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Before tackling the plane maker’s long-term issues, CEO Kelly Ortberg will need to buttress its damaged finances

Boeing’s BA -1.76%decrease; red down pointing triangle new chief executive Kelly Ortberg has many active fronts in his battle to “reset” the company, including addressing labor strikes, re-establishing a culture of accountability, fixing ongoing problems at the defense division and figuring out how to build innovative plane models again.

Now he also has to seriously worry about the company’s deteriorating balance sheet.

On Wednesday, the plane maker said that it had lost $6.2 billion and experienced a free cash flow of negative $2 billion during the third quarter, as a result of a strike that started in September. But the worse news came later in the day, when its largest machinist union rejected a deal to increase wages by 64% over the next four years.

Shares in Boeing, which closed down 1.8% Wednesday, kept falling during Thursday’s premarket trading. They have lost 54% in five years.

Remarkably, Wall Street is starting to turn against the debt too. Earlier this month, S&P Global Ratings placed the plane maker on a watchlist for potentially being downgraded to a “speculative” grade. It would be the largest-ever company to suffer this fate. The yield on its bonds has gone from trading less than one percentage-point above Treasury yields in the summer to almost 1.4 percentage points above now, edging closer to the average spread of the highest-rated “junk” bonds.

Until recently, Boeing seemed insulated from any default risk by the fact that its only true rival is Europe’s Airbus AIR 0.48%increase; green up pointing triangle, which can’t service all of the world’s airlines alone. Its order backlog spans 5,400 airplanes, valued at $428 billion.

But the continuing strike comes at a huge cost of about $1 billion in cash a month, and markets are worried about a $12.5 billion wall of debt maturing in 2025 and 2026.

“We do have a plan to address the balance sheet.” Ortberg said in a call with investors Wednesday. “The priority is to protect our investment grade.”

To be sure, Boeing’s ability to get hold of liquidity is undiminished. Despite the production stoppage, it still had $10.5 billion in cash and short-term investments at the end of September. This means that the ratio of current assets to current liabilities—a key measure of a business’s capacity to honor its near-term obligations—remained healthily above one. And, earlier this month, the plane maker secured a $10 billion line of credit, bringing its access to untapped credit facilities to $20 billion.

Investors don’t have the stomach for much more leverage, however. Debt was $57.7 billion at the end of September. After accounting for the $10 billion cash buffer, net debt amounts to more than three times the earnings before interest, tax, depreciation and amortization, or Ebitda, that Boeing would be expected to generate in five years’ time if it overcame the current problems and fully ramped up production of 737 MAX and 787 Dreamliner jets. That is heavy baggage to carry, and is generally a threshold for large companies beyond which markets start to get worried. By comparison, Airbus’s ratio was negative as of June.

Before Boeing reported results on Wednesday, analysts had penciled in, based on prior input from the company, that free cash flow would be positive next year, and debt would start getting repaid, bringing the ratio back below one by 2028.

Yet, even under that over-optimistic scenario, hefty debt repayments would eat up all of the cash expected to be generated over the next two years, according to Visible Alpha, and roughly 40% of it in the following three. On Wednesday, Boeing said it is instead likely to keep burning cash in 2025, and this was assuming the strike would end that day.

Yes, the plane maker has a whopping $83 billion in inventories, which is a $20 billion increase relative to 2018, and includes 30 parked 787s that would release a lot of extra cash if sold. But this is misleading: Allegedly finished planes have a lot of flaws that are costly to fix—what executives call “the shadow factory.”

So Boeing is left without much room to maneuver. As an analyst at a ratings agency puts it: “Investment-grade firms don’t have negative cash flow.” Were a downgrade to happen, most investment funds would be forced sellers, since they don’t have the mandate to hold speculative-grade debt.

Of course, those with the ability to buy bonds in the aftermath might then benefit, as the Arlington-based manufacturer is still unlikely to default. Even in the worst-case scenario, U.S. officials would likely protect one of their fallen industrial champions from bankruptcy, especially considering its importance to the defense sector.

The really hard pill to swallow is for shareholders. They are very unlikely to see any significant payoff in the foreseeable future, as the company goes from slashing the debt to eventually having to invest in new aircraft programs. Even after a prolonged equity slump and using 2028 earnings, Boeing’s enterprise value is 10 times Ebitda, compared with Airbus’s 11.5. The only upside is at a very long-term horizon.

Boeing is expected to raise $10 billion in new shares, though it could do as much as $25 billion over the next three years. If the end figure ends up being closer to the maximum, stock investors might counterintuitively join their bondholder peers in celebration: Dilution is a far lesser concern than a damaged balance sheet.

If Britain is to have a more European welfare state, it needs a more European tax system

If you are British and financially comfortable to reasonably well-off — say a typical Financial Times reader or, indeed, FT journalist — you certainly have pocketbook reasons to watch next week’s Budget carefully. Not because chancellor Rachel Reeves’s statement is likely to create another financial crisis, but because you are among the groups targeted for around £40bn in annual tax rises by the end of the decade.

Labour has been crystal clear that those with the broadest shoulders will bear the burden. Let me define this group as those with the top 10 per cent of income tax liabilities. There are just shy of 4mn of them and very simple maths tells you the annual additional bill would be a little over £10,000 a year each. To be in this group, you need a pre-tax income of £69,600. That’s quite something.

The calculation demonstrates the brutal maths of limiting tax increases to small groups. More importantly, it highlights how unusual the UK’s tax system is becoming in an international and historical context. This carries significant political and revenue risks for Reeves.

The UK’s overall tax burden is becoming increasingly European in its size, but the distribution of tax payments is not. Even before the previous government’s 4 percentage point cut in employee national insurance contributions, OECD figures show that UK income tax and social security burdens for employees on average incomes were comparatively very low. Not so for individuals with incomes two-thirds higher than the median, which are generally above the OECD average. It shows the UK has a very progressive direct tax system.

The Institute for Fiscal Studies calculates that while the direct tax take (income tax and employee national insurance) is at a half-century low for someone on median income, the overall tax burden is at an all-time high, with extra charges already loaded on high-income individuals and other taxes.

For income tax alone, in 2024-25 those with the top 10 per cent of incomes paid 60.2 per cent of total revenue, a figure estimated by HM Revenue & Customs to have risen from 53.5 per cent in 2010-11.

This concentration of the tax burden under the Conservatives should be surprising enough. But it is not — far from it — because those with the broadest shoulders have been running away with the nation’s loot over the past 14 years.

Separate pay-as-you-earn data also from HMRC shows that the gap in pre-tax earnings between those in the top decile and the median has been narrowing. The gap is about 6 per cent smaller than it was a decade ago and alternative official data shows a much greater compression in the earnings distribution.

Of course, we must not get too misty-eyed about the plight of those on high incomes. Their pay might not be keeping up with the rest of the population and they might be taxed a lot more than they were, but they are still richer and have better options than those on lower incomes.

Therein, however, lies one of many problems for Reeves. Having more options includes working a bit less if your marginal tax rate feels too high, retiring early or leaving the country. And it is these options that should make any chancellor think twice before raising their tax burden further. There might not be a lot more juice to squeeze.

After this Budget, unlike its European counterparts, the highly progressive UK tax system will be more vulnerable to changed behaviour — and with that comes a risk both to government revenues and to growth.

Moreover, tax is a collective activity. It is the price of participation in a civilised society and should not be seen as something that is for others to pay. In the end, if Britain is to have a more European welfare state, it needs a more European tax system. That means everyone, not just those with the broadest shoulders, needs to pay more.

Le distributeur, qui ne peut plus supporter les sanctions européennes, a sélectionné deux candidats à la reprise.

Deux ans et demi. C’est le temps qu’aura tenu Auchan en Russie, avant de baisser les armes. Depuis le début de l’offensive russe en Ukraine, le distributeur nordiste, détenu par la famille Mulliez, avait toujours refusé mordicus de quitter le pays de Poutine, sur lequel il a misé depuis 20 ans. Officiellement pour ne pas pénaliser la population locale; en fait car la Russie était un de ses marchés d’avenir, avec la Chine. Rendue à l’évidence qu’il devenait intenable pour Auchan de continuer à opérer tout en respectant les 18 trains de sanctions imposés par l’UE à Moscou, la famille Mulliez a fini par enclencher sa retraite de Russie, comme l’a révélé. La Lettre. Selon nos informations, le groupe Auchan a sélectionné deux repreneurs potentiels.>

Depuis deux ans, il avait reçu une dizaine de marques d’intérêt non sollicitées pour son réseau de 230 magasins en Russie. Mais jusque-là, il n’avait pas dévié de position: impossible de sortir sans pénaliser la population locale et ses salariés sur place. Arrivé en 2002, le groupe est acteur important de la distribution alimentaire.

Situation défavorable

La situation sur place a toutefois évolué, dégradant très fortement les conditions d’exploitation locales. «Contrairement à d’autres distributeurs européens moins regardants, Auchan respecte à la lettre les sanctions décidées contre la Russie. Elle n’y investit ni ne remonte pas un sou. Ce qui la place en situation très défavorable par rapport aux acteurs locaux de la distribution, propriétés d’oligarques russes et qui eux ne peuvent rien faire d’autre de leur argent que de l’investir dans leur société », décrypte un très bon connaisseur de l’entreprise.

Les deux repreneurs potentiels sélectionnés, l’enjeu désormais pour le groupe nordiste sera de passer les fourches caudines des autorités locales. Et surtout d’éviter les mésaventures d’autres groupes comme Danone ou Carslberg, dont les actifs russes dont ils souhaitaient à l’époque de désengager avaient été nationalisés du jour au lendemain, les repreneurs potentiels n’ayant pas l’aval de Moscou.