Boeing is once again at the center of financial and labor turmoil as it seeks to weather its latest crisis. The aviation giant, which has been suffering through financial difficulties and labor disputes, is reportedly developing plans to raise around $15 billion through equity offerings and convertible bonds. This substantial sum is needed to stabilize its operations, particularly as the company grapples with the repercussions of strikes, regulatory scrutiny, and diminished consumer confidence.
Sources close to the situation revealed to Reuters and other outlets on October 18, 2024, the outlines of Boeing's strategy. Plans include raising up to $10 billion from selling common shares and around $5 billion through mandatory convertible bonds. This type of hybrid bond could later convert to stock, providing flexibility for the company. Such moves are seen as steps to bolster its finances, which have been severely impacted due to labor disputes with its workers and production slowdowns.
The backdrop to this financial maneuvering is the current strike involving 33,000 factory workers, represented by the International Association of Machinists and Aerospace Workers. This is the first major labor strike at Boeing in over 16 years. The employees are fighting for larger pay increases and enhanced retirement benefits. Many workers express grievances over meager wage adjustments over the past decade, contrasting sharply with the hefty bonuses received by company executives.
Boeing’s operations have taken a hit from the strike, with assembly lines for key aircraft like the 737 Max, 767, and 777 severely affected. The company has been burning through cash rapidly, prompting it to pursue new capital straight from the market. The urgency of this move is compounded by Boeing's dire stock performance, with shares plummeting approximately 40% this year alone.
The financial outlook for Boeing remains precarious. Analysts suggest the planned capital raise might not suffice to fully address the cumulative crises the company faces. Boeing's investment-grade credit rating is also at risk, with major rating agencies warning they might downgrade if the company incurs more debt without first addressing its outstanding obligations.
To add to Boeing's woes, Spirit AeroSystems, one of its key suppliers, announced it would temporarily furlough around 700 employees due to the halted production connected to the strike. This furlough could last for three weeks, underscoring the ripple effect the labor dispute has on the entire aerospace sector. Companies like Spirit AeroSystems depend heavily on Boeing’s production schedules and any slowdown has immediate consequences across the supply chain.
Meanwhile, acting U.S. Labor Secretary Julie Su has stepped onto the scene to facilitate talks between Boeing and the union. Following her engagements this past week, both parties are reportedly participating in indirect negotiations, highlighting the federal government’s attention to the matter as the presidential election looms closer.
With this upheaval, BOEING's future remains uncertain. The company's focus on restructuring and its ability to raise the necessary funds will be closely watched by investors and stakeholders alike as it navigates through these troubled waters.
