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Liabilities, Commitments and Contingencies | 3 Months Ended
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Mar. 31, 2024
Commitments and Contingencies Disclosure [Abstract] |
Liabilities, Commitments and Contingencies | Liabilities, Commitments and Contingencies 737 MAX Customer Concessions and Other Considerations During the three months ended March 31, 2024, we recorded an earnings charge of $443, net of insurance recoveries, in connection with estimated considerations to customers for disruption related to the Alaska Airlines 737-9 accident and 737-9 grounding. This charge is reflected in the financial statements as a reduction to revenue. The following table summarizes changes in the 737 MAX customer concessions and other considerations liability during the three months ended March 31, 2024 and 2023.
| 2024 |  | 2023 |
Beginning balance – January 1 | $1,327 |  |  | $1,864 |  |
Reductions for payments made | (553) |  |  | (141) |  |
Changes in estimates | 510 |  |  |  |  |
Ending balance – March 31 | $1,284 |  |  | $1,723 |  |
At March 31, 2024, $430 of the liability balance remains subject to negotiations with customers, the majority of which we expect to pay in 2024. Of the contracted amount, we expect to pay $332 in 2024, while the remaining amounts are primarily expected to be liquidated by lower customer delivery payments. Environmental The following table summarizes changes in environmental remediation liabilities during the three months ended March 31, 2024 and 2023.
| 2024 |  | 2023
Beginning balance – January 1 | $844 |  |  | $752 |
Reductions for payments made, net of recoveries | (14) |  |  | (10) |
Changes in estimates | 7 |  |  | 46 |
Ending balance – March 31 | $837 |  |  | $788 |
The liabilities recorded represent our best estimate or the low end of a range of reasonably possible costs expected to be incurred to remediate sites, including operation and maintenance over periods of up to 30 years. It is reasonably possible that we may incur costs that exceed these recorded amounts because of regulatory agency orders and directives, changes in laws and/or regulations, higher than expected costs and/or the discovery of new or additional contamination. As part of our estimating process, we develop a range of reasonably possible alternate scenarios that includes the high end of a range of reasonably possible cost estimates for all remediation sites for which we have sufficient information based on our experience and existing laws and regulations. There are some potential remediation obligations where the costs of remediation cannot be reasonably estimated. At March 31, 2024 and December 31, 2023, the high end of the estimated range of reasonably possible remediation costs exceeded our recorded liabilities by $971 and $1,030. Product Warranties The following table summarizes changes in product warranty liabilities recorded during the three months ended March 31, 2024 and 2023.
| 2024 |  | 2023
Beginning balance – January 1 | $2,448 |  |  | $2,275 |
Additions for current year deliveries | 22 |  |  | 47 |
Reductions for payments made | (75) |  |  | (116) |
Changes in estimates |  |  |  | (31) |
Ending balance – March 31 | $2,395 |  |  | $2,175 |
Commercial Aircraft Trade-In Commitments In conjunction with signing definitive agreements for the sale of new aircraft, we have entered into trade-in commitments with certain customers that give them the right to trade in used aircraft at a specified price. The probability that trade-in commitments will be exercised is determined by using both quantitative information from valuation sources and qualitative information from other sources. The probability of exercise is assessed quarterly, or as events trigger a change, and takes into consideration the current economic and airline industry environments. Trade-in commitments, which can be terminated by mutual consent with the customer, may be exercised only during the period specified in the agreement, and require advance notice by the customer. Trade-in commitment agreements at March 31, 2024 have expiration dates from 2024 through 2030. At March 31, 2024 and December 31, 2023 total contractual trade-in commitments were $1,426 and $1,415. As of March 31, 2024 and December 31, 2023, we estimated it was probable we would be obligated to perform on certain of these commitments with net amounts payable to customers totaling $311 and $407 and the fair value of the related trade-in aircraft was $311 and $407. Financing Commitments Financing commitments related to aircraft on order, including options and those proposed in sales campaigns, and refinancing of delivered aircraft, totaled $17,008 and $17,003 as of March 31, 2024 and December 31, 2023. The estimated earliest potential funding dates for these commitments as of March 31, 2024 are as follows:
| Total
April through December 2024 | $1,810 |
2025 | 3,271 |
2026 | 3,996 |
2027 | 3,220 |
2028 | 1,642 |
Thereafter | 3,069 |
| $17,008 |
As of March 31, 2024, $13,682 of these financing commitments relate to customers we believe have less than investment-grade credit. We have concluded that no reserve for future potential losses is required for these financing commitments based upon the terms, such as collateralization and interest rates, under which funding would be provided. Other Financial Commitments We have financial commitments to make additional capital contributions totaling $262 to certain joint ventures over the next nine years. Standby Letters of Credit and Surety Bonds We have entered into standby letters of credit and surety bonds with financial institutions primarily relating to the guarantee of our future performance on certain contracts and security agreements. Contingent liabilities on outstanding letters of credit agreements and surety bonds aggregated approximately $4,480 and $4,548 as of March 31, 2024 and December 31, 2023. Supply Chain Financing Programs The Company has supply chain financing programs in place under which participating suppliers may elect to obtain payment from an intermediary. The Company confirms the validity of invoices from participating suppliers and agrees to pay the intermediary an amount based on invoice totals. The majority of amounts payable under these programs are due within 30 to 90 days but may extend up to 12 months. At March 31, 2024 and December 31, 2023, Accounts payable included $2.5 billion and $2.9 billion payable to suppliers who have elected to participate in these programs. We do not believe that future changes in the availability of supply chain financing would have a significant impact on our liquidity. Recoverable Costs on Government Contracts Our final incurred costs for each year are subject to audit and review for allowability by the U.S. government, which can result in payment demands related to costs they believe should be disallowed. We work with the U.S. government to assess the merits of claims and where appropriate reserve for amounts disputed. If we are unable to satisfactorily resolve disputed costs, we could be required to record an earnings charge and/or provide refunds to the U.S. government. Fixed-Price Contracts Long-term contracts that are contracted on a fixed-price basis could result in losses in future periods. Certain of the fixed-price contracts are for the development of new products, services and related technologies. This development work scope is inherently uncertain and subject to significant variability in estimates of the cost and time required to complete the work by us and our suppliers. The operational and technical complexities of fixed-price development contracts create financial risk, which could trigger additional earnings charges, termination provisions, order cancellations, or other financially significant exposure. VC-25B Presidential Aircraft The Company’s firm fixed-price contract for the Engineering and Manufacturing Development (EMD) effort on the U.S. Air Force’s (USAF) VC-25B Presidential Aircraft, commonly known as Air Force One, is a $4 billion program to develop and modify two 747-8 commercial aircraft. During 2023, we increased the reach-forward loss on the contract by $482 driven by engineering changes to support the build and installation process; the resolution of supplier negotiations; and factory performance related to labor instability. While we have provisioned for all of our anticipated costs to complete the contract, risk remains that we may record additional losses in future periods. KC-46A Tanker In 2011, we were awarded a contract from the USAF to design, develop, manufacture, and deliver four next generation aerial refueling tankers as well as priced options for 13 annual production lots totaling 179 aircraft. Since 2016, the USAF has authorized ten low rate initial production (LRIP) lots for a total of 139 aircraft. The EMD contract and authorized LRIP lots total approximately $27 billion as of March 31, 2024. During 2023, we increased the reach-forward loss on the KC-46A Tanker program by $309 primarily resulting from factory disruption and additional rework due to a supplier quality issue. During the three months ended March 31, 2024, we increased the reach-forward loss on the KC-46A Tanker program by $128, primarily due to factory disruption associated with supply chain constraints. As of March 31, 2024, we had approximately $130 of capitalized precontract costs and $214 of potential termination liabilities to suppliers related to future production lots. Risk remains that we may record additional losses in future periods. MQ-25 In the third quarter of 2018, we were awarded the MQ-25 EMD contract by the U.S. Navy. The contract is a fixed-price contract that now includes development and delivery of seven aircraft and test articles at a contract price of $890. In connection with winning the competition, we recognized a reach-forward loss of $291 in the third quarter of 2018. During 2023, we increased the reach-forward loss by $231 primarily driven by production and flight testing delays as well as higher than anticipated production costs to complete EMD aircraft attributable to factory performance. During the first quarter of 2024, we were awarded a cost-type contract modification totaling $657 for two additional test aircraft plus other scope increases. Risk remains that we may record additional losses in future periods. T-7A Red Hawk EMD Contract & Production Options In 2018, we were awarded the T-7A Red Hawk program. The EMD portion of the contract is a $860 fixed-price contract and includes five aircraft and seven simulators. The production portion of the contract includes 11 production lots for aircraft and related services for 346 T-7A Red Hawk aircraft that we believe are probable of being exercised. We expect the first production and support contract option to be exercised in 2025. During 2023, we increased the reach-forward loss on the T-7A Red Hawk program by $275 primarily reflecting higher estimated production costs. During the three months ended March 31, 2024, we increased the reach-forward loss on the T-7A Red Hawk program by $94 primarily reflecting further increases in estimated production costs. At March 31, 2024, we had approximately $235 of capitalized precontract costs and $305 of potential termination liabilities to suppliers related to future production lots. Risk remains that we may record additional losses in future periods. Commercial Crew National Aeronautics and Space Administration (NASA) has contracted us to design and build the CST-100 Starliner spacecraft to transport crews to the International Space Station and in the second quarter of 2022, we successfully completed the uncrewed Orbital Flight Test. During 2023, we increased the reach-forward loss by $288 primarily as a result of delaying the crewed flight test previously scheduled for July 2023 following notification by a parachute supplier of an issue identified through testing. A crewed flight test is planned for May 2024. At March 31, 2024, we had approximately $229 of capitalized precontract costs and $158 of potential termination liabilities to suppliers related to fixed-price unauthorized future missions. Risk remains that we may record additional losses in future periods.

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