Boeing Faces Financial Pressures After Grounding Of 737 Max

If Boeing were a normal company, it could be facing questions about bankruptcy after losing billions of dollars over the grounding of the 737 Max. But is it too big to fail?

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Tomorrow, Boeing reports how much it earned during the last three months of 2019. The company has been losing money since its biggest selling plane, the 737 MAX, was grounded. And it's had to borrow billions of dollars from major banks. NPR's Jim Zarroli reports on the financial pressures facing the company.

JIM ZARROLI, BYLINE: Over the past year, trying to predict when the 737 MAX would fly again has been an exercise in futility. Sheila Kahyaoglu is an analyst at Jefferies and Company.

SHEILA KAHYAOGLU: I don't think anybody assumed this would take over a year.

ZARROLI: The plane was grounded last March following two crashes that killed a total of 346 people. Boeing first said it expected to have the plane back in the sky by the end of last year. That proved way too optimistic.

KAHYAOGLU: It's turned out to be not a very valuable exercise guessing back when this aircraft will return to service.

ZARROLI: Tomorrow, the company will report how the grounding affected its bottom line last year. The 737 MAX provides 40% of Boeing's earnings. The company has bet its future on the plane. And now Boeing has stopped making it with no timetable for when it gets back in the air. Meanwhile, the 737 MAX continues to cost Boeing billions. Chris DeNicolo is an analyst at S&P Global. He says the company needs to restart production as soon as regulators allow the plane to fly. So Boeing can't afford to lay workers off.

CHRIS DENICOLO: Some people, if they think this is going to go on for a while, could just leave and go to other jobs. You know, it's a very tight labor market and, you know, these are generally, you know, skilled technicians and mechanics and people like that where it would probably pretty easy for them to find a new job.

ZARROLI: At the same time, Boeing needs to make sure its suppliers stay in business. And it has to help airlines that are cutting flights because the planes are grounded.

DENICOLO: They need to compensate the airlines for the deliveries that they haven't made in the past 10 months.

ZARROLI: All this costs huge amounts of money and raises disturbing questions about Boeing's future. Boeing said last October that the grounding had already cost it $9 billion. Last week, CNBC reported that Boeing was in talks to borrow $10 billion from major banks. The large credit rating agencies have downgraded its debt. So Boeing is in trouble, but could it go bankrupt or even go out of business? It won't happen, says Sheila Kahyaoglu. She says Boeing is one of the two largest aircraft makers in the world. And this kind of industry is tough for competitors to break into.

KAHYAOGLU: Commercial aircraft programs are very hard to do. Development cycles take a very long time. It requires a lot of cash.

ZARROLI: And the world's airlines really need Boeing. There aren't a lot of other places they can go to buy planes. In fact, Boeing has a seven-year backlog of orders for the 737 MAX. Last week, Boeing's new CEO, David Calhoun, told reporters that as he works to get the plane flying again, he's getting fantastic support from customers, regulators and the Trump administration.

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DAVID CALHOUN: Everybody wants Boeing to succeed for the sake of the country. And I understand that. And I have it on my shoulders, but I'm not going to let it weigh me down.

ZARROLI: The long delays in getting the 737 MAX back in the air have severely damaged Boeing's reputation and cost it a lot of money. But, ultimately, it's a company that's too big to fail. Jim Zarroli, NPR News.

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