S&P: Boeing's Ratings Not Immediately Affected by Strike

By Chris Wack

S&P Global Ratings said Boeing's issuer credit rating and negative outlook wouldn't immediately be affected by news that its machinist union rejected a contract offer and voted to strike.

The ratings firm said the strike will likely delay Boeing's recovery, including its goal of increasing 737 Max production to 38 planes a month by the end of the year.

S&P Global sees Boeing's plans to increase and stabilize its aircraft production volumes as necessary for it to generate free cash flow. A shorter strike, on the order of weeks, would likely be manageable for Boeing and not lead to a negative rating action.

An extended strike would be costly and difficult to absorb, given Boeing's already strained financial position.

S&P Global says the rating is supported by Boeing's massive order backlog and effective market duopoly with Airbus, because the two companies manufacture the vast majority of narrow and wide-body aircraft globally.

Boeing's ratings could be lowered if it fails to reach an agreement with its union and the strike continues for an extended period. Under this scenario, S&P expects a corresponding delay in the expected recovery in Boeing's cash flow and credit measures beyond this year.

Write to Chris Wack at chris.wack@wsj.com