Fitch, Moody's cut Boeing's debt outlook to 'negative' on 737 MAX problems
(Adds Moody's comments; Updates shares)
By Sanjana Shivdas
July 22 (Reuters) - Fitch Ratings and Moody's lowered their
outlooks for Boeing Co to "negative" from "stable" on
Monday, citing delays in its 737 MAX jets' return to service.
The revision, which comes on the heels of Boeing's nearly $5
billion charge related to the grounding, could potentially
increase borrowing costs for the world's largest planemaker.
Both the ratings agencies, however, retained their
investment grade credit rating on Boeing debt, given the
company's liquidity, financial flexibility and dominant position
in the market. Fitch has an 'A'/'F1' rating on Boeing debt,
while Moody's has an 'A2' rating. (https://bit.ly/2M3V8tm)
Boeing is facing one of the worst crises in its history as
its fastest-selling jetliner has been grounded since March after
crashes in Ethiopia and Indonesia that killed a total of 346
Fitch said https://www.fitchratings.com/site/pr/10083377 MAX
will remain a concern for the aviation sector in 2020, and
expects a lingering impact on Boeing's operating margin for
several years after the jet returns to service.
The outlook revision was also based on the challenge of
returning parked planes to service, delivering stored
post-production aircraft and the financing needed to build up
working capital, Fitch said.
The outlook indicates the direction in which Fitch's rating
is likely to move over a year or two.
Boeing did not respond to a request for comment.
Moody's said the grounding of the company's 737 MAX aircraft
will run longer than expected, which will compound its
operational disruption, costs and the size of the investment in
"The negative outlook also contemplates the execution risk
in returning the narrow-body franchise to normalcy following the
grounding's end, which remains uncertain, and the timeframe for
repaying the debt incurred to fund the grounding and restore
confidence in the all-important MAX program, and in Boeing, more
broadly," Moody's said.
As of March 31, Boeing had total debt of $14.7 billion
according to Refinitiv data, and Fitch said it estimated that
consolidated debt for the company would rise by almost $10
billion to nearly $24 billion in 2019.
"The MAX situation also presents significant public
relations challenges, and the impact on Boeing's reputation and
brand will be a watch item for the next year or more," Fitch
Fitch in April had warned that 2019 would be stressful for
Boeing, expecting most credit metrics to deteriorate.
On Monday, it flagged the risk of higher concessions to
airlines, especially if the MAX grounding extends into the
end-of-year holiday season.
It said the MAX situation was largely a temporary issue of
timing unless substantial orders were canceled.
Shares of the planemaker closed down nearly 1% at $373.42.
(Reporting by Sanjana Shivdas and Vibhuti Sharma in Bengaluru;
Editing by Shinjini Ganguli and Anil D'Silva)
© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.