On Friday, Fitch Ratings, a credit rating agency, slashed Boeing’s 2024 projections, lowering its forecasts for aircraft deliveries and free cash flow. This move reflects Boeing’s ongoing challenges, including regulatory hurdles and sluggish production of its key 737 MAX jet.
The downward revision stems from two main factors. Firstly, the Civil Aviation Administration of China (CAAC) has restricted deliveries of specific Boeing models to Chinese airlines. This delay is due to the CAAC requesting additional documentation related to the aircraft’s voice recorder and battery information.
Secondly, the US Federal Aviation Administration (FAA) oversees Boeing’s manufacturing facilities closely. This increased scrutiny involves individual certification of newly produced aircraft, impacting production speed.
Fitch now predicts Boeing will deliver between 350 and 370 737 MAX planes in 2024, down from their previous estimate of around 400. Deliveries of the 787 Dreamliner are also expected to fall short, with Fitch revising its forecast to 65-70 deliveries compared to the earlier expectation of 75.
These delivery shortfalls translate to a financial strain. Fitch anticipates Boeing to experience modestly negative free cash flow in 2024, a significant shift from their previous projections of breakeven or positive cash flow. This negative cash flow indicates that Boeing will spend more than it generates, raising concerns about its financial health.
While these adjustments paint a concerning picture, Fitch isn’t anticipating any immediate credit rating downgrades for Boeing. Their current rating sits at BBB-minus, one level above “junk” status, with a negative outlook from multiple agencies. The recent struggles add to Boeing’s existing woes, which include the fallout from the 737 MAX grounding following two fatal crashes.
Despite Fitch’s decision to hold off on a downgrade, Boeing’s financial situation remains precarious. The comments from rating agencies like Fitch and Moody’s, which highlighted Boeing’s unexpected negative cash flow, underscore the seriousness of the situation.
However, there are some mitigating factors. Boeing recently issued $10 billion in debt, bolstering its liquidity and providing a buffer against immediate financial pressures. Additionally, Fitch acknowledges that Boeing aims to ramp up production of the 737 MAX to around 38 planes per month. This increase and potential inventory reduction efforts could help Boeing return to positive cash flow.
Overall, Fitch’s downgrade of Boeing’s 2024 outlook serves as a stark reminder of the company’s challenges. The road to recovery will likely be long and require Boeing to navigate a complex web of regulatory hurdles while ramping up production and ensuring the smooth delivery of aircraft. Investors and analysts will closely watch Boeing’s progress in the coming months to see if the company can meet these challenges and achieve its financial goals.
