Boeing at risk of Moody's downgrade on cash flow concerns

Boeing Co., the jet maker that on Monday unveiled a sweeping leadership overhaul, may have its credit rating downgraded by Moody’s Ratings as a safety crisis weighs on the company’s production and revenue.

The ratings provider placed Boeing’s Baa2 senior unsecured rating on review for downgrade from stable, according to a statement on Tuesday, citing the potential for Boeing to fail to deliver 737 aircraft at the volumes needed to materially expand free cash flow and “retire debt in a reasonable timeframe.”

Boeing on Monday announced a management shakeup that includes Chief Executive Officer Dave Calhoun stepping down at the end of the year. Stan Deal, the embattled chief of Boeing’s commercial airplane division, is departing immediately and will be replaced by Chief Operating Officer Stephanie Pope.

The planemaker has faced growing criticism after the Jan. 5 midair blowout of a fuselage panel on an Alaska Airlines flight exposed lapses in Boeing’s manufacturing controls. The Federal Aviation Administration has capped production of the 737 Max jetliner, Boeing’s main source of revenue and a backbone of domestic flying within the U.S., until the agency is satisfied the company has adequate quality controls in place.

The blunder has strained Boeing’s finances, limiting its ability to boost production it had been counting on to achieve its pre-crisis target of generating $10 billion in cash by 2025 or 2026. Chief Financial Officer Brian West last week cautioned that the company expects a massive cash drain this quarter, an outflow of at least $4 billion.

Boeing entered 2024 with almost $16 billion in cash plus short-term investments and managed to retire $4.4 billion worth of debt through early March, according to Moody’s. Still, cash will fall “well below” $10 billion by the end of this month, according to Moody’s Senior Vice President Jonathan Root.

Fitch Ratings revised Boeing’s rating to stable from positive in mid-March, noting that Boeing’s “positive triggers” will likely be delayed by around 12 months to 2026.

(With assistance from Julie Johnsson and Siddharth Philip.)