Boeing, facing financial strain due to a strike and years of operational and safety issues, is seeking to raise tens of billions of dollars in cash by borrowing from major banks and selling stock and debt. The company plans to borrow $10 billion from a consortium of banks and raise an additional $25 billion through stock and debt sales. Boeing’s debt has increased significantly over the last six years, with core operating losses exceeding $33 billion. The month-long strike by 33,000 members of the International Association of Machinists has further impacted production.
Despite its financial struggles, Boeing’s unique market position as one of the few companies that produce full-size jets for the global airline industry ensures its survival. Along with European rival Airbus, Boeing dominates the market for these essential aircraft, with backlogs of orders stretching for years into the future. Airbus does not have the capacity to take on Boeing’s orders, and another competitor would face significant challenges in entering the market. While Boeing has lost market share to Airbus in recent years, its position in the industry remains strong.
Boeing has faced a series of challenges in recent years, including two 737 Max crashes that resulted in the deaths of 346 people. The company faced scrutiny for allegedly deceiving the Federal Aviation Administration during the certification process for the plane and is facing fines and monitoring as part of a plea agreement. Whistleblowers have also raised concerns about safety and production practices at Boeing, highlighting instances where safety was compromised for the sake of profit. These issues have further damaged the company’s reputation and financial stability.
The strike by the International Association of Machinists is the latest setback for Boeing, resulting in a halt in production of key aircraft models. The company and the union leadership initially reached a tentative agreement that was rejected by union members, leading to the strike. Boeing’s offer to increase raises for union members was also rejected, prolonging the strike and impacting production further. Additionally, delays in the delivery of the 777X due to testing issues will add to Boeing’s cash flow problems in the near-term.
Despite its challenges, Boeing’s ability to raise money from banks and sell stock and debt on Wall Street is expected to be successful due to its market position and the essential nature of its products. While the company is facing significant financial losses and debt, its role as one of the primary suppliers of full-size jets to the airline industry ensures its continued relevance. The company’s long-term survival is aided by the lack of viable competitors in the market and the lengthy process required for new entrants to gain approval for their aircraft. Overall, Boeing’s future remains uncertain, but its position in the industry gives it a measure of stability despite ongoing financial difficulties.
