Grounded Boeing 737 MAX aircraft are seen parked in an aerial photo at Boeing Field in Seattle, Washington
Lindsey Wasson | Reuters
Boeing‘s credit ratings were downgraded on Wednesday by Moody‘s Investors Service after the company said it planned to halt production of its beleaguered 737 Max, which remains grounded after two fatal crashes.
Boeing on Monday said it would temporarily shut down production of the planes starting in January, less than a week after regulators said they weren’t done with their review. Boeing was forced to walk back its forecast that government officials would sign off on the jetliners by the end of the year.
Moody’s said the decision to halt production would raise costs for Boeing’s best-selling plane and that the prolonged grounding would increase compensation claims from airline and leasing firm companies.
The credit-rating firm downgraded Boeing a notch to A3, which is still investment grade but the latest sign that the crisis is driving up Boeing’s borrowing costs.
“The downgrades follow the extension of the grounding of the 737 Max into 2020, the announced plan to shut down this important program for some interim period and the uncertainty and elevated risk — both financial and operational — for Boeing and its broader supply chain over the ensuing period,” said Jonathan Root, Moody’s lead Boeing analyst in a release.
Moody’s did raise its outlook on Boeing to stable, from negative, because of the company’s “strong liquidity and financial flexibility” and strength in Boeing’s other businesses, which include defense and services.
“The stable outlook also reflects that Boeing’s historically aggressive financial policy will remain tempered, with no share repurchases until after a sustained recovery following the ungrounding of the Max,” Moody’s said.
Boeing has $16.4 billion in outstanding debt as of the end of the last quarter, according to FactSet.