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Report: Boeing considers tapping debt market to cover 737 Max compensation costs


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Report: Boeing considers tapping debt market to cover 737 Max compensation costs

Boeing Co. is studying the possibility of tapping into the bond market to help cover the mounting compensation costs related to the grounding of the 737 Max aircraft, The Wall Street Journal reported, citing sources familiar with the matter.

Apart from raising debt, Boeing is also considering plans to postpone capital expenditures and acquisitions, as well as potential spending cuts on research and development, to boost its finances, the report's sources added.

Boeing's earnings took a hit in the second and third quarters of 2019 as the 737 Max jets stayed grounded worldwide following two fatal accidents. In the second quarter of 2019, the company incurred an after-tax charge of $4.9 billion for "potential concessions and other considerations to customers for disruptions" that will be provided over several years.

American Airlines Group Inc. said Jan. 6 that it had reached a compensation agreement with Boeing for financial damages stemming from the grounding of the 737 Max aircraft. The company plans to add more than $30 million of the payment to its employee profit-sharing program.

The settlement with Boeing is not expected to have any material financial impact on American's earnings in the fourth quarter of 2019, the company said, adding that it will continue talks on compensation for damages relating to the 737 Max grounding beyond 2019.

Mexican airline operator Grupo Aeroméxico SAV de CV also struck a compensation deal with Boeing for an undisclosed amount, Reuters reported. Turkish Airlines and Southwest Airlines Co. previously agreed to a compensation package.