Moody’s places Boeing ratings on review for possible downgrade

Moody’s Investors Service on Tuesday said it was considering downgrading Boeing’s “Baa2” senior unsecured rating and “Prime-2” short-term rating.

“Placing the ratings on review for downgrade follows Moody’s belief that Boeing will be unable to deliver 737 narrow-body aircraft at the volumes required for it to materially expand its free cash flow and retire debt in a reasonable timeframe,” the agency said.

The Baa2-backed long-term revenue bond and VMIG 2-backed short-term revenue bond, issued by the Miami-Dade County Industrial Development Authority, were also placed on review for downgrade.

The US planemaker has been wrestling with a growing crisis following a January mid-air panel blowout on a 737 MAX planethat resulted in a shakeup among its top management on Monday.

Boeing referred to a comment last week from CFO Brian West who said, “The path to stable financials is a stable factory and that’s what we’re focused on right now.”

Boeing CEO to step down

The review comes just days after CEO Dave Calhoun announced that he would be stepping down from his post at the end of the year. Calhoun’s announcement follows the planemaker’s sprawling safety crisis exacerbated by a January mid-air panel blowout on a 737 MAX plane.

The January incident was the most recent in a series of safety crises that have shaken the industry’s confidence in the planemaker and hampered its ability to increase production. Calhoun, 66, was brought in as CEO following a pair of crashes in 2018 and 2019 that killed nearly 350 people.

Boeing shares have lost roughly a quarter of their value since the incident. They were up 1.4 per cent Monday, off highs hit earlier in the day.

“They need more than just a shakeup at the CEO and the chairman of the board level… they’re just paralysed from making decisions,” said Robert Pavlik, senior portfolio manager at Dakota Wealth. “It’s going to take a little bit more time for Boeing to get it straightened out.”

The company in the midst of federal investigations and US authorities curbed production while Boeing attempts to fix safety and quality problems.

The company is in talks to buy former subsidiary Spirit AeroSystems to try to get more control over its supply chain.

Read: Emirates’ Sir Tim Clark urges Boeing to prioritise safety in CEO search – FT