Boeing Plans to Raise US$35 Billion to Tackle Financial Issues

Boeing has unveiled a comprehensive plan to raise up to US$35 billion to address its financial difficulties, which have been exacerbated by a prolonged labor strike and ongoing production challenges. 

The aerospace giant, facing severe cash flow issues, announced its intent to secure US$25 billion through stock and debt offerings, along with an additional US$10 billion credit facility from major financial institutions including Bank of America, Citibank, Goldman Sachs, and JPMorgan. These measures aim to stabilize its finances amidst significant disruptions caused by a strike of over 33,000 workers and production setbacks of its flagship 737 MAX jet.

The financial moves are a response to a severe liquidity crisis triggered by a series of challenges. The company has been hit hard by the mid-air panel blowout of its 737 MAX earlier this year, which led to a regulator-imposed production cap, and by the strike that has halted operations at key factories. Boeing has indicated that the new credit facility, which it has yet to draw from, is intended to provide short-term liquidity. Additionally, a shelf registration allows the company to issue stock or debt over a three-year period to further bolster its balance sheet.

"We take the vagueness and breadth of the shelf announcement and the need for temporary financing as implying that the banks are struggling to sell this issue to potential investors or lenders," according to Nick Cunningham, Analyst, Agency Partners. 

In the first month of the strike alone, the company incurred an estimated US$3 billion in costs, according to the Anderson Economic Group (AEG). The strike, led by the International Association of Machinists and Aerospace Workers (IAM), has shut down Boeing’s main production facilities in Renton and Everett, Washington, significantly impacting output of its most important models, including the 737 and military programs. 

Boeing has also been forced to cut 17,000 jobs, approximately 10% of its workforce, in an effort to further reduce costs. As of the end of 2023, the company employed nearly 171,000 people globally, with around 41,000 located outside the United States.

Boeing’s production woes are compounded by declining jet deliveries. In September, the company delivered 33 planes, down from 40 in August, falling further behind its rival, Airbus. With a backlog of orders and mounting delivery delays, the company is struggling to keep pace in a highly competitive aerospace market.

Boeing has US$11.5 billion in debt maturing by February 2026, and it has committed US$4.7 billion of its shares to acquire Spirit AeroSystems and assume its debt. 

"We are constantly evaluating our capital structure and liquidity levels to ensure we can satisfy our debt maturities over the next 18 months while keeping confidence in our credit rating as investment grade," said Brian West, Chief Financial Officer, Boeing, at a Morgan Stanley conference last month.