The hits keep on coming for Boeing.
But this one is a financial
blow.
Fitch Ratings, one of the country’s foremost credit rating
agencies, has downgraded the airplane manufacturer from ‘positive’ to ‘stable.’
Now the question is, if the company woes continue will it have
to resort to junk bonds?
A junk bond is a gamble for investors. They can come with a
higher yield, but also a higher risk of default. It also can inhibit a company’s
ability to borrow money.
Fitch also sees a problem for Boeing in facing its outside
entities. The company still has numerous lawsuits to encounter from the January
5 incident in which a door panel blew off in Alaska Airlines plane. Boeing also
has to deal with government agencies such as the Department of Justice, the
National Transportation Safety Board and the Federal Aviation Administration.
“The FAA recently completed a quality control audit of Boeing’s
production processes following the January 2024 incident involving an Alaska
Airlines flight,” Fitch said. “The investigation resulted in greater
operational disruption and slower 737 MAX production than Fitch previously
anticipated during the first few months of 2024. Boeing has until late-May 2024
to develop a plan to address the various concerns and failures highlighted by
the FAA, during which time Fitch believes Boeing will continue to operate at a
slower production pace in line with early 2024 levels.”
Boeing still has a fairly strong credit rating but is nonetheless
one step away from junk bond status.
The
share price in Boeing stock is down 27 percent for the year so far.
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