Boeing has taken a massive financial hit, and this started well before the Alaska Airlines door panel issue earlier this year.
Simply put, Boeing has been hemorrhaging money for
the better part of the last five years.
How much? Try $32 billion. With government investigations, safety protocol questions, and delivery delays, one wonders how long Boeing will last.
But remember that the company maintains a bit of exclusivity. It is one of only two manufacturers in the world that build full-service commercial jets. Few companies could handle that kind of financial hit, meaning Boeing could survive for several more years just on that alone.
But the January
5 Alaska Airlines door panel incident exacerbated the financial woes.
“Given the dynamics of their place
in the industry and the industry itself, they have the luxury of time,” said
Richard Aboulafia, managing director at AeroDynamic Advisory, an aerospace and
defense industry consultant. “It’s an industry with the highest possible
barriers to entry and very strong demand for its products. But they’ve wasted a
lot of that time.”
A Good News, Bad News Situation
Boeing is in a good news and bad news situation. The company has more than 5,000 airplane orders, but it can’t fulfill them fast enough to make a profit.
“Can the current situation go on
forever? No, it can’t,” said Ron Epstein, aerospace analyst for Bank of
America. “That being said, they have some leeway. They’re not going to be in
trouble tomorrow.”
Management said it is now concerned more about safety and quality issues than profitability.
“It is important
that our people and our stakeholders understand how promising
Boeing’s future looks,” CEO Dave Calhoun said. “Demand across our portfolio
remains incredibly strong. Our people are world-class. There’s a lot of work in
front of us, but I’m proud of our team and remain fully confident in our
future.”
Still, he and several other
executives said they would step down by year’s end.
The company has a staggering $48
billion in debt right now, and may have to issue more debt this year to avoid
falling into junk bond status.
Chief Financial Officer Brian West
recently told investors that Boeing is handling its debt load.
“We’re
committed to managing the balance sheet in a prudent manner with two main
objectives,” he said then. “One, prioritize the investment grade rating; and
two, allow the factory and supply chain to stabilize for a stronger trajectory
as we exit this year.”
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