FILE PHOTO: Employees walk past a Boeing 737 Max aircraft at Boeing's 737 Max production facility in Renton, Washington, U.S. December 16, 2019. REUTERS/Lindsey Wasson

(Reuters) - S&P Global Ratings on Thursday placed Boeing Co's BA.N 'A-' credit rating on 'credit watch' with negative implications, citing a rise in costs and cash outflows at the U.S. planemaker due to a further delay in the grounded 737 MAX's recertification.

The ratings agency said its expects Boeing’s funds from operations (FFO) to debt ratio to fall below 30% in 2020, following the plane manufacturer’s announcement earlier this week that the 737 MAX will not win approval for a return service until mid-year.

“This will result in a longer period of cash outflows than we expected for 2020, as well as less debt reduction in the latter half of the year because Boeing will deliver fewer aircraft,” S&P Global Ratings said in a statement.

The agency said it could lower Boeing’s rating below ‘A-’ if FFO to debt did not rise above 30% within the next 12-24 months, or if the 737 MAX grounding permanently damages Boeing’s reputation with customers and regulators.

On Wednesday, Fitch Ratings also cut Boeing’s outlook to “negative” from “stable” and affirmed the company’s credit rating at ‘A-‘, citing regulatory risk regarding the timing of the 737 MAX’s return to service.