Will Extended Conflict Save Boeing?

The American aerospace corporation Boeing is in a financial pinch with multi-billion dollar loans, a sharp increase in staff salaries, and new contracts. Among the latter are contracts for the supply of weapons systems to Ukraine and Israel. This suggests that the Boeing crisis is related to what is happening on the battlefields in these countries.

Boeing sold its small division Digital Receiver Technology (DRT), which develops military technologies, to the American subsidiary of the French concern Thales. This is one of Boeing’s attempts to address a severe crisis, now facing one of the world’s largest aircraft manufacturing corporations.

The root cause of the crisis was the crashes of Boeing-produced airliners, the discovery of numerous violations of production technology, as well as strikes and layoffs, which have reduced the number of workers at the enterprise by 10 percent.

The new owner is an American subsidiary of a French corporation. Therefore, Washingtion will retain control over what is sold. And it is also unlikely that significant secrets in the package of documents will be transferred to the French when the deal is executed, which is confirmed by information from the media in Europe and America, which report that “they will transfer video surveillance technologies” and nothing more.

But that is not the end of its woes: On Wednesday, October 23, striking Boeing workers will present the company’s management with a draft agreement according to which the company’s staff salaries should be increased by 35 percent. A preliminary agreement on this has already been reached.

Boeing hopes to raise $35 billion in the near future to ensure its survival. The company intends to raise funds by issuing debt and selling assets worth $25 billion. In addition, it has signed a new credit line for $10 billion with Bank of America (BofA), Citibank, Goldman Sachs and JP Morgan. The US financial regulator SEC has already been notified of this.

Meanwhile, financial holding company Wells Fargo estimates that the company’s bill for claims is growing by $500 million a week. Moreover, the production loss due to the shutdowns runs counter to Boeing’s goal of increasing productivity and implies delays in deliveries, creating a vicious cycle. For example, the start of deliveries of the advanced 777X airliner has just been delayed until 2026.

The company’s stock market capitalization is $91.8 billion. One sign of Boeing’s crisis is that its main competitor, European Airbus, has surpassed it in stock market value. Over the course of 2024, Boeing lost 42.8 percent of its market value, or in other words, $65.89 billion.

Naturally, this was noticed by rating agencies: Moody’s assigned Boeing a Baa3 rating in September, with the prospect of a downgrade. S&P Global shares the same opinion. If this decision is confirmed, the company’s debt will move into the category of so-called junk bonds, which it is trying to avoid with its multi-billion-dollar financial health plan.

Member of the ‘Big Three’

Boeing occupies an important place in the US military-industrial complex, being a member of the “big three” – the main suppliers and contractors of the Pentagon (along with Lockheed Martin and Raytheon). In addition to aircraft, on-board electronic equipment and aircraft engines, Boeing produces a wide variety of weapons and military equipment. In terms of sales of military products (which account for 56 percent of revenue), the company ranked third in the world in 2021.

Among them are ground combat vehicles, engines for tracked armored vehicles, military robotics, automated troop control systems, combat information and control systems, reconnaissance and navigation satellites, satellite communication, reconnaissance and targeting systems. And, of course, high-precision aerial bombs and guided missiles.

All of this is in demand in NATO countries. Also, Ukraine and Israel in particular, are counting heavily on such deliveries. The current geopolitical situation can provide the American manufacturer with an increased portfolio of orders. Not least for this reason, Washington aims to give its military-industrial complex the opportunity to earn money while competing on the international arms market.

According to Reuters: “Boeing produced the first guided light bombs (GLSDB) for Ukraine in January 2024, capable of reaching targets up to 100 miles from the drop site.” The first samples were tested on January 16 over the Gulf of Mexico, after which “the rest of the batch” was sent to Kiev. Boeing, together with Sweden’s SAAB, are the developers of these weapons.

However, these are not just aerial bombs – they are actually guided missiles. A rocket engine has been added to the gliding aerial bomb, and thus they have been transformed into long-range weapons that can be used from ground launchers, such as HIMARS, for example.

These munitions are not as powerful as ATACMS missiles, but they are much cheaper, smaller in volume, easier and faster to deploy, which makes them well suited for example to “create a tactical advantage for Ukraine in the theater of operations”.

According to news reports, Boeing has won a $7 billion tender to manufacture and supply GLSDB to Ukraine, Israel and other US allies. And although there are already antidotes to GLSDB in deploying electronic warfare systems, Boeing’s survival does not bode well for any peaceful settlement.