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Boeing 737’s Return to China Prompts Planemaker to Raise Funds

Logjams have hurt Boeing’s cash flow while debt has soared, raising fears among investors of a potential credit rating downgrade for America’s largest exporter


Aircraft, including Boeing 737, at airport
The pandemic and the grounding of its best-selling model after fatal crashes have drained its cash and saddled Boeing with debt.. Photo: Reuters

 

Boeing said the imminent resumption of 737 MAX airliner services in China – as well as delivering a backlog of its 787 Dreamliner jets – has prompted the planemaker to consider raising fresh equity.

The logjams have hurt Boeing’s cash flow while debt has soared, raising fears among investors and analysts of a potential credit rating downgrade for America’s largest exporter.

West said Boeing did not need to tap credit lines or raise equity immediately, but “all options are on the table” such as an equity raise in the longer term as deliveries and production bounce back.

Resuming deliveries of 787 Dreamliner jets and clearing inventories of its 737 Max are vital for Boeing’s ability to emerge from overlapping crises.

The pandemic and the grounding of its best-selling model after fatal crashes have drained its cash and saddled Boeing with debt.

 

Tit-for-Tat Tariff War

China, one of the top aviation markets in the world, has been a holdout in clearing the 737 MAX to return to commercial service. Boeing sold a quarter of its jets to Chinese carriers before the grounding and the years-long tit-for-tat tariff war.

Boeing chief financial officer Brian West said China was close to clearing the 737 MAX to return to service, but progress with regulators and customers was delayed by stringent Covid-19 protocols.

On Thursday, China would “strictly limit” unnecessary travel outside the country by Chinese citizens as part of its COVID-19 response, the National Immigration Administration said, putting another obstacle in front of mass travel.

“We still want to make sure we’re very sensitive to that part of the world,” West said of China. But when Boeing raises production, “it will be a function of our confidence in our supply chain, not the demand signals”.

Boeing shares were fell 4.8% on Thursday after they popped up 4% shortly after West made optimistic comments.

 

 

 

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

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