Boeing To Seek $10+ Billion In Loans To Help Cushion 737 MAX Crisis

Boeing is in discussions with banks regarding a loan of at least $10 billion. Reuters reports that is to help the planemaker cope with the mounting costs it has faced due to the grounding of its 737 MAX aircraft.

Boeing, 737 MAX, Court Case
While the 737 MAX continues to rest in storage, the costs continue to rise for Boeing. Photo: Getty Images

Large sums

The news of this loan follows the reports that the Federal Aviation Administration may delay the aircraft’s safety approval till after March. This is a blow for the company as it means that its aircraft will continue to be inactive for a longer time, which in turn will increase its costs.

Boeing already raised the amount it has earmarked in compensation money to airlines. An amount of $4.9 billion was initially claimed to be set aside last summer but now reports are stating that this has now increased to $6.1 billion.

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Southwest 737 MAX Parked
Southwest is one of the 737 MAX’s largest customers. Photo: Getty Images

Covering all angles

The firm has already reached compensation deals with several carriers. However, many are still seeking greater payouts. This is due to how much the grounding is having a cumulative effect on their operations.

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Many carriers have struggled to cope with covering their operations with other aircraft and have had to spend money on alternative solutions. With the aircraft’s reintroduction continuing to be delayed, these airlines are also piling up their costs along with Boeing.

Additionally, it could take months for airlines to implement their own checks, maintenance and training procedures after the plane is cleared by authorities. Therefore, they are likely to request even more compensation than before.

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Turkish Airlines Boeing
Turkish Airlines is one of the airlines to reach a compensation deal with Boeing over the 737 MAX grounding. Photo: Getty Images

Wider issues

Furthermore, Boeing has to cover the fees that come with the 737 MAX saga. The FAA has recently proposed a $5.4 million fine for the company. This is reportedly due to the installation of nonconforming slat tracks on over 175 of the planes.

Boeing did not shed any further light on the loan situation with Reuters. However, it did comment about the suspension of its 737 MAX production in its facility in Renton, Washington.

“MAX production has now been temporarily suspended inside the 737 factory. The Renton site remains open as our teams focus their work on several quality initiatives,” the manufacturer shared, as reported by Reuters.

It’s approaching a year since the aircraft type was grounded following two fatal incidents. Altogether, the safety of passengers on future operations is the most important factor at stake. Therefore, it’s important that the reintroduction is not rushed, even if it means more costs for Boeing.

Simple Flying reached out to Boeing for further comment on the reports of it planning to receive a $10 billion loan. However, a spokesperson informed us that it is not something that it would comment on.

What are your thoughts on these reports regarding Boeing seeking loans to cover the 737 MAX damages? Let us know what you think of the situation the comment section.

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martyn

They should stop paying out dividends if they are needing such a large amount. It is being rumoured that they expect the 737 Max to be grounded till at least June.

Norm

The US government should obtain a detailed list of all those “Rich” BOEING Bloodsuckers, who have been comfortably receiving their timely Bonuses and Dividend Checks, and ask them to Reimburse Boeing all those undo received funds for their Ignorance in running the B737 MAX program. They are now getting away with Murder!

Frank

Forget about dividends – since 2013 Boeing has spent $43 BILLION on share buybacks, to boost stock price. That money should have gone back into the company for newer jets. Now they gotta beg for $10 billion…

After Blowing $43 Bn on Share-Buybacks in 6 Years, Boeing Scrambles to Borrow $10 Bn, on Top of a $9.5 Bn Credit Line in Oct, to Fund its 737 MAX Fiasco

https://wolfstreet.com/2020/01/20/after-blowing-43-bn-on-share-buybacks-in-6-years-boeing-scrambles-to-borrow-10-bn-on-top-of-the-9-5-bn-credit-line-it-got-in-oct-to-fund-the-surging-costs-of-its-737-max-fiasco/

Putting a priority on financial engineering over actual engineering can get very expensive.

JFP

Boeing should be seeking these loans from institutions in Brazil or India. Perhaps both. Send the U.S. government a message…