Boeing looking to borrow up to $10 billion because of 737-Max problems


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Boeing apparently is in discussions with several banks in an effort to secure a $10 billion loan to help it deal with the costs related to the suspension of production of the 737-Max airplane after two fatal crashes.

Boeing is in talks with banks to secure a loan of $10 billion or more, according to people familiar with the matter, as the company faces rising costs stemming from two fatal crashes of its 737 Max planes. The company has secured at least $6 billion from banks so far, the people said, and is talking to other lenders for more contributions. The total amount could rise if there is additional demand from banks, one person familiar with the matter said.

Liquidity isn’t an immediate concern, analysts have said, but the new debt shows Boeing is shoring up its finances amid the cash-sapping fallout of the two crashes — one in Indonesia in October 2018 and another in Ethiopia in March last year — that killed all 346 people aboard the two flights.

The amount Boeing is seeking to borrow is more than what some analysts were expecting. For example, Jefferies earlier this month forecast Boeing would issue $5 billion in debt this quarter.

I must emphasize that this story relies on anonymous sources, and is reported by CNBC, a division of NBC, one of today’s least reliable news sources.

More trustworthy information should become available on January 29, when Boeing makes its next earnings report.

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11 comments

  • Scott M.

    Hi Bob, there’s a Boeing-related story that just broke on Ars Technica by Eric Berger. He’s got sources saying that the Starliner’s thruster system was overstressed during the attempt to reach the ISS.

    https://arstechnica.com/science/2020/01/nasa-and-boeing-are-closely-looking-at-starliners-thruster-performance/

  • Scott M.

    Rereading the article, it’s even worse than I thought. If (stress the if) Eric’s source is correct, eight or more thrusters failed at one point and one thruster never turned it on at all.

  • Scott M: To be honest, I do not think this story is that significant. Based on what happened, the thrusters were overstressed, because the timing issue had them doing things they probably would never do.

    If anything, the story suggests that NASA and Boeing are just being very thorough about the investigation.

  • Kyle

    If I understand this correctly Boeing tried reusing old 737 air frame design and just slapped on larger engines to increase its range and what not, but now the plan stalls easily and is grounded for almost a year. Their new 777X also reuses an existing air frame design and they just slapped on THE LARGEST ENGINES IN HISTORY to increase its range and capacity. What could go wrong?

  • Richard M

    Based on what happened, the thrusters were overstressed, because the timing issue had them doing things they probably would never do.

    This was my initial reaction as well.

    What *is* worrisome, however, is that one thruster apparently never fired at all. They really need to thoroughly understand *why* that happened, and be sure they have a fix that works.

    My default has been “fix the timer issue, and just fly crew next time” – to not bother with another OFT. Starliner got to orbit, and got back down successfully, after all, and worse comes to worst, the crew can dock manually if they have to – they’re trained for it. But that’s been on the assumption that the investigations do not uncover additional, more fundamental problems. I’m not ready to change my mind yet – I don’t know enough to say – but these new revelations are of some concern.

  • Scott M.

    Richard M., my initial thought as well was that the thruster overstress wasn’t that big of a deal.

    But I agree that if Eric’s source is correct and one of them never turned on, then that’s a real area of concern.

  • Cotour

    The new engines provide a I think a 15% increase in efficiency, and that is a very big deal, without the adaptation or an entirely new design no one would buy the Max. And Airbus has a design that was either primarily designed to accept these new bigger more efficient bypass engines or they were easier to adapt them to their air frames because of the higher I think 1.5 foot (?) stance of the Airbus plane compared to the lower to the ground Boeing plane.

    That is why the cowling on the 737 Max is not round, it is more oval to gain more ground clearance and I believe they are pushed a bit forward. And this new configuration contributed to the plane having a new trim / balance. And in addition there is a newer control system that if you were trained in on properly there was no real problem. But if you were not, like these foreign pilots, there was.

    I believe that the system if you were not properly trained in on became a negative feed back system, one system working against the other. In other words a big mess.

    And there are as I understand it right now 700 planes or there about’s that are out of service and being stored / maintained. That alone is a tremendous financial strain, not to mention the possible liability issues and failed sales.

    Boeing, a potential Black Swan event? Or an investment opportunity? A friend who knows better than I loves Boeing and says anything at $320 is a buy. Im not so sure, but I suck at investing in such things.

  • Mike Borgelt

    Kyle, Airbus put similar engines on the A320 NEO and A321 NEO and they cause the same problems there. There is currently an Airworthiness Directive on both limiting the aft Center of Gravity position, which does bad things to the economics of the aircraft. These are however, fly by wire aircraft so the equivalent of MCAS needed on the 737MAX will be some tweaks to the FBW algorithms. These will be done mid 2020, meanwhile the aircraft continue to fly. Note that they were certified and flying for some years without the fix.
    All you had to do to cancel MCAS on a 737MAX is hit the two easily accessible stab trim cutout switches or even just hang on to the trim wheel to stop the rotation. Stab trim cutout is a memory checklist item.

  • Edward

    Richard M wrote: “My default has been ‘fix the timer issue, and just fly crew next time’ – to not bother with another OFT.

    This is not a bad default. Testing often results in issues that need to be studied, corrected, or both. We learned and focused on the timing problem because it caused a major change to the test plan. There are undoubtedly several other minor anomalies throughout the spacecraft and overall system that also will be addressed before manned flights begin. The expectation that there will be issues to address is one of the reasons that schedules leave some time between the test and the certification that the test article is ready for flight.

    Few qualification tests come up with no anomalies at all. As I recall, it is said of the Apollo 4 all-up Saturn V unmanned test flight that the engineers complained that they didn’t learn enough from the test, because it went too well. They had a different attitude about the next all-up Saturn V test flight, Apollo 6 (not a repeat of Apollo 4 but a test with its own objectives), which provided some issues for correction, despite successfully fulfilling its test plan.

    Minor issues may not require a retest to ensure that the problem is rectified. The next Saturn V launch was manned, despite the issues generated by the Apollo 6 test. Tests are expensive in terms of cost and schedule, so performing a second test requires that an issue leaves doubt as to whether the flight unit will perform properly. This is why there was talk of not repeating the Starliner test.

    Up until the news that one thruster never fired and eight or more thrusters failed at one point, it seemed like there was only one problem with a likely-known root cause. However, the Ars Technica article does not make clear whether the one thruster should have fired and there was a problem with it (perhaps putting additional stress on other thrusters and contributing to the excessive propellant use), or whether the thruster was one of the ones that were shut down and it never had an opportunity to fire. Is this a problem to be corrected or just a thruster that was untested in flight? It is also unclear whether a retest would be required even if the thruster had a problem that needs to be rectified.

    Since eight thrusters failed at one point and all but one of the entire set of 28 thrusters were eventually turned back on and none were reported to have been turned off again, it seems that most or all of the eight that failed returned to operation — their failure being a temporary condition.

  • Side-by-side comparison of engine nacelles on 737 NG and 737 MAX:

    https://leehamnews.com/2018/11/14/boeings-automatic-trim-for-the-737-max-was-not-disclosed-to-the-pilots/

    And more than you ever wanted to know about the aircraft’s airport integration:

    https://www.boeing.com/resources/boeingdotcom/commercial/airports/acaps/737MAX_RevE.pdf

  • Andi

    It’s bad enough that they implemented MCAS and didn’t tell the pilots about it so they’d at least be aware that it was there (they did that so they could advertise that the MAX would behave just like the NG and not require any pilot retraining), but I’ll never understand how they made the whole system dependent on ONE external sensor when the aircraft is equipped with two of them.

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