No Rating Action Yet But Will Continue Monitoring Carefully

Credit agency S&P Global Ratings said in an October 14 press release that Boeing’s preliminary third-quarter losses are mostly due to cost overruns and delays in new commercial and defense aircraft development. Those charges will total about $5 billion in noncash charges but do reflect changes in cash flow in future years.

Boeing has announced a 10% reduction in their workforce, about 17,000 employees, in coming months but possibly not until 2025. This will create a significant reduction in expenses and also a concomitant decrease of productivity, but the overall effect is not yet clear. The strike by the machinists union has already caused a shutdown of production of its best-selling 737 models along with some 767 and 777 aircraft.

The largest component of the charges, $2.6 billion, is related to delays in production of the new widebody 777X aircraft. Deliveries were scheduled to begin in 2025 but have been pushed to 2026, with the cargo version delayed until 2028. The delay in the 777 is related to engine issues just discovered in August 2024, and the charge reflects costs needed to fix them and is also exacerbated by the strike.

Overall, S&P Global says that the company’s ‘BBB’- long-term issuer credit rating and CreditWatch placement with negative implications are not affected by the Q3 announcement, and there is no change to the credit rating at this time.

S&P Global expects to have the CreditWatch placement resolved by the end of 2024, adding that it could lower the rating if Boeing continues to have operational delays, or the strike persists, if significant cash outflows continue, or if the company doesn’t raise sufficient capital to meet its upcoming needs without increasing equity financing.

‘BBB’ is considered still within “investment grade” for securities.

FMI:  www.boeing.com/