Photo Credit: Getty Images
In a play to shore up its financial position, Boeing has announced plans to raise up to $25 billion through debt or stock offerings, while securing a $10 billion credit line from major banks. This strategic decision comes as the aerospace giant grapples with a perfect storm of production issues, a prolonged strike, and market uncertainties.
The company's financial woes have been brewing for some time. Boeing hasn't turned a profit since 2018, and its cash reserves had dwindled to $10.3 billion by September 2024, dangerously close to the minimum required for operations. The ongoing machinists' strike, which began on September 13, 2024, has only exacerbated the situation, with Boeing burning through approximately $1 billion per month.
Industry analyst Marie Thompkins of AeroSpace Partners comments, "Boeing's move to raise capital is a necessary step to avoid a potential credit rating downgrade to junk status. It's a delicate balancing act between maintaining liquidity and managing investor confidence."
The impact of these challenges is reflected in Boeing's stock performance, with shares plummeting over 40% year-to-date. Trading at around $150 in mid-October, the stock has fallen significantly from its January price of $250.
In response to these pressures, Boeing announced on October 11, 2024, that it would cut approximately 17,000 jobs. CEO David Calhoun stated, "While these decisions are difficult, they are necessary to ensure Boeing's long-term stability and competitiveness in the global aerospace market."
The company's financial maneuvers have not gone unnoticed by credit rating agencies. Moody's analyst Jonathan Berger warns, "Boeing's debt load of $45 billion net is concerning. The success of this capital raise will be crucial in determining the company's credit outlook."
Boeing faces the daunting task of resuming production of its bestselling 737 Max, which has been halted due to the strike. The company must also navigate ongoing regulatory scrutiny following past safety issues.
The coming months will be critical in determining whether these moves can successfully stabilize the company's finances and restore confidence in one of America's most iconic manufacturers.
