new York
CNN
—

Boeing, cash-strapped and struggling with massive financial losses due to a crippling strike and years of operational and safety problems, is turning to major banks and Wall Street to raise tens of billions of dollars in cash.

In a regulatory filing early Tuesday, the company announced plans to borrow $10 billion from a syndicate of banks. The company also separately announced plans to raise $25 billion through stock and debt sales.

The company’s debt rose sharply over the past six years as Boeing reported core operating losses of more than $33 billion. Commercial aircraft production has been brought to a near standstill by a month-long strike by 33,000 members of the International Association of Machinists.

Talks between Boeing and IAM collapsed last week with no new negotiations planned. On Friday, Boeing’s new CEO Kelly Ortberg announced plans to cut 10% of its global workforce of 171,000 employees.

Boeing’s credit rating has fallen to the lowest investment grade level – just above “junk bond” status – and major ratings agencies have warned that Boeing is at risk of being downgraded to junk bond. That would increase the cost of borrowing. Boeing’s long-term debt rose to $53 billion at the end of June, compared with $10.7 billion at the end of March 2019, when a second deadly 737 Max crash led to a 20-month grounding of the company’s best-selling plane Airplane.

Over the past six years, Boeing has been plagued by one problem after another, ranging from the embarrassing to the tragic. Two 737 Max crashes killed 346 people, a tragedy for which the company agreed to plead guilty to deceiving the Federal Aviation Administration during the plane’s certification process. A federal judge is considering whether to approve his plea agreement, which calls for up to $487 million in fines and requires the company to operate under the supervision of a court-appointed monitor. Lawyers for the families of the accident victims argued in court that the punishment was not severe enough.

Whistleblowers have testified before Congress that Boeing’s production process prioritizes profits over safety and quality, violating the company’s own rules. That became clear in January when a door plug broke off the side of a 737 Max flown by Alaska Airlines, leaving a gaping hole in the plane shortly after takeoff. Although none of the crew or passengers were seriously injured, the incident sparked numerous federal investigations, including one that found the plane had left a Boeing factory without the four screws needed to secure the door stopper.

The IAM strike is just the latest blow. Last month, the company and union leadership agreed to a tentative agreement that would have given union members a 25% raise over the four-year term of the contract, but the rank and file voted almost unanimously to reject the agreement and go on strike. Boeing’s offer to increase wage increases to 30% over the life of the contract was also rejected by union negotiators.

For all its problems, Boeing is able to borrow money from the syndicate of banks and will likely be able to sell the equity and debt it needs on Wall Street because of the unique market position in which it operates. Boeing and European rival Airbus are essentially the only companies making the large jets the global aviation industry needs. Its position as part of a duopoly essentially ensures its survival.

Both have an order backlog that extends years into the future. And Airbus doesn’t have the capacity to accept Boeing’s orders. If an airline were to cancel its orders for Boeing jets and order from Airbus instead, it would have to wait up to five years before deliveries of those aircraft begin. And it would take years for another competitor to get approval for its own plane if it tried to enter the market. Even though Boeing has lost market share to Airbus in recent years, that is not the case.

But the strike-caused halt in production of the 737 Max, as well as the 767 and 777 cargo planes, will create further short-term cash flow problems for Boeing, as the company receives most of the money from the sale of an aircraft at the time of delivery. Additionally, the company announced Friday that the already long-delayed 777X, the next generation of this wide-body passenger aircraft, will be delayed even further due to problems discovered during test flights. Now delivery is not scheduled to begin until 2026.

This story has been updated with additional reporting and context.