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Moody's downgrades Boeing after 737 MAX production suspension

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Moody's downgrades Boeing after 737 MAX production suspension

Moody's downgraded Boeing Co.'s senior unsecured debt to A3 from A2 and short-term debt to Prime-2 from Prime-1 following the aircraft manufacturer's announced plan to suspend production of its troubled 737 MAX model beginning in 2020.

The suspension and the extended grounding of the 737 MAX planes into 2020 will increase costs for the program and compensation claims from affected airlines and lessors, lowering the 737 program's revenues and profit margins for years to come, Moody's said.

Boeing's reputation could also be negatively affected by the extended grounding as well as from "governance missteps" in its handling of the 737 MAX crisis, damaging the business moving forward.

Moody's changed the outlook on Boeing to stable from negative, reflecting the company's strong liquidity, financial flexibility, stability in its defense business and growth in its services division, which together offset the impact of the MAX grounding.

The stable outlook also reflects Boeing's decision to hold off on share repurchases until after a sustained recovery once all MAX planes have returned to service.