Boeing's Credit Rating Threatened by Ongoing Strike

(Reuters) – Global ratings agency S&P announced on Tuesday that it has placed Boeing (NYSE:BA)'s rating on CreditWatch negative due to approximately 33,000 workers being on strike, pausing production of its best-selling jets.

The union members, who have been on strike for 26 days, are demanding a 40% pay increase over four years and the restoration of a defined-benefit pension that was eliminated a decade ago.

S&P estimates that Boeing will experience a cash outflow of around $10 billion in 2024 and will likely need additional funding. The CreditWatch listing indicates an increased chance of a downgrade if the strike persists, which would worsen costs and hinder the company's recovery in aircraft production and cash flow generation.

Last month, all three major ratings agencies, including S&P, cautioned that a prolonged strike at Boeing's West Coast factories could lead to a ratings downgrade, further complicating the planemaker's situation given its significant debt.

This labor strike, the first at Boeing since 2008, comes amid scrutiny from U.S. regulators and airline customers following a mid-air incident in January when a door panel detached from a 737 MAX jet.

Boeing is burdened by a staggering $60 billion in debt. S&P indicated that it does not anticipate the company meeting its goal of boosting 737 MAX production to 38 planes per month by year-end. The strike is projected to cost Boeing over $1 billion each month, despite implementing cost-saving measures in response to the production halt.