Boeing On Review For Downgrade By Moody's Amid Ongoing 737 MAX Grounding - Statement

Prominent rating agency Moody's placed US aerospace manufacturer Boeing on review for possible downgrade as the 737 MAX jet model continues to be grounded and the company's assets face financial repercussions as a result, the agency said in a statement

MOSCOW (UrduPoint News / Sputnik - 14th January, 2020) Prominent rating agency Moody's placed US aerospace manufacturer Boeing on review for possible downgrade as the 737 MAX jet model continues to be grounded and the company's assets face financial repercussions as a result, the agency said in a statement.

"Recent developments suggest a more costly and protracted recovery for Boeing to restore confidence with its various market constituents, and an ensuing period of heightened operational and financial risk, even if certification of the MAX comes relatively near-term, as expected," Jonathan Root, Moody's senior vice president and lead analyst for the company, was quoted as saying in the statement, which was published on Monday.

Boeing's current rating stands at A3 in the long-term and Prime-1 in short-term rating, which in Moody's rating system qualifies as "upper-medium grade and low credit risk" and able to repay short-term debt. The agency will review whether to peg it down to a Prime-2 depending on the prospects of the 737 MAX line coming back into production, according to the statement.

The key supplier of parts for the Boeing 737 MAX, Spirit AeroSystems, announced last week that it had temporarily laid off 2,800 employees due to suspended production. Analysts of the agency noted that this step was unexpected and represents an example of a risk that pressures the company's credit profile. According to Moody's, the longer the flight ban lasts, the higher the risk to Boeing's reputation, which may have a longer-term effect on the company's future operations.

In October 2018, a Boeing 737 MAX operated by Lion Air plunged into the sea near Indonesia, and half a year later, another aircraft of the same model crashed in Ethiopia. The two tragedies killed a total of 346 people. The investigation revealed that potential errors in the functioning of the Maneuvering Characteristics Augmentation System could have caused the crashes.

In the wake of the two deadly accidents, aviation authorities and carriers around the world either grounded all 737 MAX series aircraft or closed their airspace to them.