Few companies confronting Boeing’s challenges would be able to contemplate raising more than $50 billion. But Boeing is not a normal company.
Few, if any, companies confronting the existential challenges Boeing is experiencing would be able to contemplate raising more than $50 billion of new capital. Boeing’s creditor and shareholders, however, know that it is too big and strategically important to the industry and America to be allowed to fail.
It also said it planned to cut its workforce by 10 per cent, or about 17,000 employees, over the next few months. The bulk of those contracts were entered into before the pandemic upended supply chains and sparked a massive surge in the US inflation rate that rendered them unprofitable.Boeing lost $US2.4 billion in its defence, space and security division in the September quarter. That’s unsustainable, and the pressure on the US government to help bail Boeing out by putting profit back into those contracts is obvious.
If Boeing can raise fresh equity, it might also avert the threat of a ratings downgrading that would exclude most of its $US50 billion-plus of long-term debt from investment-grade indices. Some institutions can’t hold anything other than investment-grade debt. A downgrade would restrict the company’s access to debt and add to its cost.
On Friday, Boeing said deliveries of its 777X model would be further delayed, to 2026. First deliveries of the plane, Boeing’s largest wide body aircraft, were originally scheduled to occur in 2019. Airbus has benefited from Boeing’s woes, but doesn’t have the capacity to capitalise significantly on the opportunity the problems have presented.
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