April 15, 2024

Boeing airplane

Photo: Benoit Tessier (Reuters)

After a turbulent few months at Boeing, the aircraft manufacturer is hitting another bump: Moody’s Ratings has put two of Boeing’s ratings on review for downgrade.

The financial firm’s ratings division disclosed on Tuesday that it’s weighing a potential downgrade for Boeing’s Baa2 senior unsecured rating and Prime-2 short-term rating, primarily because of concerns that Boeing will be unable to deliver enough 737 aircraft to increase its cash flow and reduce its debt within a “reasonable timeframe.”

The Chicago-based aerospace firm has struggled to regain its footing after a difficult start to the year, beginning with the fateful blowout of a door plug on an Alaska Airlines flight in early January. Increased scrutiny of its safety practices by regulators and uncovered a litany of quality control concerns. And after months of misfortunes, Boeing CEO David Calhoun announced Monday that he’ll be stepping down from the company by the end of 2024, accompanied by several other senior leaders.

In a letter to staff Monday, Calhoun called the door plug incident a “watershed” moment for the company.

Moody’s noted that the “aftereffects of the door plug ejection” on the Alaska Airlines flight, “and investments in components and parts inventory” for Boeing’s 737 aircraft will result in $4.5 billion in negative cash flow during the first quarter. The ratings agency is projecting that the company will have just $1 billion in free cash flow for 2024.

The agency also cast doubt on whether the aerospace giant will reach delivery goals, noting that to achieve 400 deliveries this year, Boeing will have to average 36 deliveries over the next 10 months of 2024. It believes that it “will be difficult” for Boeing to achieve this delivery rate given the company’s current conditions.

Despite the turmoil, Calhoun remarked Monday that Boeing will continue to move forward with its potential acquisition of Spirit AeroSystems, which supplies the fuselage for its 737 Max 9 planes. Moody’s said it will weigh the possible benefits of the deal when making its ratings decision.

Moody’s announcement comes less than two weeks after Fitch Ratings downgraded its outlook on the airplane maker’s credit to “stable” from “positive.”

Boeing’s shares were down 2.3% on Tuesday afternoon, hovering at around $187 per share.

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