Brian West
Executive Vice President & Chief Financial Officer at Boeing
Thanks, Dave, and good morning, everyone. Let's start with the total company financial performance.
Second quarter revenue was $19.8 billion, that's up 18% year-over-year. The growth was primarily driven by higher commercial volume, including increased 787 deliveries. Core operating margin in the quarter was minus 2%, and the core loss per share was $0.82. Margins and EPS were driven by expected abnormal costs and period expenses as well as losses on three fixed price development programs in our defense business, which I'll cover later.
Free cash flow, as Dave mentioned, was positive $2.6 billion in the quarter, significantly better versus last year and last quarter, driven by higher commercial deliveries and favorable receipt timing. Relative to our expectations shared at the last earnings call, the strong order activity in the quarter drove over $2 billion of favorable advanced payment timing. Keep in mind, most of this was expected to incur in the third quarter.
Turning to the next page, I'll cover commercial airplanes. BCA booked 460 net orders in the quarter, including 220 with Air India, 39 with Riyadh Air and signed a purchase agreement with Ryanair for up to 300 737 MAX-10s. We now have over 4,800 airplanes in backlog valued at $363 billion.
Revenue was $8.8 billion, up 41% year-over-year on 136 airplane deliveries, driven by the 87 program. Operating margin was minus 4.3%, a sequential improvement versus the first quarter as anticipated, but remains negative as we continue to be impacted by expected abnormal costs and period expenses, including higher R&D spending.
As Dave noted, we've worked through a number of operational challenges so far this year. We're making steady progress, and we'll continue to focus on stability, as we look to increase production on key programs. On the Spirit work stoppage, we were pleased to see a quick resolution and we will work through any limited impacts to production. Overall, this is not expected to change our production and delivery outlook.
On to the programs, on the 737, we had 103 deliveries in the quarter, including 49 in June, a positive proof point that the production system is stabilizing. In regards to Spirit bidding issue that we discussed last quarter, in May, we resumed deliveries of reworked airplanes and also began producing newly-built airplanes meeting our specifications. In light of this progress, we are now transitioning production to 38 per month, and still plan to increase to 50 per month in the '25-'26 time frame.
As we move to the higher rate, we will continue to prioritize stability and it will take some time to consistently deliver at 38 per month off the line. We still project full year 737 deliveries of 400 to 450, with sequential improvement in the second half. We ended the quarter with approximately 220 MAX airplanes in inventory. This includes 85 for customers in China and 55 that have now been re-marketed as part of the plan we previously discussed. We still expect most MAX inventory airplane to be delivered by the end of 2024.
Moving on to the 87 program. We had 20 deliveries in the quarter, and still expect between 70 to 80 deliveries this year. We increased production to four per month during the quarter and still plan to reach five per month by year-end. We ended the quarter with 85 airplanes in inventory and rework is progressing nicely. And we still expect most to be delivered by the end of 2024. We booked $314 million of abnormal costs in the quarter, in line with expectations and there's no change to the total estimate of $2.8 billion, which is largely done by year-end.
Finally, on the 777X program, efforts are ongoing and the program timeline is unchanged. Abnormal costs were $136 million as expected, and we've lowered our total estimate from $1.5 billion to $1 billion, which reflects plans to resume production later this year rather than early 2024.
Moving on to the next page and defense and space. BDS booked $6 billion in orders in the quarter, including award from the U.S. Army for 19 CH-47 Chinooks, and the backlog is now at $58 billion. Revenue was flat at $6.2 billion, and we delivered 38 aircrafts in the quarter.
Operating margin was minus 8.5%, primarily driven by three fixed-price development programs. The first was related to Commercial Crew tied to scheduled delays that we previously shared and had a $257 million impact. The second on MQ-25 related to a scheduled shift that drove a $68 million impact. And lastly, on the T-7A production contract, we revised the long-term production cost estimates that will occur over several years, starting in the 2025 time frame which drove an impact of $189 million.
These determinations were mostly made over the last few weeks, as we close out the quarter. Similar to last quarter, roughly 60% of the portfolio is generating solid levels of performance, in line with historical margins. But we continue to see operational impacts from labor instability and supply chain disruption on other programs that contributed to lower margins.
Looking at BDS in aggregate, it will take time to return to normalized levels of performance. We're confident and we're focused on the path to high single-digit margins in 2025, 2026. There's strong demand across the customer base, the portfolio is well-positioned, and we're focused on execution.
Moving on to the next page, let's cover services. BGS had another very strong quarter. BGS received $4 billion in orders during the quarter, and the backlog is $18 billion. Revenue was $4.7 billion, up 10% year-over-year, primarily driven by favorable volume and mix in both commercial and government services. Operating margin was 18%, an expansion of 110 basis points versus last year with both our commercial and government businesses delivering double-digit margins. Operating margins in the quarter were higher-than-expected due to favorable mix, which we don't expect to continue at these levels. In the quarter, BGS announced an expansion in Poland with a new parts distribution site, a collaboration with CAE and the Japan Airlines has adopted the Boeing Insight Accelerator for their 787 fleet.
Turning to next page, I'll cover cash and debt. We ended the quarter with $13.8 billion of cash and marketable securities and our debt balance decreased to $52.3 billion. In the quarter, we repaid $3.4 billion of maturing debt and provided a $180 million cash advance to Spirit, as previously shared. Year-to-date, we've repaid $5.1 billion of debt, which is essentially all our maturities for the year. We also maintained $12 billion revolving credit facilities at the end of the quarter, all of which remain undrawn. Our liquidity position is strong, the investment-grade credit rating continues to be important, and we're deploying capital in line with the priorities we've shared, invest in the business and pay down debt through strong cash flow generation.
And flipping to the last page, I'll cover our outlook. The 2023 overall financial outlook is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation. The operating cash make-up by division will likely be different with BCA and BGS better than expected, and BDS lower than expected due to the lower operating performance. Net-net, we still have confidence in the $3 billion to $5 billion of free cash flow for the year.
Stepping back to address the state of the market. Commercial demand remains strong across our key programs and services. Cargo remains healthy. Global passenger traffic was up 39% in May, and is at 96% of pre-pandemic levels, 105% domestic and 91% international. China passenger traffic in May was at 87% of pre-pandemic levels with domestic traffic up more than 300% year-on-year and above pre-pandemic levels.
Defense demand is also robust, and FY '24 budget continues to progress in line with our expectations. Our portfolio and capabilities are well-positioned to support the needs of the nation and of our allies. With demand strong, we still find ourselves in a supply constrained environment and our focus continues to be on execution, both within our factories and the supply chain as we steadily increase production.
Relative to the first half of 2023, we continue to expect operating and financial performance to improve in the second half. On the third quarter specifically, we expect BCA margins to improve sequentially, but remain negative and we're not anticipating much in terms of BDS profitability. The 2Q effective tax rate of 63% included cumulative adjustments related to the projected valuation allowance. These adjustments will continue to weigh on the tax rate for the remainder of the year. And given the strong results in 2Q cash flow, 3Q will be lower sequentially, still positive and likely in the hundreds of millions of dollars.
All things considered, we feel good about where we're at on the road to recovery. Right now, we're squarely focused on meaningful operating performance improvement, including deliveries, revenue, margins and cash flow, all of which will improve as we progress through 2023. And while the challenges remain, we're headed in the right direction. Ultimately, we expect our operational and financial performance to continue to accelerate, align with the plan we laid out at our IR Day last November, and we are confident in $10 billion of free cash flow in 2025, 2026.
With that, I'll turn it over to Dave with some final remarks.
