Boeing’s Struggles Question Its Place in the Dow Jones

The Dow Jones Industrial Average, a key indicator of the US economy, is traditionally made up of 30 cornerstone companies. However, analysts are now questioning whether Boeing should still be included in this prestigious index.

Ron Epstein, an aerospace analyst for Bank of America, stated that Boeing no longer aligns with the characteristics of strong, reliable companies typically expected in the Dow. He emphasized that Boeing does not check the essential boxes needed for such inclusion.

The Dow’s designation as an ‘industrial’ index is outdated, as the US economy has shifted from manufacturing to a more diverse mix of sectors, including services and technology. This historic transition has led to significant changes in the composition of the Dow over the years.

Boeing, which has not reported an annual profit since 2018, has faced substantial challenges. The company has recorded core operating losses of approximately $33.3 billion, casting doubt on its financial viability going forward.

Recent events have further complicated Boeing’s situation. Following a serious safety incident involving an Alaska Airlines flight, Boeing has been under multiple federal investigations due to allegations regarding its corporate culture prioritizing profit over safety. As a result, the company’s production of the 737 Max has been limited to only 32 deliveries per month, a number insufficient to achieve profitability.

Additionally, Boeing’s credit rating is at the lowest end of what is considered ‘investment grade’, with signs indicating a potential downgrade to junk bond status. This alarming outlook is unprecedented among other companies in the Dow.

In July, Boeing agreed to plead guilty to deceiving the Federal Aviation Administration during the 737 Max’s approval process, which has further damaged its reputation. The company is now subject to oversight by a court-appointed monitor.

Despite these challenges, Boeing remains a significant player in the US economy with substantial employment and economic impact. It employs nearly 150,000 individuals and has a reported economic influence of $79 billion through its various suppliers across the country.

While analysts recognize Boeing’s contributions to the aerospace industry, they debate its relevance in the Dow. The index has evolved to reflect current economic realities, and some experts suggest that companies like Lockheed Martin or GE Aerospace could be more suitable representatives of the aerospace sector.

Historically, Boeing joined the Dow in 1987 and has remained a fixture for 37 years. However, the longevity of a company in the index does not guarantee its continued presence, as evidenced by past removals of other major corporations.