The company needs the funds to deal with high costs associated with the 737 Max crashes.
CNBC reported that Boeing has been shopping around for loans to the tune of $10 billion or more. The company needs this money to deal with the rising costs associated with the 737 Max crashes last year.
Boeing has reportedly secured $6 billion in loans and is looking for additional banks to supplement the rest. Boeing declined to comment on the story, but the information supposedly comes from a source very close to the matter.
The backstory on the 737 crashes
Boeing continues to deal with the fallout of the fatal 737 Max crashes. The first crash happened in October 2018 in Indonesia and the second happened in Ethiopia in March.
In total, 346 people died as a result of the crashes. The 737 has been grounded ever since and the company has faced numerous hurdles with getting the airliner back in the air.
Most recently, Boeing acknowledged a software issue with the 737 Max. During a test flight, the flight computers were not communicating with each other at takeoff. The company is unsure how long it will take to resolve the software issue.
This prompted Moody’s Investor Service to review the company’s credit rating. Analyst Jonathan Root said that recent developments with the 737 Max indicate that the company’s recovery will be more costly than originally expected.
The grounding of the 737 Max hasn’t just been costly for Boeing; it also cost the airlines more than $1 billion in lost revenue. Last July, the company was forced to take a $5.6 billion pre-tax charge to compensate its customers.
Final thoughts
Citigroup, Bank of America, JP Morgan, and Wells Fargo have already agreed to contribute to the loan. But even after the loan is finalized, Boeing still faces a long road ahead. Not only does the company have to prove that the 737 Max is safe again, but it also has to find a way to re-establish trust with its customers.
Investors will be watching closely to see what happens with the 737 Max in 2020. The past year has been full of ups and downs for Boeing and the stock is currently down more than 9% from a year earlier.
