Boeing's Outlook Darkens, Fitch Joins S&P and Moody's

Key Takeaway

• Fitch Ratings downgraded Boeing's outlook to negative, following S&P and Moody’s, amid cash burn of $3.9 billion in Q1.
• Boeing faces "heightened execution risks" and may issue new debt to mitigate early 2025 cash-flow challenges.
• Stability possible if Boeing delivers over 100 of its 737 Max and half of its 787 Dreamliners from inventory by early next year.

Boeing's Credit Outlook Dims

Fitch Ratings, following the steps of S&P Global Ratings and Moody’s Ratings, has downgraded Boeing Co.'s outlook to negative from stable, marking a unanimous pessimistic view among major credit graders. This decision comes in the wake of Boeing's first-quarter financial results, which revealed a significant cash burn of $3.9 billion due to slowed 737 Max production. The aerospace giant also anticipates another "sizable" cash usage in the current quarter, further straining its financial health.

Government Support on the Horizon?

The discussion around potential government intervention for Boeing has gained traction, especially considering the company's strategic importance to the U.S. economy. Former US Treasury official Brad Setser has suggested that, akin to the support seen in sectors like semiconductors and clean energy, Boeing might warrant federal financing to navigate its current crisis. This suggestion comes as Boeing's cash reserves dwindle to $7.5 billion after a substantial free cash flow burn, compounded by Moody's downgrading its credit rating to Baa3, the lowest investment-grade level.

Production Challenges and Industry Ripple Effects

Boeing's operational hurdles, particularly with its 737 Max and 787 Dreamliner models, have led to a slowdown in aircraft deliveries. This has not only impacted Boeing's financials but also affected airlines' growth plans and operational strategies. The Federal Aviation Administration (FAA) has capped 737 Max production at 38 planes a month, further delaying deliveries. These production issues have forced airlines to adjust their capacity, potentially leading to fare increases as demand for air travel remains strong.

Street Views

• Fitch Ratings (Bearish on Boeing Co.):

  "The negative outlook reflects heightened execution risks at Boeing the next year or two as it normalizes production, navigates seasonal cash-flow swings and repays debt, among other issues."

Management Quotes

• Brian West, CFO of Boeing:

  "He intends to protect the company’s investment-grade rating, and that the company still has access to $10 billion in untapped credit lines... monitoring its access to cash and believes it still has significant market access if it needs to supplement liquidity."