Boeing HQ
Today’s key news focuses in on Boeing raising equity to shore-up a weak balance sheet. The company, expected to burn another $3 billion in Q3 after burning through $8.2 billion in the first half of 2024, is running low on cash. Rating agencies have made it clear that additional debt would result in a credit downgrade to junk status, so the company has no real alternative but to raise additional capital through an equity sale.
New reports suggest an initial raise of $10 billion happening once the IAM strike ends. Our view is that the capital raise may need to be larger, perhaps $20 billion, to provide an appropriate cash cushion given that additional debt repayments will be required in Q1 of 2025. This will, of course, further negatively impact Boeing shares, which are down more than 40% this year.
The emergence of a rudder problem on the Boeing 737NG and 737 MAX models, with the FAA taking its time to evaluate what the National Transportation Safety Board, the US accident investigation agency, deemed as an urgent problem. The NTSB indicated that more than 40 foreign airlines may have the suspect parts installed, creating potentially unsafe operations, and has provided a warning. The FAA is looking into the matter, but has taken neither quick nor decisive action.
International regulators, ranging from Europe’s EASA to India’s DGCA are poised to take action with airworthiness directives that may, just like the initial 737 MAX crashes, be faster to act than the FAA. Given the agencies terrible oversight of Boeing, one must as the question of why decisive actions are delayed when it comes to Boeing? Our view is the the FAA performance is unacceptable, and should err on an abundance of caution rather than additional study given the credibility of the NTSB.
In good news for Boeing, LOT Polish, a major 737 MAX and 787 customer, has taken four additional MAX 8 aircraft from the leasing community. It is always nice when existing customers opt for more aircraft, and a positive for Boeing.
An editorial by a business school professor believes that Boeing can recover from its Starliner embarrassment, but at this point can’t afford another failure. With the replacement of Ted Colbert, CEO of the Defense, Space and Security unit, that will become the challenge of the eventual successor to his position. Currently, Steve Parker, COO, will take the interim reins as Boeing suffers from fixed price contract cost overruns and continuing losses at the business unit.
Finally, a federal judge ruled that Boeing and its former CEO Dennis Muilenburg must face security fraud claims with respect to statements made on the safety of the 737 MAX. Â This lawsuit could come back to haunt the company with massive fines and perhaps jail time for the former CEO.
Links to today’s key stories follow:
- Boeing weighs raising at least $10 billion selling stock, Bloomberg News reports – Reuters
- US warns 40 airlines may be using Boeing 737s with suspect rudder control parts – The Standard
- DGCA may issue advisory after US warning on Boeing 737’s jammed rudder system – The Hindu
- Urgent Boeing safety issue isn’t being taken seriously by FAA, key regulator says – WHDH
- Lot Polish Airlines acquires four new Boeing 737 MAX 8 aircraft – Aviation Source
- Boeing can recover from its Starliner troubles but it can’t afford any other misfires – Yahoo
- Boeing, Ex-CEO unable to escape fraud claims related to 737 MAX – Bloomberg Law
