Hit by the pandemic, Boeing In March, it was humiliated as a symbol of US power and went to the markets to seek funds to finance its operational weakeningBut he had no luck.
While it raised US$25.000 billion, that step showed that it faces a new era in its 103-year history: Boeing is no longer the infallible behemoth that dominated the aeronautical market for decades.
Boeing accumulates cancellations of purchase orders for its flagship product, the 737 MAX, which have been grounded around the world for more than a year following two accidents that killed 346 people and revelations that weakened the company's image. And appetite for the 787, its latest revolutionary aircraft, has waned considerably.
Boeing, which contributes 1% of the GDP of the world's largest economy, now has its future overshadowed by the global health crisis that has decimated air transport and also by relentless competition from its European rival Airbus.
"Boeing is facing serious financial challenges," said Stan Sorscher, a former Boeing engineer. "Air traffic has plummeted, planes are grounded, airline customers don't need new planes and the capacity of suppliers in its supply chain is in question," he added.
Scott Hamilton, an expert at the analyst firm Leeham, went further: "Boeing's big challenge is to survive."
And the group's CEO, David Calhoun, admits that ground has been lost.
"There's no doubt that the MAX problems, the accidents, have sunk us and set us back almost two years," he said on Fox Business Network on May 8.
Rebuild
While it retains huge political clout - its weapons programmes were successful when the civilian division collapsed - Boeing must rebuild its reputation, battered by harsh revelations about its corporate culture, which created problems during the development of the 737 MAX.
Faced with such a crisis and weaknesses, financial rating agencies, which judge a debtor's ability to honor its credits, lowered Boeing's rating to just one step above that of risky investment.
For a long time, Boeing was considered a bankruptcy-proof company. It claims to have 17.000 suppliers in the United States, 2,5 million jobs and is one of the largest suppliers to the Pentagon.
Early in the crisis, Boeing sought $60.000 billion in federal aid and won strong support in Washington, including from President Donald Trump himself, who said in April: “We cannot let anything happen to Boeing.”
However, to help the bank, the government was considering demanding strict compensation to prevent public funds from being used to pay dividends or executive salaries.
Boeing received assistance from the Federal Reserve that injected liquidity into the debt market and opened the door for it to raise $25.000 billion.
Boeing was forced to make concessions, including paying higher interest to its creditors if rating agencies continue to downgrade its rating.
When will the 737 MAX be available?
The group is now “financially sound,” said a banking source who advised Boeing, whose debt exceeds $60.000 billion. Another source noted that “investors are hopeful that the company will reorient itself and move forward.”
The road ahead looks tortuous because the global health crisis generated by Covid-19 has practically destroyed the market for large aircraft, which was already in trouble.
Boeing will not produce more than 10 787 aircraft per month until 2021, compared to 14 at the beginning of this year, and in 2022 the production will be reduced to 7 units per month.
Airbus has increased its lead in the single-aisle aircraft sector. That adjusts to the effects of the pandemic as airlines plan to shift to those types of aircraft that are easier to fill and consume less fuel.
“Over the long term, Boeing’s product line is inferior to Airbus’. The 787 is strong but demand is weak. The 777X is a good aircraft but no longer has a market, the MAX family is inferior to the A320neo programme. Boeing does not have an aircraft that competes with Airbus’ A220,” says Scott Hamilton.
Such uncertainties are weighing on the delivery date of the 737 MAX. In March and April, Boeing received 258 cancellations of purchase orders for these aircraft.
Boeing insists that deliveries will resume "in mid-2020" but sources in the aviation regulatory system told AFP that test flights of these aircraft are not scheduled before June.
Boeing, meanwhile, has cut its workforce by 10 percent, eliminating 16.000 jobs, and may eliminate two 787 assembly lines and move engineering centers to less expensive states, according to aviation sources.
Source: AFP
Aduana News is the first Argentine customs newspaper to launch its digital version. With 20 years of experience, its publications and initiatives aim to provide the most relevant knowledge on customs issues in order to contribute to safe trade in the region.
