Boeing Co. plans to raise more debt as the company faces further complications regarding the return to service of its 737 Max planes.
Although Boeing had about $ 20 billion in funds available at the end of the third quarter, costs related to Max’s crisis are rising, the Wall Street Journal reported on Monday. This prompted the company to consider taking on additional debt, the newspaper said, citing unidentified people familiar with the matter.
Boeing is halting production of the Max, which has yet to get approval to resume service after two fatal crashes resulted in a global flight ban in March. The production disruption has reduced some costs, but it also means a longer wait for payments for finished aircraft. The Chicago-based company is also facing compensation claims from airlines disrupted by the grounding, as well as the families of the crash victims.
The New York Times reported on Sunday that Boeing is discovering potential new issues with the aircraft that go beyond the initial software malfunctions that played a role in the crashes.
Meanwhile, American Airlines Group Inc. said it has reached a deal with Boeing over the financial blow caused by the grounding of the 737 Max. The carrier said it would share around $ 30 million of the proceeds with employees.
The companies are still in talks about compensation for damages beyond 2019, American said. The Max’s absence since March has reduced American’s pre-tax income by at least $ 540 million in 2019, the airline said.
American is the second US carrier after Southwest Airlines Co. to negotiate compensation in 2019 with Boeing. American has said it expects “substantially all” of the settlement to come in the form of reduced aircraft costs for grounded planes and future deliveries. Employees will receive their payment through the airline’s profit sharing program in March.
The Federal Aviation Administration recently asked Boeing to examine all possible ramifications of the modifications to the aircraft. During this examination, Boeing found that the electrical wire harnesses in the plane were too close together and – at least in theory – increased the risk of a short circuit that could cause pilots to lose control of the plane.
“We have identified this wiring harness problem and are working with the FAA to perform the proper analysis,” Boeing spokesman Gordon Johndroe said on Monday.
The company said, however, that it was too early to know whether it will need to make any design changes, such as moving the wire harnesses away. Boeing says it believes other protective measures, including circuit breakers and insulation around wiring, might be enough to prevent one short circuit from leading to another crash.
Boeing engineers completed changes to a key software system called MCAS that was activated by faulty sensors with every crash, firmly pushing planes’ noses down, a condition called runaway stabilizer.
Boeing has been working for more than a year to repair the MCAS, which was designed in part to save the plane from aerodynamic stalls that could knock it down from the sky. Boeing makes the system less powerful and connects it to two sensors instead of one for additional protection against the type of sensor failures that occurred before the crashes in Indonesia and Ethiopia.
U.S. regulators are considering requiring pilots to take simulator training before they can use the Max again, the Journal reported on Sunday. The article quoted government and industry officials familiar with the topic.
The Federal Aviation Administration initially rejected the idea because it would cause additional costs and delays for airlines, the Journal said. But in recent weeks, officials have said agency and industry security experts are increasingly interested in demanding such training.
Analysts expect Boeing to raise up to $ 5 billion in additional debt to help cover expenses that could exceed $ 15 billion in the first half of the year, the Journal said. The funds would help maintain Max production facilities and finished aircraft, as well as close the $ 4 billion purchase of an 80% stake in Embraer’s airliner business.
Boeing CEO Dennis Muilenburg was ousted last month. Next week, David Calhoun, a board member who took over as president in October, will assume the role of chief executive.
Boeing shares have fallen about 21% since the second of two plane crashes, which together killed 346 people. The stock rose 0.29% to $ 333.74 on Monday.
The Associated Press contributed to this report.
