EDIT: And an hour after writing this Boeing just now announcing (surprise, surprise) they don’t expect return-to-service until July and stock is currently trading down 5.5%)

I shorted BA for a few months based on many HN posts after the crashes, but covered my position after it seemed to stabilize at ~320. I think it will probably head lower, but as a general rule I try to find companies I believe in rather than companies I don’t.

It was a very interesting choice to maintain the dividend for now. I think they will have to revisit that and it will kick-off the next big swing downward.

Last week the WSJ reported [1] that they are in the process of raising a new $5 billion round. Now [2] the word on the street is they’re looking for $10 billion over 2 years - a “mid term” debt round, structured as a line they can draw on over several years - somehow this is supposed to limit the effect it will have on their debt rating. A significant Moody’s downgrade seems like it’s past due, and Moody’s recently announced they put BA “on review”. [3]

Their debt at the start of Q4 was $15 billion and then rose to $20 billion by the end of Q4. Back in 2018 it was closer to $12 billion. I wouldn’t be surprise to see it near $25 billion at the end of Q1.

Supposedly Boeing keeps about $10 billion in liquidity “available” but they’ve burned through that by now.

The “charges” they take against the MAX disaster which started at $5.6 billion could balloon as high as $20 billion as the ramifications continue to unfold. [4]

Lastly I would point out that over the last decade plus timeframe the FAA hollowed out as a regulatory agency into a box checker. Today they have as I understand it just ~750 total pilots and engineers on staff to review technical data from the plane manufacturers. The FAA said last year to do it themselves they would need 10,000 more. [5]

> “It would require roughly 10,000 more employees and another $1.8 billion for our certification office,” Elwell told the Senate subcommittee on aviation and space.

> The FAA Aircraft Certification Service had a budget of $239 million for fiscal 2019 and about 1,300 employees, 745 of whom are pilots, engineers and technical staff who oversee design approvals and production.

I recall news articles claiming Congress recently approved significant new funding for the FAA, but looking at their budget [6] PDF page 37 it seems like “Regulation & Certification” remains level-funded at $1.3 billion the last three years.

A more recent report on the MAX specifically [7] said;

> The report said the FAA had just 45 people in an office overseeing Boeing's Organization Designation Authority (ODA) and its 1,500 employees.

...

> The FAA's office oveseeing Boeing has just 24 engineers and they face a wide range of tasks to ensure compliance in overseeing Boeing's 737, 747, 767, 777, and 787 programs.

> The review added there are only two technical FAA staff assigned per Boeing program and some are "new engineers with limited airworthiness experience."

The full report which this article is excerpting I believe is this one. [8] See specifically PDF Page 47 but put down any objects you might be prone to throwing before beginning to read.

I would imagine engineers qualified to actual critically review detailed 737 specifications aren’t unemployed and take a long time to hire. How long will it take the FAA to even staff up to the point where they can start doing their job if they are only just now getting the money to hire? Pundits saying they expected the 737 return-to-service to happen before New Years and now say it’s happening any day now I think don’t comprehend the massive gap between what the FAA used to do and what they are now tasked with doing, and that they literally don’t have the qualified people in-house to even start doing much of this work. All that assumes necessary funding has even been appropriated and there are the people and the culture in place to even do the work. Big IFs.

To me that points to a extremely delayed return to service as new engineers are hired and brought on to critically review documentation which used to be rubber stamped — let alone dealing with the actual software failures and faulty design specifications which straight up didn’t/don’t conform to modern safety standards.

In short, my prediction is that BA will inevitably have to suspend its dividend, it will take a charge upwards of $20 billion for the MAX, return to service will be extremely delayed beyond analysts wildest expectations, they will be downgraded by Moody’s and their debt load will increase to nearly $30 billion over the course of 2020 into 2021, and there is a remote chance of a debt squeeze, and the company declaring bankruptcy and having to restructure.

I don’t currently own any position in Boeing (other than through holdings in the S&P500) and do not plan on initiating any BA position in the next 72 hours. This is not investment advice.

[1] - https://www.wsj.com/articles/boeing-considers-raising-debt-a...

[2] - https://www.cnbc.com/2020/01/20/737-max-crisis-boeing-seeks-...

[3] - https://www.marketwatch.com/story/boeings-debt-on-review-for...

[4] - https://apple.news/AcnxFGCurRfW3l1BNvzr6aw

[5] - https://www.forbes.com/sites/jeremybogaisky/2019/03/27/want-...

[6] - https://www.transportation.gov/sites/dot.gov/files/docs/miss...

[7] - https://www.reuters.com/article/us-usa-boeing-faa-certificat...

[8] - https://www.faa.gov/news/media/attachments/Final_JATR_Submit...