Boeing Faces $32 Billion Loss and Rising Debt

In recent years, Boeing has experienced an unprecedented financial downturn, losing a staggering $32 billion over the past five years.

by Faruk Imamovic
Boeing Faces $32 Billion Loss and Rising Debt
© Getty Images/Stephen Brashear

In recent years, Boeing has experienced an unprecedented financial downturn, losing a staggering $32 billion over the past five years. Despite such losses, the aerospace giant remains afloat, spared from bankruptcy thanks to its crucial role in a tightly held duopoly with Airbus for the manufacturing of full-size passenger jets—a sector still in high demand globally.

Boeing’s current predicament is underpinned by a combination of substantial backlogs and slowed production rates. The company has a pending order of 5,600 commercial jets, valued at $529 billion, equating to years' worth of production.

However, the pace at which these orders are being fulfilled has diminished significantly due to persistent quality control issues, leaving the company struggling to achieve profitability. "Can the current situation go on forever? No, it can’t," remarked Ron Epstein, aerospace analyst for Bank of America.

Yet, he notes that "they have some leeway. They're not going to be in trouble tomorrow."

A Quest for Stability Amidst Challenges

Boeing's recent history has been marred by safety concerns and quality issues, notably a fuselage blowout due to missing bolts this January.

Such incidents have eroded consumer confidence and sparked numerous federal investigations, further complicating the company's efforts to regain stability. Moreover, Boeing's financial woes have led to an alarming rise in debt levels—from $13 billion at the end of 2018 to $48 billion today.

This increase brings with it the risk of the company’s debt being relegated to junk bond status, a situation Moody’s Ratings suggests could become reality unless Boeing significantly improves its financial performance soon.

Amid these challenges, Boeing CEO Dave Calhoun remains optimistic. "It is important that our people and our stakeholders understand how promising Boeing’s future looks," Calhoun conveyed in a recent meeting with investors.

"Demand across our portfolio remains incredibly strong. Our people are world-class."

Strategic Advantage and the Road Ahead

Despite the hurdles, Boeing retains significant strategic advantages due to the inherent nature of the aerospace industry.

Even if customers were to shift their orders from Boeing to Airbus, the latter's backlog exceeds 8,000 jets, with production rates that could extend delivery times up to a decade. This backlog acts as a buffer, providing Boeing with a cushion as it attempts to rectify its operational and financial issues.

Furthermore, the operational costs associated with switching fleets from Boeing to Airbus can be prohibitive for airlines, involving extensive retraining for pilots and hefty investments in spare parts. This logistical and financial complexity helps secure Boeing's position, at least in the short term.

Nevertheless, the future of Boeing may hinge on its leadership decisions. With CEO Calhoun planning to retire by the end of the year, the choice of his successor could be pivotal. Richard Aboulafia, an aerospace industry expert, emphasizes, "It’s a long road back, it’s a decade-long process. But changing management is a very good first off ramp [to current problems]."