Ritika Janiya
Boeing, the world’s biggest airplane manufacturer, is facing some of its toughest days. The stiffest challenge it currently faces starts from the massive strikes held by its workers to the issues meant for safety inside its airplanes. As if that was not enough, Boeing has taken a decision to raise a staggering sum of $25 billion to float and keep running its business. They will achieve this through the issuance of stocks and debt to investors. That way, they are requesting people to invest shares in the company or to lend them money, which they will refund later after making some interest out of it. But that is not all; they have also obtained a credit deal of $10 billion with some banks to have extra cash coming through.
The Bad Year for Boeing
For Boeing, 2024 has really been a rough year, mainly with the biggest issue it faces from strike action by 33,000 of its employees. The strike action began about a month ago, and this will cost the company more than $1 billion. These workers are very important to Boeing’s production, so it’s really hard to make planes when they are on strike.
The workers were unimpressed by Boeing’s offer of a 30% pay raise over four years. The representatives of the unions representing the workers did not negotiate with Boeing, so Boeing withdrew its offer and announced it would be cutting 17,000 jobs globally, or about 10 percent of the company’s total employees, in an attempt to save money.
This isn’t the first challenge Boeing faces this year:. Last month, one of its aircraft, a 737 Max 9, had part of a door panel fall off while flying in mid-air shortly after takeoff from Portland, Oregon. That safety issue led to the Federal Aviation Administration imposing restrictions on how many Max jets Boeing can produce. Adding to this, in July, Boeing had to plead guilty to a criminal fraud charge related to the crashes of two 737 Max jets in 2018 and 2019 that killed 346 people. As part of the settlement, Boeing agreed to pay almost $250 million in fines.
Boeing’s Plan to Raise $25 Billion
With all these problems stacking up, Boeing needs money—and fast. So, they are going to raise up to $25 billion to solve their financial troubles. How do they do it? By selling debt to investors in the form of stocks, of course. That’s it, in a nutshell: they are basically asking people to buy a piece of the company or lend them money that they’ll pay back later with interest. This would, in turn, give Boeing the financial elbow room through this challenging phase and allows it to continue running its business for the next three years.
In addition, Boeing established a $10 billion credit agreement with a bank group that includes some heavy hitters such as Citibank and Goldman Sachs. The credit agreement is sort of a fall-back safety net-it provides Boeing with immediate access to funds, but they haven’t drawn on it yet.
Job Losses and Labor Walkouts
One of the major reasons Boeing needs this amount of money is that the strikes by the workers are dealing much with the production schedules. It has been calculated that Boeing has already lost more than $1 billion because of these strikes. The company, Boeing, also offered the workers a 30% raise over four years which would have ensured increased productivity for sometime but the employees were not convinced by this offer. When the bargains between the company and the unions failed, Boeing withdrew its offer. Instead of promotions, they devised a plan to downsize by 17,000 jobs, or roughly 10% of their people. That is a lot of jobs that will save Boeing money, but it is also an awful way of the times for this company.
Safety Concerns and Lawsuits
Boeing has some issues also on the safety side. One of the aircraft they produced lost a panel for a door during flight earlier this year. Fortunately, no one lost their life; it brought up many questions with regard to safety measures in Boeing aircraft. The FAA moved swiftly and placed a cap on the number of Max jets Boeing could manufacture. That is not the first time that the company is encountering problems related to safety. In 2018 and 2019, two Boeing 737 Max jets crashed; hundreds of people lost their lives. Boeing came clean to the fraudulent charges concerning the crashes and was forced to pay an enormous sum of $250 million in terms of fines.
What the Future Holds for Boeing
The future as to how much Boeing can raise from the offering is unknown, but they are expected to have enough cash at hand by the end of the year. Boeing also has a lot of debt that it needs to deal with. The company has $11.5 billion worth of debt that comes due by February 2026. Moreover, Boeing stands ready to spend $4.7 billion to buy Spirit AeroSystems, a supplier of parts it sold off 20 years ago. Boeing hopes to mitigate safety concerns on its production lines by buying Spirit AeroSystems back.
Meanwhile, Boeing is doing all its best in keeping the book running with no negative crunches. According to Boeing, siphoning this money will give them the room they need in running their finances over the next three years. The $10 billion credit agreement that they have signed with banks represents another step towards this plan; they ensure that they stay liquid and ready to be disbursed in case they need quick cash.
Boeing Battle to Stay Afloat
Boeing is now in a pretty tough position, and the company has to struggle to regain itself. The strikes, the job cuts, the safety concerns, and billions of debt made Boeing take drastic measures to save its future. Their $25 billion plan is such an aggressive measure, but they might need it to sail through this turmoil. Whether it will be sufficient to solve all its problems remains to be seen, but for now, Boeing is fighting to turn the corner in these bad times.
