By SCOTT REEVES in New York | China Daily Global | Updated: 2020-01-23 00:18
Boeing said Tuesday that it doesn't expect federal regulators to approve its changes to the grounded 737 MAX plane until June or July, several months later than the company was saying a few weeks ago.
The announcement by Boeing caused its stock to be temporarily halted after shares fell by almost 6 percent to a 52-week low at one point. The Federal Aviation Administration (FAA) released a statement shortly afterwards, confirming the news, and trading reopened. Boeing shares closed down 3.4 percent.
"This updated estimate is informed by our experience to date with the certification process," Boeing said in a statement. "It is subject to our ongoing attempts to address known schedule risks and further developments that may arise in connection with the certification process. It also accounts for the rigorous scrutiny that regulatory authorities are rightly applying at every step of their review" of the plane's flight controls and pilot-training requirements.
The new timetable is conservative and intended in part to give Boeing some leeway with airline customers frustrated over the past 10 months after the company repeatedly missed its own deadlines for the plane's return to service, The New York Times reported, citing people "familiar with the matter''. If regulators find no new problems with the plane, they could lift the grounding by the spring, the people said.
The 737 MAX has been grounded since March last year after two crashes killed a total of 346 people.
Boeing is in talks to raise $10 billion or more in bank loans as the company faces rising costs from the MAX grounding, CNBC reported Tuesday.
Citing "people familiar with the matter", the cable news network said Boeing had secured about $6 billion from Citigroup, Bank of America, Wells Fargo and JP Morgan.
Boeing declined to comment.
Earlier this month, Boeing said it planned to explore tapping the bond market to raise additional funds. After reviewing Boeing's balance sheet, S&P; Global, Moody's Investors Service and Fitch this month downgraded Boeing's bond rating by one notch.
The downgrade of senior and short-term debt likely means Boeing will cut the price of its bonds and pay a higher interest rate if it turns to the bond market to raise additional funds to cover expenses in the future. Bond prices and yield move in opposite directions.
CNBC said the financing will be a two-year "delayed draw" loan, meaning Boeing can tap the money as needed rather than taking all or some of the cash now and accruing interest charges. The cable network said that may not negatively affect the company's credit rating as other types of loans or tapping the bond market could.
Boeing appears to be bolstering its balance sheet to cover contingencies because the company doesn't face a cash crunch. However, Boeing's debt increased substantially in the last year, according to filings with the US Securities and Exchange Commission (SEC).
On Sept 30, 2019, debt totaled $20.3 billion, nearly double the $10.7 billion Boeing had on Dec 31, 2018. In 2017, it added less than $1 billion in long-term debt, Boeing said in SEC filings.
Meanwhile, Boeing's revenue has dropped. The company's third-quarter 2019 revenue totaled $20 billion, down from $25.1 billion a year ago.
Net earnings for the quarter were $1.2 billion, down from $2.4 billion in the same quarter in 2018, according to SEC filings. European rival Airbus has now surpassed Boeing as the world's largest aircraft builder.
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