Is Boeing Corporation Stock Halal To Invest? Facts You Should Know

Report Published as on 2nd August 2024

We have conducted a comprehensive review on Boeing Co  from a Shariah point of view and analysed its sources of income to know whether they are complying with Shariah principles.

The Boeing Company (or simply Boeing) (/ˈboʊɪŋ/) is an American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, and missiles worldwide. The company also provides leasing and product support services.

The Boeing Company is one of the world’s largest aerospace and defense manufacturers. As a leading global aerospace company, Boeing develops, manufactures and services commercial airplanes, defense products and space systems for customers in more than 150 countrie.

Boeing Co. continues to be a leader in the aerospace industry, driving innovation and delivering high-quality products and services to its global customers. The company continues to expand its product line and services to meet emerging customer needs. Its broad range of capabilities includes creating new, more efficient members of its commercial airplane family; designing, building and integrating military platforms and defense systems; creating advanced technology solutions; and arranging innovative financing and service options for customers.

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)

(In millions of USD) For the year ended 31^ST December 2023

Commercial Airplanes Segment:

This segment develops, produces and markets commercial jet aircraft principally to the commercial airline industry worldwide. We are a leading producer of commercial aircraft and offer a family of commercial jetliners designed to meet a broad spectrum of global passenger and cargo requirements of airlines. This family of commercial jet aircraft in production includes the 737 narrow-body model and the 767, 777 and 787 wide-body models. Development continues on the 777X program and the 737-7 and 737-10 derivatives.

Services: Boeing offers comprehensive fleet support services, including maintenance, engineering, and training.

Defense, Space & Security Segment:

This segment engages in the research, development, production and modification of manned and unmanned military aircraft and weapons systems for strike, surveillance and mobility, including fighter and trainer aircraft; vertical lift, including rotorcraft and tilt-rotor aircraft; and commercial derivative aircraft, including anti-submarine and tanker aircraft. In addition, this segment engages in the research, development, production and modification of the following products and related services: strategic defense and intelligence systems, including strategic missile and defense systems, command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR), cyber and information solutions, and intelligence systems, satellite systems, including government and commercial satellites and space exploration.

Global Services Segment:

This segment provides services to our commercial and defense customers worldwide. Global Services sustains aerospace platforms and systems with a full spectrum of products and services, including supply chain and logistics management, engineering, maintenance and modifications, upgrades and conversions, spare parts, pilot and maintenance training systems and services, technical and maintenance documents, and data analytics and digital services

Tricky Areas From s Shariah Perspective

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

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.

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.

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.

Global Services:

Maintenance, Repair, and Overhaul (MRO) Services: Providing MRO services for aircraft is permissible as it involves maintaining and enhancing the usability of tangible assets.

Training and Support Services:

These services are also generally permissible, provided they do not involve non-permissible elements such as interest-based financing or unethical practices.

Tricky Areas from a Shariah Perspective

Interest Income:

Boeing may earn interest income from its cash reserves and investments. Any revenue generated from interest (riba) is strictly non-permissible in Islam. Detailed financial reports need to be examined to determine the proportion of income derived from interest.

Debt Financing:

The use of interest-bearing debt to finance operations is a significant concern. Shariah law prohibits engaging in transactions that involve riba. Boeing’s financial structure and the extent to which it relies on debt financing would need to be assessed.

Investments and Partnerships:

Boeing’s investments and partnerships with other companies, especially those involved in non-permissible activities (e.g., alcohol, gambling, conventional financial services), need thorough evaluation. If Boeing holds significant stakes in such entities, it may affect its overall compliance status.

Ethical Concerns in Defense Contracts:

Contracts involving the sale of military equipment and defense services, especially those used in conflicts causing harm to civilians, pose ethical issues. From a Shariah perspective, the involvement in activities that lead to significant harm or oppression is non-permissible.

Let’s Have a Look At The Non-Operating Revenue Of The Company

Non-operating revenue: 

(All figures in Lakhs of INR for the Year ended 31st March 2023)

It is clear from the table above that the non-operating income of the company include interest income  which is Shariah not compliant. This amount is included for the calculation of the Sector Compliance and Dividend Purification.

Sector Compliance Calculation:

Dividend Purification Calculation:

Financial Ratio Screen:

 (All figures in Lakhs of INR for the Year ended 31^st March 2023)

Source: All the above information is based on the website of the company and the latest Annual Report for the period ended 31^th March 2023.

https://www.sec.gov/ix?doc=/Archives/edgar/data/12927/000001292724000010/ba-20231231.htm

Conclusion

Given the above information, we at Islamicly believe that Boeing Corporation is Shariah Compliant company as per the Shariah screening criteria.