Boeing, a leading aerospace company, is facing a challenging period as Moody’s Ratings recently downgraded its credit rating, bringing it close to junk status. The downgrade from Baa2 to Baa3 reflects the struggles within Boeing’s commercial airplanes segment, impacting the company’s free cash flow.

The inadequate performance of the commercial segment has hindered Boeing’s ability to generate the expected levels of free cash flow, according to a statement by Moody’s. This downgrade comes after Boeing reported a cash burn of $3.9 billion in the first quarter, with expectations of further cash usage in the current period.

Quality-control issues, particularly concerning the 737 Max aircraft, have contributed to the financial challenges faced by Boeing. The company’s decision to reduce 737 Max production rates to address safety concerns has further impacted its cash flow generation.

Moody’s predicts ongoing headwinds for Boeing’s commercial segment until at least 2026, with annual free cash flow projected to fall short of upcoming debt obligations. The company is expected to issue new debt to manage these shortfalls.

Despite the current difficulties, Boeing’s CEO, Dave Calhoun, remains optimistic about the company’s ability to generate $10 billion in free cash flow by 2025 or 2026. Calhoun emphasized the long-term goal in a recent interview, acknowledging the challenges in the near future.

Boeing ended the first quarter with $7.5 billion in cash and short-term securities, down from $16 billion at the beginning of the year. The company still has access to $10 billion in undrawn credit, providing some financial flexibility during this turbulent period.

The recent credit rating downgrade by Moody’s underscores the challenges Boeing is currently facing, particularly in its commercial airplanes segment. The company’s efforts to address quality-control issues and improve cash flow generation will be crucial in navigating through this crisis.