Fitch affirmed its A rating of Boeing cutting the outlook to negative, the first credit warning after the grounding which was prompted by two deadly crashes.
Tuesday 23, July 2019
Fitch Ratings said that Boeing’s credit rating is at risk as the grounding of the 737 Max drags into a fifth month, reported Bloomberg.
The rating agent stated that the uncertainty around the return to service of Boeing’s best-selling jet and the growing logistical challenge of getting parked planes back in the air threaten the company’s credit.
In the longer term, the Max’s grounding presents a significant public-relations challenge that will remain a risk for Boeing’s reputation and brand into next year and beyond, added Fitch.
Additionally, Fitch said that there is also a danger that the company will have to make costlier concessions to airlines. Boeing last week unveiled a $4.9 billion after-tax charge to cover potential consideration for customers who have been forced to cancel flights.
Fitch expects that there will be a lingering operating-margin impact for several years after the 737 Max returns to service.
Boeing is rated A2 by Moody’s and an equivalent A from S&P Global Ratings, the sixth-highest investment-grade rating, both carry stable outlooks.
Last week, S&P said that Boeing’s announcement that it will be taking a $5.6 billion pretax charge to compensate for the grounding of the 737 Max would not affect the company’s credit ratings, warning that more damaging effects to Boeing’s finances or a substantial loss in market share to the 737 could warrant a downgrade.
Regulators around the world banned the plane from flying in March after the Ethiopia crash, the second in five months for the new version of the workhorse 737.