The Impact of Boeing's Crisis in the US

(CLO) Boeing is falling into a financial crisis worth tens of billions of dollars, affecting the company, employees, suppliers, airlines and the entire US economy.

After 33,000 members of the International Federation of Mechanical Engineers went on strike against the company a month ago, Boeing failed to deliver enough planes as promised, affecting airlines, especially domestic flights in the US.

Boeing 737 MAX aircraft. Photo: AP

The financial challenges facing Boeing, which existed before the strike, raise deep concerns about the impact on the aviation industry in particular and the US economy in general.

Economic damage, layoffs

Two 737 MAX crashes occurred in late 2018 and early 2019, claiming the lives of 346 people and forcing the airline to stop operating for 20 months.

Since then, Boeing has incurred a loss of more than $33 billion and its financial situation shows no signs of improving. According to credit rating agency Standard & Poor's, the strike, which began on September 13, is costing the company an additional $1 billion a month. The halt in production of the 737 Max, which is Boeing's main revenue generator, has cut off a steady stream of income.

Boeing is trying to raise up to $25 billion in capital under the pressure of the crisis. This plan includes additional borrowing, issuing shares and bonds. At the same time, to reduce costs, the company decided to cut 10% of its global workforce, equivalent to about 17,000 people. In addition, 33,000 workers on strike will also face reduced income, receiving only a small portion of their salary through strike subsidies from the union.

Impact on the entire US economy and the risk of bankruptcy

Boeing’s financial woes are not just bad news for the company, they are also a blow to the U.S. economy. As one of the nation’s largest exporters, Boeing generates $79 billion in revenue and supports 1.6 million jobs in the U.S. each year.

Corporate spending cuts and layoffs will have a domino effect that will hurt local businesses, especially in Washington. In addition, more than 10,000 suppliers nationwide will be impacted by the crisis.

Total losses from the strike by Boeing workers, suppliers, the company and local governments reached about $5 billion in the first month, according to an analysis by the Anderson Economic Group.

Boeing's credit rating is at risk of being downgraded to junk status, which would put the company in an extremely difficult financial situation. This means that Boeing's borrowing costs will increase significantly, putting a lot of pressure on the company's cash flow.

Furthermore, the risk of insolvency and bankruptcy increases significantly. However, filing for bankruptcy does not necessarily mean the complete collapse of a business. Many large corporations such as General Motors have gone through this process and then successfully recovered.

However, the possibility of Boeing being forced into bankruptcy during the current financial crisis is considered low. The main reason is the monopoly position of Boeing and Airbus in the large jet market. Both companies are almost the only options for global airlines.

Ha Trang (according to CNN)

Source: https://www.congluan.vn/nhung-tac-dong-tu-cuoc-khung-hoang-cua-boeing-doi-voi-nuoc-my-post317255.html