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June 1, 2024

Fitch Lowers Boeing’s 2024 Aircraft Delivery and Cash Flow Forecasts Amid Challenges

Fitch Ratings has revised its 2024 forecasts for Boeing, reducing expectations for aircraft deliveries and free cash flow. This adjustment comes as Boeing navigates investigations and a downturn in the production of its top-selling jet models.

The Civil Aviation Administration of China’s (CAAC) decision to restrict deliveries of certain aircraft models to Chinese customers significantly impacted the delivery forecasts. CAAC has requested additional documentation regarding voice recorder and battery information before accepting further deliveries. Additionally, the U.S. Federal Aviation Administration (FAA) has maintained oversight within Boeing’s factories, requiring individual certification for newly produced aircraft, further complicating Boeing’s production and delivery schedules.

Boeing holds a BBB-minus rating, just one notch above “junk” status, with a negative credit outlook from several rating agencies. This precarious position is exacerbated by inconsistent production rates of the 737 MAX, which slipped to single digits at times during the spring. Earlier this month, Boeing announced that it would burn cash rather than generate free cash flow in the near term.

Jonathan Root, senior vice president at Moody’s Ratings, remarked on Boeing’s unexpected negative free cash flow announcement. He noted, “This is another example of ongoing negative surprises from Boeing as it rehabilitates its commercial airplanes business.”

Despite these setbacks, Boeing’s liquidity position received a boost from a $10 billion debt issue in May, which currently mitigates “potential ratings pressure,” according to Root. Nick Varone, a senior director at Fitch, confirmed that the agency had already factored in the possibility of Boeing burning cash in 2024 into its negative outlook. He emphasized that a return to a stable outlook would depend on the production rate of the 737 MAX returning to around 38 units per month or a reduction in inventory levels.

Fitch now forecasts between 350 to 370 deliveries of the 737 MAX and about 65-70 deliveries of the 787 Dreamliner in 2024. These figures are lower than previous expectations of approximately 400 and 75, respectively.

The revised forecasts underscore the challenges Boeing faces in stabilizing its production and delivery processes amidst regulatory scrutiny and market pressures. The company’s ability to navigate these challenges will be crucial in determining its financial stability and credit rating in the coming years.

Read more Business related news on R9 News
Jhumpa Lahiri

Jhumpa Lahiri

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