| Ticker | BA |
| Company Name | Boeing Co |
| Shariah Compliance | Not Compliant |
| DP-Ratio | 0% |
Shariah Issues in Defence, arms, weapons and aerospace industries:
Companies involved in Defense, Arms, Weapons, Military and Aerospace industries may have some very significant Shariah compliance issues.
Islamic investors are concerned that companies which are involved in arms, ammunition and warfare industries are, directly or indirectly, likely to support atrocities against humans in general.
The Islamicly Shariah Board is of the view that such industries must be considered Shariah compliant unless there is direct evidence of such illegal usage of their weapons and warfare products. Hence companies deriving revenues from manufacturing or supplying defense equipment, warfare supplies as well as arms and ammunition will be considered Shariah compliant.
The Shariah Board believes defense industries are vital for countries to safeguard and defend themselves against oppressors and to maintain their sovereignty. Hence the end use of such warfare products can have a clear Shariah permissible usage. Further, defense and warfare industries are subject to global scrutiny of customers and have strict policies in place to screen out anti state elements to avoid arms being directly sold to such possible non-compliant usage entities.
Shariah Compliance Issues in Boeing Co
When examining Boeing’s revenue streams from a Shariah compliance perspective, several complex issues arise. Boeing, as a multinational corporation, has diverse sources of income that include both permissible and potentially non-permissible activities under Islamic law. Here are the key areas to consider:
Primary Revenue Streams
1. Commercial Airplanes
Manufacturing and Sale of Aircraft: This is Boeing’s largest segment, generating significant revenue from the sale of commercial aircraft to airlines worldwide. This activity is generally permissible in Shariah as it involves the production and sale of tangible goods.
Leasing of Aircraft: Leasing arrangements need careful scrutiny. If they involve interest-based financing, they may be considered non-permissible. However, operational leases, where the lessor retains ownership and only rents out the aircraft, can be compliant.
2. Defense, Space & Security:
Military Aircraft and Weapons Systems: This segment involves the sale of military hardware and systems, which may raise ethical concerns from a Shariah perspective. The involvement in the arms industry can be deemed non-permissible due to the potential harm these products can cause. In the absence of any adverse report on the end usage of their products, the Shariah board believes such revenues will be considered Shariah compliant.
Space Exploration and Satellites: These activities are generally permissible, as they involve scientific and technological advancements. However, contracts involving defense and surveillance applications may need further scrutiny.
Let’s have a look at the operating segments from which the company derives its revenue and apply the Shariah screens to them:
Segment Breakup: (In millions of USD)
For the year ended 31st December 2024
| Segments | Revenue | Non – Permissible Revenue | % of Non – Permissible Revenue | Non – Permissible Criteria Classification | Segment Description | Shariah Compliance Comments |
| Commercial Airplanes | 22,861 | – | – | – | Manufacturing and sale of aircraft | No Shariah concerns found |
| Defense, Space & Security | 23,918 | – | – | – | Military and aerospace products | Boeing’s Defense, space & Security revenues is considered Shariah compliant, since the Shariah Board considers defense, arms and security industries to be Shariah compliant. |
| Global Services | 19,954 | – | – | – | Provides services to its commercial and defense customers worldwide | No Shariah concerns found |
| Eliminations | -216 | – | – | – | – | No Shariah concerns found |
| Other Income | 1,222 | – | – | – | Misc Income from operations | No Shariah concerns found |
| Income/Loss From Operating Investments, Net | 71 | – | – | – | Strategic Investments aimed to increase operational efficiency | No Shariah concerns found |
| Total | 67,810 | – | – | – | – | – |
Let us look into the Non-Operating revenue of the Company
Non-operating revenue: (In millions of USD)
| Segments | Revenue | Non – Permissible Revenue | % of non – permissible Revenue | Non – permissible segment classification | Segment Description | Shariah Compliance Comments |
| Gain on dispositions, net | 46 | – | – | – | Disposition of their strategic investments | No Shariah Concerns |
| Total Non-Operating income | 46 | – | – | – | – | – |
It is clear from the table above that the non-operating income of the company is Shariah Compliant. This amount is included for the calculation of the Sector Compliance and Dividend Purification.
Sector Compliance Calculation
| Total revenue | 67,810 |
| Non-permissible operating revenue | 0 |
| % of non-permissible revenue | 0% |
| Sector compliance | Compliant |
Dividend Purification Calculation
| Revenue Description | Non-Permissible Revenue |
| Non-permissible operating revenue | 0 |
| Non-permissible non-operating revenue | 0 |
| Total non-permissible revenue | 0 |
| Total revenue of the company | 67,856 |
| Dividend Purification Ratio | 0% |
Financial Ratio Screen
(All figures in Millions of USD for the Year ended 31st December 2024)
| Amount | Remarks | |
| Market Cap (as on 31st December 2024) | 113,678.216 | – |
| Total Debt | 53,864 | – |
| Debt Ratio | 47.38% | Fails the threshold of 33% |
The Company here fails the Financial Ratio screening, as the Debt Ratio is found to be well over the 33% threshold.
Source: All the above information is based on the website of the company and the latest annual report for the period ended 31th December 2024.
Conclusion
Given the above information, we at Islamicly believe Boeing is not Shariah-compliant due to its high debt ratio.
