New York”•Credit ratings agency S&P on Monday downgraded its rating for aircraft manufacturer Boeing due to the grounding of the 737 MAX and the coronavirus pandemic.
“Boeing’s cash flows for the next two years are going to be much weaker than we had expected, due to the 737 MAX grounding, resulting in worse credit ratios than we had forecast,” S&P said in a statement.
“In addition, the significant reduction in global air travel due to the coronavirus will likely result in an increase in aircraft order deferrals, further pressuring cash flows.”
It lowered its rating for the company to BBB from A-.
The MAX has been grounded for the past year after two crashes that killed 346 people, spawning numerous lawsuits and investigations.
Boeing estimates that the MAX crisis will cost it at least $18.7 billion, which caused its debt to explode to $27 billion as of December 31, 2019.
“It’s critical for any company to preserve cash in challenging periods,” Boeing Chief Executive David Calhoun wrote in a message to workers last week.
He announced the company would limit travel and bar overtime except in “critical” cases, and pause new hiring pending a review.
Boeing has said it expects the MAX to receive regulatory approval to return to the skies at mid-year, but that would come at a highly uncertain time for airlines.
The coronavirus pandemic poses the most serious crisis for the airline industry since the terrorist attacks of September 11, and likely will cause airlines to postpone their purchases of planes and cancel orders.