boeing 737 airplane

Boeing seeks $10bn in loans amid 737 Max fallout

Image credit: DT

According to reports, the US aerospace giant is seeking to secure $10bn in loans as it weathers a crisis over its 737 Max jetliners.

In March 2019, all aviation authorities grounded the hundreds of Boeing 737 Max aeroplanes in operation after almost 350 people were killed in two crashes within five months: one flight involving Indonesia’s Lion Air and a separate flight involving Ethiopian Airlines. Several airlines have since announced that they will stop operating the model.

As its aircraft were grounded, investigators looked into how the crashes could have occured, with particular scrutiny about the safety checks for Boeing’s new flight control software, MCAS, and the process through which the US Federal Aviation Authority (FAA) permitted the aircraft to take to the air while unready.

So far, the grounding has cost Boeing more than $10bn in lost revenue and compensation for victims’ families. Costs continue to mount and it remains unclear when the 737 Max might return to the skies amid ongoing investigations. Although Boeing has developed a software patch for MCAS, US officials have suggested that certification may be delayed until March of this year or later as regulators complete stringent safety checks.

In addition to other larger costs, the aerospace manufacturer is likely to have to pay a multimillion dollar fine to the FAA for faulty installations which have threatened safety on its aircraft

Now, CNBC has reported that Boeing is seeking $10bn in loans from a handful of banks to remain afloat through the crisis. According to the report, Boeing has already secured approximately $6bn in loans and is in talks to borrow more. A source told CNBC that the extra $4bn in loans could take the form of a two-year delayed-draw loan, allowing Boeing to withdraw pre-agreed amounts of money at pre-agreed times.

This month, Boeing halted production of the 737 Max in Renton, Washington State with its 12,000 affected employees diverted to related work and other teams.

The financial impact of the crisis on Boeing will be revealed in detail during its Q4 earnings report, due out later this month. However, analysts estimate that Boeing has been losing approximately $1bn each month through the almost year-long grounding, with a grim future on the horizon. Boeing has also reported its poorest annual net orders in decades.

Meanwhile, European aerospace rival Airbus has expanded its new A321 manufacturing capacity at its Toulouse site in response to surging demand for its own aircraft.

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