Boeing Drops on Reports of Max Issues, Possible Fundraising

By Christopher Jasper and Tony Robinson | January 6, 2020

Boeing Co. fell following reports that the company is weighing a move to raise more debt after the grounding of the 737 Max and that the jetliner’s return to service could face further complications.

While Boeing had about $20 billion in available funds at the end of the third quarter, costs stemming from the Max crisis are increasing, the Wall Street Journal reported Monday. That has prompted the company to consider raising additional debt, the paper said, citing unidentified people familiar with the matter.

Boeing is halting output of the Max, which has yet to gain approval to resume service after two fatal crashes prompted a global flight ban in March. While the production hiatus has reduced some costs, it also means a longer wait for payments for finished planes. The Chicago-based company also faces compensation claims from airlines disrupted by the grounding, as well as from families of the crash victims.

The shares dropped 1% to $329.44 at 9:41 a.m. in New York amid a broad slump on tensions in the Mideast. Through Friday, Boeing had tumbled 21% since the second of the crashes, which killed a total of 346 people.

Boeing Chief Executive Officer Dennis Muilenburg was ousted last month and will be replaced next week by David Calhoun, a board member who took over as chairman in October.

Analysts expect Boeing to raise as much as $5 billion in extra debt to help cover spending that may exceed $15 billion in the first half, the Journal said. Funds would help maintain Max production facilities and finished planes, as well as close the $4 billion purchase of an 80% stake in the airliner business of Embraer SA.

Weighing Simulators

Meanwhile, U.S. regulators are considering requiring pilots to complete simulator training before they can operate the Max again, the Wall Journal reported Sunday. The story cited government and industry officials familiar with the matter.

The Federal Aviation Administration originally rejected the idea since it would cause extra costs and delays for airlines, the Journal said. But in recent weeks officials said there has been increased interest among agency and industry safety experts in requiring such training.

The FAA’s formal decision isn’t expected until at least February, and the situation remains “fluid,” according to the paper. An agency spokeswoman declined to comment on specifics, saying more analysis and testing is required. A spokesman for the company told the Journal that Boeing is “evaluating all aspects of a safe return to service including pilot training, procedures and checklists.”

The New York Times reported on Sunday that Boeing was uncovering potential new problems with the plane that go beyond the initial software malfunctions that played a role in those crashes.

One of those issues is whether two bundles of wires are too close to each other, raising the risk of a short-circuit that could affect control of the plane’s tail.

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