FAST FIVE: Boeing Drops, Drags Dow To Session Lows After Fitch Puts Single-A Rating In Danger Of Downgrade
With the ongoing debacle over the 737 MAX seemingly getting worse by the day, a potentially far more ominous development hit today when rating agency Fitch warned that it may downgrade Boeing as the grounding of the ill-fated airplane stretches into the 5th month.
Citing regulatory uncertainty around the return to service of Boeing's workhorse jet and the “growing logistical challenge” of getting parked planes back in the air, Fitch said Boeing's credit rating was threatened as its cut its credit outlook for the aerospace giant while confirming its single-A, the sixth-highest investment-grade rating, and adding that there's also a risk that the company will have to make costlier concessions to airlines.
Boeing is currently rated A2 by Moody and A by S&P, which both have stable outlooks on the company, although we expect these to be cut soon now that Fitch has broken the seal.
S&P said last week that Boeing's announcement that it will be taking a $5.6 billion pretax charge to compensate for the grounding of the 737 Max wouldn't affect the company's credit ratings.
While Boeing's bonds were unchanged after Fitch's report, BA stock dropped and since Boeing is the most important Dow member, the industrial average quickly slumped to session lows.