As Boeing’s fortunes are yet to turn around, the manufacturer is looking at the possibility to acquire a new revolving credit facility.
Boeing has reportedly approached several banks for the possibility of acquiring a $4 billion revolving credit facility, reported Reuters, citing a source familiar with the matter. The option to increase the credit facility to $6 billion is also on the table, as Boeing continues to struggle amidst the current downturn in travel.
The company finished off 2020 with $25.6 billion of liquidity, consisting of $7.8 billion of cash and $17.8 billion of marketable securities. In Q3 2020, the company’s liquidity stood at $27.1 billion ($10.6 billion of cash and $16.5 billion of securities). Overall, Boeing burned through $19.7 billion of cash, which “reflected lower commercial deliveries and service volume as well as the timing of receipts and expenditures,” stated the Executive Vice President and Chief Financial Officer (CFO) of the company during its Q4 2020 earnings call on January 27, 2021.
“Once cash flow generation returns to more normal levels, reducing our debt levels will be a key focus area,” added Smith, as he indicated that Boeing believes the company has sufficient liquidity and has no plans to increase its debt levels. For now, the company predicts it would return to a positive cash flow in 2022, as Boeing considers commercial aircraft delivery volumes to be “a key driver for improvements from 2020 to 2021.” Still, 2021 is set to be a cash-negative year for the planemaker.
As 737 MAX deliveries resume, cash improves?
While Boeing has resumed deliveries of the 737 MAX, which was first ungrounded by the Federal Aviation Administration (FAA) in November 2019, most of these deliveries were of aircraft that were manufactured while the type was prohibited from flying. As a result, Boeing was spending resources to build them, yet was not able to recoup the costs due to the fact that no airline was able to accept deliveries of the 737 MAX prior to the ungrounding. By Q3 2020, Boeing had around 450 aircraft of the type in its inventory – a quarter later that number was reduced to approximately 410.
“As we previously communicated, we expect to have to remarket some of these aircraft and potentially reconfigure them,” commented Smith. According to the CFO, the company “accrued a $9.3 billion liability for the estimated potential concessions and other considerations,” due to the Boeing 737 MAX groundings.
In Q4 2020 alone, the manufacturer highlighted that its commercial aircraft division’s margins were affected by $468 million of abnormal production costs related to the 737 program.
Nevertheless, while Boeing is now finally able to ship MAX aircraft to customers, deliveries of the Boeing 787 Dreamliner, another cash-cow aircraft of the planemaker, have stopped. In the last quarter of the year, Boeing delivered only four Dreamliners, ending 2020 with 53 deliveries of the 787. Numerous production issues have plagued the aircraft program throughout the year, which resulted in thorough inspections on 787s produced at Everett and North Charleston facilities.
Another painful blow was the Boeing 777X program, whose entry into service date was pushed back once again to late-2023, forcing Boeing to record a $6.5 billion charge in Q4 2020.
Overall, the company’s debt grew from $25.3 billion by the end of 2019, to $62 billion a year later.