant abroad with various assistance from
the  Defendants,  seeks more than $57.0  million in alleged  damages  (primarily
consisting of lost profits) based on various  theories.  The Company believes it
has meritorious  defenses to all of the allegations,  but is unable to determine
at this stage of  discovery  if the  litigation  will have any  future  material
adverse effect on the Company's earnings, cash flow or financial position.

The  Company is a party to  litigation  in the  United  States  District  Court,
Southern District of Florida,  entitled  McDonnell  Douglas Finance  Corporation
adv. Aviaco International Leasing, Inc., Aviaco Traders International,  Inc. and
Craig  L.  Dobbin  with  Related  Counter-Claims  (collectively  referred  to as
"Aviaco").  The  foregoing  litigation  arose  out of an action  brought  by the
Company  in July 1991  seeking  remedies  on account  of  defaults  by the other
parties to the  litigation  under loan and related  documents  involving a $17.9
million loan made by the Company.  In January 1994, in response to the Company's
foreclosure  of two aircraft and a related  aircraft lease  agreement  which had
been collateral for the loan, Aviaco filed a counter-claim  against the Company,
asserting nine claims for alleged  damages based on various tort and contractual
theories relating to the Company's foreclosure.

The case  proceeded to jury trial on the three of nine claims which survived the
Company's  Motion for Summary  Judgment.  The case was  submitted to the jury on
October 16, 1997.  On October 17, 1997,  the jury returned a verdict in favor of
Aviaco awarding  aggregate  damages of  approximately  $12.2 million,  including
damages of  approximately  $10.0 million for the failure to exercise  reasonable
care with regard to the related lease agreement.

In December  1997,  the Company  filed a Motion for Judgment as a Matter of Law,
arguing, inter alia, to set aside the $10.0 million award as not being supported
by the record  evidence or by  applicable  law. On February 13, 1998,  the Judge
ruled in favor of the Company and set aside the $10.0 million award.

On March 2, 1998, the Judge entered a Final Judgment  against the Company in the
aggregate amount,  including prejudgment interest, of approximately $2.8 million
with post judgment  interest thereon at the rate of 5.42% per annum. Both Aviaco
and the Company have appealed from the Final Judgment to the United States Court
of Appeals for the Eleventh  Circuit.  Taking into account amounts  reserved for
this litigation,  the Company does not expect such litigation to have any future
material adverse effect on its earnings, cash flow or financial position.

A number of legal  proceedings  and  claims are  pending  or have been  asserted
against the Company.  A substantial  number of such legal proceedings and claims
are  covered  by third  parties,  including  insurance  companies.  The  Company
believes that the final outcome of such  proceedings  and claims will not have a
material adverse effect on its earnings, cash flow, or financial position.


Item 2.       Changes in Securities and Use of Proceeds

Omitted pursuant to instruction H(2).


Item 3.       Defaults Upon Senior Securities

Omitted pursuant to instruction H(2).


Item 4.       Submission of Matters to a Vote of Security Holders

Omitted pursuant to instruction H(2).


Item 5.       Other Information

Summarized below is information on the effects of the  Boeing-McDonnell  Douglas
merger, borrowing operations,  portfolio balances, new business volume, analysis
of allowance for losses on financing receivables and credit loss experience, and
receivable write-offs, net of recoveries by segment.

The Effects of the Boeing-McDonnell Douglas Merger

On August 1, 1997, the Boeing-McDonnell  Douglas merger was consummated pursuant
to an Agreement and Plan of Merger dated as of December 14, 1996,  among Boeing,
West  Acquisition  Corp.,  a  wholly-owned  subsidiary  of Boeing  ("Sub"),  and
McDonnell  Douglas  (the  "Merger  Agreement").  Under the  terms of the  Merger
Agreement,  Sub was  merged  into  McDonnell  Douglas,  with  McDonnell  Douglas
surviving as a wholly-owned subsidiary of Boeing.

The many possible ramifications of strategic decisions to be made by Boeing with
respect  to  the  Company  are  currently  unknown  and,  therefore,  cannot  be
quantified  at this time.  Boeing is actively  considering  the  possibility  of
divesting  all or part of the  Company's  assets or all or part of the Company's
stock, presently held indirectly by Boeing.

Borrowing Operations

The Company has issued $300.0 million of the $400.0 million aggregate  principal
amount of medium-term  notes which were  authorized for issuance in October 1997
at interest rates ranging from 5.73% to 6.58% and with  maturities  ranging from
10 months to 11 years.  On July 31, 1998,  the Company  authorized an additional
$500.0  million (an  aggregate of $600.0  million  authorized,  but unissued) of
medium-term  notes to be  offered  and sold from  time to time in the  Company's
discretion pursuant to the Company's public shelf registration (SEC Registration
No.333-37635).

   
On June 8, 1998,  Standard & Poor's Corp.  announced  that it lowered its credit
ratings on Boeing and the Company. The ratings of the Company's senior unsecured
debt  and  subordinated  debt  were  lowered  from  AA to  AA-  and  AA-  to A+,
respectively.  The  outlook  for the  Company  was  deemed  to be  "developing."
Standard & Poor's  stated  that  ratings  "could be raised if [the  Company]  is
retained as a  continuing  operation of Boeing Co.  Ratings  could be lowered if
[the Company] is divested to a weaker entity."
    

Portfolio Balances

Portfolio balances for the Company's financial reporting segments are summarized
as follows:
<TABLE>
<CAPTION>

                                                                                June 30,         December 31,
(Dollars in millions)                                                             1998               1997
                                                                           ---------------------------------------
Aircraft Financing
    Boeing/McDonnell Douglas aircraft financing
<S>                                                                            <C>                <C>        
       Finance leases                                                          $     923.4        $     964.9
       Operating leases                                                              477.4              495.2
       Notes receivable                                                               84.3               61.9
                                                                           ---------------------------------------
                                                                                   1,485.1            1,522.0
                                                                           ---------------------------------------
    Other commercial aircraft financing
       Finance leases                                                                137.6              133.3
       Operating leases                                                               44.5               51.9
       Notes receivable                                                                4.0                4.3
                                                                           ---------------------------------------
                                                                                     186.1              189.5
                                                                           ---------------------------------------
Commercial Equipment Leasing
    Finance leases                                                                   395.6              410.9
    Operating leases                                                                 330.4              375.0
    Notes receivable                                                                 318.7              190.7
                                                                           ---------------------------------------
                                                                                   1,044.7              976.6
                                                                           ---------------------------------------
Other                                                                                  4.1               12.2
                                                                           ---------------------------------------
                                                                               $   2,720.0        $   2,700.3
                                                                           =======================================
</TABLE>


New Business Volume

New business volume is summarized as follows:
<TABLE>
<CAPTION>

                                                                                      Six months ended
                                                                                          June 30,
(Dollars in millions)                                                             1998               1997
                                                                            -------------------------------------
<S>                                                                             <C>               <C>        
Boeing/McDonnell Douglas aircraft financing                                     $      25.5       $       1.6
Other commercial aircraft financing                                                    22.5               -
Commercial equipment leasing                                                          171.8             111.0
                                                                            -------------------------------------
                                                                                $     219.8       $     112.6
                                                                            =====================================
</TABLE>


Analysis of Allowance for Losses on Financing Receivables and Credit Loss
Experience
<TABLE>
<CAPTION>

                                                                                June 30,          December 31,
(Dollars in millions)                                                             1998                1997
                                                                           ---------------------------------------
Allowance for losses on financing receivables at beginning
<S>                                                                            <C>                 <C>       
    of year                                                                    $     55.9          $     48.6
Provision for losses                                                                  5.3                11.5
Write-offs, net of recoveries                                                         -                  (2.5)
Other                                                                                 -                  (1.7)
                                                                           ---------------------------------------
Allowance for losses on financing receivables at end of
    period                                                                     $     61.2          $     55.9
                                                                           =======================================

Allowance as percent of total portfolio                                               2.3%                2.1%

Net write-offs as percent of average portfolio                                           - %              0.1%

More than 90 days delinquent:
    Amount of delinquent installments                                          $      0.6          $      1.8
    Total receivables due from delinquent obligors                                   37.8                15.5
    Total receivables due from delinquent obligors
       as a percentage of total portfolio                                             1.4%                0.6%
</TABLE>


Receivable Write-offs, Net of Recoveries by Segment

   
The Company's  financial  reporting segments had no net write-offs or recoveries
of  receivables  for the six months  ended June 30, 1998.  Commercial  equipment
leasing had $0.3 million in net recoveries,  while commercial aircraft financing
had no net write-offs or recoveries of receivables for the six months ended June
30, 1997.
    


Item 6.       Exhibits and Reports on Form 8-K

A.    Exhibits

         Exhibit 12 Computation of Ratio of Income to Fixed Charges.

         Exhibit 27 Financial Data Schedule.

B.    Reports on Form 8-K

         None.



<PAGE>



                                                    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,  its principal  financial  officer and by its principal  accounting
officer, thereunto duly authorized.



                                           Boeing Capital Corporation


August 12, 1998                            /s/ STEVEN W. VOGEDING
                                           __________________________________ 
                                           Steven W. Vogeding
                                           Vice President and Chief Financial
                                           Officer (Principal Financial Officer)
                                           and Registrant's Authorized Officer




                                           /s/ MAURA R. MIZUGUCHI
                                           __________________________________ 
                                           Maura R. Mizuguchi
                                           Controller 
                                           (Principal Accounting Officer)