Boeing’s recovery from a potential downgrade of its existing credit rating was only possible due to an October 30 issuance of $21 billion worth of bonds and stocks. Boeing raised that huge amount by selling expanded shares to nip its free cash flow (FCF) deterioration.
To achieve the uncommon $21 billion Capital infusion, the aviation company sold 112.5 million units of ordinary shares, $143 apiece. In addition, Boeing also generated $5 billion by selling depositary shares.
In 2024 alone, Boeing’s stock has plummeted by 42%, the Dow Jones Industrial Average pegs it as the second-worst financial performance. This year, the odds seem to have been stoked against the planemaker. The company is under investigation after two recent fatal crashes of its B737 MAX 9 jetliner. One of the crashes occurred in December 2023 after a mid-flight fuselage failure.
The Department of Justice and the Federal Aviation Administration are directly involved in the ongoing investigations. However, the investigations would assess Boeing’s regulatory compliance and may eventually propose safety improvements. Nonetheless, the market demand for Boeing aircrafts has not disappeared. On the contrary, the planemaker is struggling to keep up the supply chain.
ALSO READ: Boeing Halts 777X Aircraft Tests After Discovering Damage to Jet Structure
Sharp Decline in Aircraft Deliveries
There’s also the Union strike of about 33,000 Boeing workers that started in September 2024. The factory workers had a congress in mid October where they voted to kick against the planemaker’s latest contract offer. The said offer consists of a 35% raise that stretches across four consecutive years. Another looming issue is an October 11 internal memo that indicates Boeing intends to downsize by 10%.
The strike is still ongoing, disrupting the supply chain by causing Boeing production delays and resulting in a backlog of aircraft deliveries. Despite having a steady market demand, a combination of all the aforementioned challenges is affecting Boeing’s financial performance negatively and making revenue forecasts difficult.
So far, the planemaker’s scorecard for 2024 aircraft deliveries is way below its precedences. So far, Boeing has been able to deliver about 305 aircrafts this year, which is 25% short of the figures from 2023. In October alone, the company received 77 customer orders and was only able to deliver only 14. From projections, those numbers are not likely to improve in November.
Bae Se Ho, an IM Securities analyst, suggests that the throughput issue is likely to subside in 2025. The logic behind that projection is that the B737 MAX 9 investigations should be close to an end and the strike should be in check by then. Worst case scenario, the reporting team will stipulate specific upgrades or safety improvements in the B737.
Presently, Boeing is behind schedule on the production of 6,197 units of aircraft. Interestingly, that number will keep rising as more customer orders trickle in, and production drags. Naturally, new orders will join the waitlist, which may involve a nine-year wait, at an aircraft production rate of 700 units per annum. High demand is no excuse for flouting regulatory compliance in the aircraft production process.
Financial Struggles: Declining Cash Reserves and Rising Debt
Going by Boeing’s Q3 2024 report, the company’s cash reserves are leaking at a phenomenal rate. The report states that the reserves stands at $10.47 billion, 21% short of the figures from last year. Similarly, Boeing’s recovery would have to factor in its $47.2 billion net debt, $8.3 billion higher than the figure from last year.
Significant Decline in Free Cash Flow for 2024
Aerospace industry watchers and financial experts have pegged the lag in Boeing’s recovery to the strike, layoff related protests and the fuselage investigations. Another woe of the planemaker is the deteriorating free cash flow (FCF) which has accumulated to $10.2 billion.
The financial implication of Boeing’s ongoing crisis made the stocks and convertible bonds issuance of October inevitable. As it turns out, the planemaker has a $11.5 billion loan maturing in February 2026, and needed an insurance against defaulting.
ALSO READ: Boeing Machinists to Vote on New Proposal Offering 35% Raises, Potentially Ending Strike
Capital Infusion to Address Liquidity and Debt Concerns
Financial analysts who have been closely monitoring Boeing’s economic performance suggest that the $21 billion seed money came at the right time. Raising that money was a wise move by Boeing execs as it has significantly improved the company’s liquidity issues.
So, with the improved liquidity, Boeing can cut its dependence on debt to run operational costs. Similarly, the noose of debts servicing would get loosened a bit as the company would be on the path to economic recovery through the $21 billion stimulus.
2025 Revenue and Profit Forecasts Indicate Optimistic Outlook
According to IM Securities, Boeing’s recovery will be accentuated by a $85.7 billion revenue in 2025. That revenue figure would mark a 17% year-on-year increase. Similarly, the earnings per share (EPS) that has been in the reds should also go green in 2025, at $1.89. Afterall, the goal of any business is profitability in the long run.
Future Guidance to Determine Extent of Boeing’s Recovery
According to Bae, the Q4 2024 earnings call will set the tone for Boeing’s economic recovery in 2025. In addition, the analyst opines strongly that the planemaker’s deliveries will receive a boost in the coming year.
Boeing is a behemoth in the aerospace industry, and such entities don’t cave in easily. So, we expect to see the planemaker return to its aircraft production streak.