Moody's downgrades Boeing's debt rating on hit from coronavirus outbreak

[BENGALURU] Moody's Investors Service on Friday downgraded the debt rating of Boeing, flagging the hit to the US planemaker's operations from the novel coronavirus pandemic.

Moody's cut the senior unsecured debt ratings of Boeing and its unit Boeing Capital to "Baa2" from "Baa1" with the rating outlook as negative. While the rating maintains Boeing at investment grade, Moody's warned it was tempered by considerable operational and financial risk in upcoming years.

The downgrade reflects the expected strain on Boeing's financial performance and balance sheet in the coming years due to the hit the coronavirus will have on demand for new commercial aircraft, the ratings agency said.

The coronavirus pandemic, which has led to travel bans and plummeting aviation industry demand, has compounded the crisis over the grounding of Boeing's 737 MAX following fatal crashes that killed 346 people.

The outbreak is likely to become a "significantly greater pressure point" on the company than the 737 MAX crisis said Jonathan Root, senior vice president and lead analyst at Moody's.

"We now estimate external funding needs in 2020 to at least double - to US$30 billion - compared to our pre-coronavirus expectations," Mr Root added.

Boeing chief executive officer Dave Calhoun last week outlined a plan of voluntary layoffs for employees, while warning that the pandemic would have a lasting impact on the aerospace industry. The company earlier this week suspended production of its 787 airplane at its facilities in South Carolina.

Reuters reported last week that planemakers - including Boeing and Airbus - were looking at drastic cuts in wide-body production amid a slump in demand for the industry's largest jetliners, citing manufacturing and supplier sources.

REUTERS