Boeing is once again facing a fresh storm of crises that threatens its long-term stability. In recent months, the aerospace giant has grappled with mounting financial pressures due to a month-long strike by 33,000 workers, regulatory scrutiny, and production setbacks that have compounded already existing problems. To shore up its faltering finances, Boeing announced plans to raise up to $25bn through a combination of stock and debt offerings, as well as a $10bn credit agreement with major lenders.
A crippling cash crunch: Boeing’s financial woes have been years in the making. The company’s debt has skyrocketed to $53bn, a substantial leap from just $10.7bn in early 2019. This surge in debt can be traced back to the twin tragedies of the 737 Max crashes, which not only resulted in a 20-month grounding of the aircraft but also cast a long shadow over Boeing’s reputation. The fallout from these incidents has only been exacerbated by ongoing production issues and costly delays in rolling out new aircraft models like the 777X.

The production halt, brought on by the strike and continued problems with its 737 Max and freighter models, has strained cash flow significantly. Boeing’s revenue model depends heavily on aircraft deliveries, and any interruption to the production line leads to immediate cash flow issues. The strike, in particular, has compounded these challenges, with some analysts estimating that it is costing Boeing more than $1bn per month.

To stave off further financial distress, Boeing has resorted to raising capital through debt and equity offerings. The company’s decision to raise up to $25bn provides it with a much-needed financial cushion, allowing it to navigate through an uncertain landscape where it faces the dual challenge of labour unrest and a potential credit downgrade to junk bond status.
Labour strikes and mounting pressure: Boeing’s labour strike, which began on September 13, has proven to be a significant obstacle in the company’s path to recovery. The International Association of Machinists (IAM) represents the 33,000 striking workers, many of whom have taken to the streets to demand better wages and working conditions. Boeing initially proposed a 25% wage increase over four years, which was overwhelmingly rejected by the union members, who countered with demands for a more substantial increase and better pension benefits.

Negotiations between Boeing and IAM have hit a stalemate, with talks breaking down last week. Despite Boeing’s attempt to sweeten the deal with a 30% wage increase, the strike continues. For Boeing, this labour unrest has been particularly damaging, as it has brought production to a grinding halt across several key aircraft lines. The longer the strike drags on, the greater the impact on Boeing’s financial health, especially since its production delays were already a critical concern.

The Biden administration has also expressed concern over the prolonged strike, given Boeing’s status as a key player in the US economy. Acting Deputy Secretary of Labor Julie Su has intervened in an attempt to mediate between the company and union, but as of yet, no resolution has been reached. With Boeing planning to lay off 17,000 workers by mid-November, the strike is set to become even more contentious as the unions brace for what they see as corporate scapegoating.
Production woes: 737 Max and 777X delays: Boeing’s production challenges are not limited to the strike. The 737 Max, Boeing’s best-selling jet, continues to experience issues. Earlier this year, a door panel blew off a 737 Max mid-flight, prompting regulatory intervention and forcing Boeing to slow production of the jet. While no one was seriously injured in the incident, it raised serious concerns about quality control at Boeing’s factories, with investigations revealing lapses in adhering to safety protocols.

The 777X, Boeing’s long-delayed widebody aircraft, has also encountered further setbacks. Initially expected to be delivered in 2023, the 777X’s entry into service has now been pushed to 2026 due to problems discovered during test flights. For airlines counting on these aircraft to modernize their fleets, this news has been disappointing, and for Boeing, it represents yet another obstacle in regaining its position as the world’s premier aircraft manufacturer.
Boeing’s market position: Despite the tumult, Boeing retains a unique position within the global aerospace industry. Alongside European rival Airbus, Boeing is one of only two companies capable of producing full-size commercial jets. This duopoly has largely insulated Boeing from the worst-case scenario of complete financial collapse. Even as airlines cancel or defer orders due to delays, switching to Airbus is not an easy option, given that Airbus is already operating at full capacity with a backlog of orders stretching several years into the future. That said, Boeing’s shrinking market share and damaged reputation have allowed Airbus to gain ground. Boeing’s ability to recover from this crisis will depend on its ability to quickly resolve the strike and ramp up production, while also addressing the quality and safety concerns that have dogged its operations.
Investor sentiment and potential downgrade: Boeing’s precarious financial situation has not gone unnoticed by credit rating agencies. Both S&P Global and Fitch have warned that Boeing is on the brink of having its bonds downgraded to junk status. Such a downgrade would significantly increase Boeing’s borrowing costs at a time when the company is already heavily reliant on external financing. To avoid this outcome, Boeing needs to demonstrate that it can stabilise its operations and resolve the ongoing strike.

Investor sentiment remains mixed. While Boeing’s stock has seen some minor gains following announcements of its capital-raising efforts, analysts have expressed concerns about the scale of the company’s liquidity crisis. Some, like Nick Cunningham from Agency Partners, have questioned whether Boeing’s fundraising efforts are sufficient to address its long-term financial needs.
The author is an aviation analyst. X handle: @AlexInAir