Cash-starved Boeing, contending with massive financial losses from a crippling strike and years of operational and safety problems, is turning to major banks and Wall Street to raise tens of billions of dollars in cash.
In a regulatory filing early Tuesday, the company announced plans to borrow $10 billion from a consortium of banks. It also separately announced plans to raise $25 billion by selling stock and debt.
The company’s debt surged in the last six years as Boeing reported core operating losses of more than $33 billion. Its commercial airplane production has ground to a near halt by a month-long strike by 33,000 members of the International Association of Machinists.
Talks between Boeing and IAM broke down last week with no new negotiations planned. On Friday, Boeing’s new CEO Kelly Ortberg announced plans to cut 10% of its worldwide staff of 171,000 workers.
Boeing’s credit rating has plunged to the lowest investment-grade level – just above “junk bond” status – and major credit rating agencies have warned Boeing is in danger of being downgraded to junk. That would raise its borrowing needs. Boeing’s long-term debt has climbed to $53 billion at the end of June from $10.7 billion at the end of March 2019, when a second fatal crash of the 737 Max led to a 20-month grounding of that plane, the company’s best-selling aircraft.
Over the last six years, Boeing has been buffeted by one problem after another, ranging from embarrassing to tragic. Two 737 Max crashes killed 346 people, a tragedy for which the company agreed to plead guilty to deceiving the Federal Aviation Administration during the certification process for the plane. A federal judge is considering whether or not to accept its plea agreement that would include up to $487 million in fines and require it to operate under the supervision of a court-appointed monitor. Attorneys for families of the crash victims argued in court that the penalty is not severe enough.
Whistleblowers have testified before Congress that Boeing’s production process put profits ahead of safety and quality, violating the company’s own rules. That was driven home in January when a door plug blew off the side of a 737 Max flown by Alaska Airlines, leaving a gaping hole in the plane shortly after takeoff. While none of the crew members or passengers were severely injured, the incident prompted numerous federal investigations, including one that found the plane had left a Boeing factory without the four bolts needed to keep the door plug in place.
The strike by the IAM is just the latest blow. Last month, the company and union leadership agreed to a tentative deal that would have given union members a 25% raise over the four-year life of the contract, only to have the rank-and-file vote nearly unanimously to reject the deal and go on strike. Boeing’s offer to increase the raises to 30% over the life of the deal was also rejected by union negotiators.
This story has been updated with additional reporting and context.
