Boeing, once a symbol of American industrial strength, is now facing an escalating financial turmoil. The company, contending with a damaging strike and years of operational and safety challenges, announced plans to borrow $10 billion from major banks. Additionally, the aerospace titan seeks to raise $25 billion by selling stock and debt on Wall Street to maintain liquidity.
The latest financial maneuver follows Boeing’s report of $33 billion in core operating losses over the last six years. These setbacks, combined with the grounding of commercial airplane production due to a month-long strike involving 33,000 members of the International Association of Machinists (IAM), have crippled the company’s production lines.
This comes as Boeing grapples with multiple operational challenges, including a series of tragic accidents involving its best-selling 737 Max.
A Long, Painful Decline: Boeing’s Escalating Debt
Boeing’s financial woes are not new, but the situation has worsened dramatically in recent years. In the last six years alone, Boeing has seen its debt balloon from $10.7 billion in March 2019 to a staggering $53 billion by mid-2024. This sharp increase in debt followed two fatal crashes involving Boeing’s 737 Max, which resulted in the deaths of 346 people and led to the plane’s global grounding for nearly two years.
The crashes, both linked to faulty safety systems and lapses in the certification process, have marred Boeing’s reputation. The company agreed to plead guilty to deceiving the Federal Aviation Administration (FAA) during the plane’s certification, a plea deal that includes up to $487 million in fines.
However, families of the crash victims argue that the penalty is not severe enough. A federal judge is currently reviewing the plea agreement to determine whether it adequately addresses the magnitude of the tragedy.
The 737 Max scandal continues to haunt Boeing as whistleblowers have testified before Congress, accusing the company of prioritizing profits over safety. These concerns were underscored earlier this year when a door plug on an Alaska Airlines 737 Max blew off during flight, revealing a critical oversight in the manufacturing process.
Investigators later found that the plane had left Boeing’s factory missing the necessary bolts to secure the door plug, raising fresh concerns about the company’s quality control practices.
Union Strike Cripples Production Amid Failed Negotiations
While Boeing was already dealing with long-term operational issues, the recent strike by the IAM has compounded the company’s problems. A tentative labor agreement that would have given union workers a 25% pay raise over four years was rejected by the rank-and-file membership, leading to a strike. Boeing’s revised offer of a 30% pay raise also failed to gain traction with union leaders, leading to an impasse in negotiations.
The work stoppage has been costly for Boeing, halting production of key aircraft, including the 737 Max, 767, and 777 freighters. Since Boeing collects the bulk of its revenue upon aircraft delivery, the production delays are expected to worsen the company’s cash flow problems.
Delays in 777X Program Add to Boeing’s Woes
In addition to the strike-related disruptions, Boeing recently announced further delays in the development of its highly anticipated 777X widebody passenger jet. Originally expected to enter service much earlier, Boeing has pushed back the plane’s delivery schedule to 2026 due to technical issues discovered during test flights.
This marks another blow to Boeing’s reputation, as the 777X was seen as a key component of the company’s future commercial aircraft portfolio.
Survival Amid Crisis: Boeing’s Market Position Provides a Lifeline
Despite Boeing’s mounting challenges, the company’s survival seems assured due to its unique market position. Boeing, alongside its European rival Airbus, holds a virtual duopoly in the production of full-size commercial jets. Both companies have extensive order backlogs stretching years into the future, making it difficult for airlines to cancel Boeing orders in favor of Airbus without enduring long delays.