Boeing Ratings Outlook Cut by Fitch

Fitch Ratings lowered to negative its long-term credit ratings outlook on The Boeing Company (BA) and its financial unit, Boeing Capital Corp.

Fitch said the long-term issuer default rating of A+ on Boeing and Boeing Capital Corp., along with other ratings, were supported by financial flexibility, large order backlog, and the company’s balanced portfolio approximately equally split between defense and commercial.

However, the rating agency cited several risks and uncertainties prompting the lowered ratings:

1) Concerns about the recession’s impact on the commercial aerospace industry. Defense companies have been adversely impacted during the recession by exposure to commercial aviation as consumers travel less and airlines cut capacity.

2) Downward pressure on U.S. Defense Department budgets.

3) Concerns about the health of the aircraft financing market, given very tight credit markets, and Boeing’s significant inventory stockpile last year.

4) Fitch said its revised ratings reflect expectations of production cuts later in 2009 and into 2010. The rating agency cited the potential for further delays in Boeing’s 787 Dreamliner program.

Boeing has already delayed the 787 aircraft’s launch by about two years; however, last week the company announced that it still plans the first test flight during the current 2nd quarter of 2009.

Fitch said it will review Boeing’s ratings if there are additional delays to the 787 program. The rating agency believes keeping the plane on schedule will help reduce inventories and likely decrease research and development expenses.

The Boeing Company is involved in the design, development, manufacture, sale and support of commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems and services.

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