Boeing Co. is looking to raise up to approximately $19 billion through a stock offering as the aerospace giant grapples with liquidity issues exacerbated by a contentious worker strike and ongoing safety concerns. The company announced on Monday that it plans to offer 90 million shares of common stock and $5 billion in depositary shares.
The move comes at a critical time for Boeing, which reported a third-quarter loss of more than $6 billion last week-the second-worst quarterly performance in its history. The strike, now entering its seventh week, has halted production of the company's bestselling jetliners, depriving Boeing of much-needed cash flow from aircraft deliveries.
"We plan to use the net proceeds for general corporate purposes, which may include repaying debt, additions to working capital, capital expenditures, and funding investments in our subsidiaries," said Cesar Pina, Boeing's Chief Financial Officer, in a statement. The company's stock closed at $155.01 on Friday but slipped nearly 2% in pre-market trading following the announcement.
The labor standoff intensified after Boeing factory workers voted to reject the company's latest contract offer, opting to continue the strike that began on September 13. According to local union leaders in Seattle, 64% of members of the International Association of Machinists and Aerospace Workers (IAM) who cast ballots voted against accepting the proposal.
"The workers have spoken, and they are demanding a fair contract that addresses years of lagging pay and the restoration of a defined-benefit pension plan," said Robert Martinez Jr., IAM International President. The union represents approximately 33,000 Boeing employees.
The strike adds to a series of challenges for Boeing, which has not posted a profitable year since 2018. The company became the focus of multiple federal investigations after a door panel blew off a 737 Max plane during an Alaska Airlines flight in January, raising fresh concerns about its safety culture. Additionally, issues with Boeing's Starliner spacecraft have dealt a blow to its space division after the vehicle had to return to Earth without completing its mission to the International Space Station.
"Boeing is facing a perfect storm of financial pressures," said Richard Aboulafia, an aerospace analyst at Teal Group. "Between the prolonged strike, the 737 Max safety issues, and setbacks in its space endeavors, the company needs to shore up its balance sheet urgently."
Boeing's debt load stands at a staggering $58 billion, and the company burned through nearly $2 billion in cash during the third quarter alone. Chief Financial Officer Cesar Pina indicated that positive cash flow is not expected until the second half of next year.
The stock offering is being managed by major financial institutions, including Goldman Sachs, Bank of America, Citigroup, and JPMorgan Chase. The infusion of capital is intended to provide Boeing with a financial cushion as it navigates these turbulent times.
"Raising capital in the current market environment is a prudent step," said John Schmidt, an analyst at Capital Investments. "However, investors will be closely watching how Boeing addresses its operational challenges and labor disputes."
Adding to Boeing's woes, the company announced plans last month to cut 17,000 jobs in an effort to reduce costs. CEO David Calhoun acknowledged the difficulties ahead during an earnings call last week. "We are taking decisive actions to manage our liquidity and enhance long-term stability," Calhoun said. "Our focus remains on resolving the strike, meeting our commitments to customers, and restoring confidence in our products."
The strike has not only impacted Boeing's finances but also strained relationships with suppliers and airlines awaiting aircraft deliveries. "Delays in production have a ripple effect throughout the entire aerospace industry," noted Sara Nelson, President of the Association of Flight Attendants-CWA. "It's imperative for Boeing to reach an agreement with its workers to minimize further disruptions."
Boeing's challenges have allowed its European rival Airbus SE to gain market share, especially after the two fatal crashes of the 737 Max in 2018 and 2019 led to a worldwide grounding of the aircraft. The incidents were attributed to design flaws, significantly tarnishing Boeing's reputation.
"The competitive gap between Boeing and Airbus is widening," said Michael Goldberg, an aviation consultant. "Boeing needs to resolve internal issues swiftly to prevent long-term damage to its market position."
As Boeing moves forward with its capital-raising efforts, the company faces scrutiny from investors, regulators, and industry stakeholders. The successful resolution of the strike and a return to profitable operations remain critical for the aerospace giant's future.
"We recognize the challenges ahead, but we are confident in our ability to navigate through this period," CFO Cesar Pina stated. "Our commitment to safety, quality, and transparency will guide us as we work to rebuild trust and deliver value to our shareholders."
