Boeing Asks for a Bailout, But Won’t Reveal How Much It Wants
Taylor Rains March 18, 2020
Boeing is no stranger to crisis. After the grounding of its best-selling 737 MAX jet in 2019, the company found itself facing financial turmoil as it desperately tried to get the aircraft flying again. To help deal with its cash burn, the company was able to secure $13.8 billion in loans from a group of banks in January. Originally, the company only cashed out $7.5 billion, but nevertheless, the impact of the coronavirus is now forcing it to withdraw the entire amount. However, the cash may not be enough, and the company is looking towards the Trump administration for a potential short-term bailout.
Decrease in Demand
Boeing has felt the effects of COVID-19 as carriers cancel aircraft orders or delay payments for planes already in production. According to Reuters, the company has experienced a 60% drop in stock value (opened at $132.51 on Tuesday) and is now looking for access to private and public liquidity for itself and all companies affected within the aviation sector. Boeing said this aid is one of the “the most important ways” for the industry to recover from the crisis. The statement continued, “We appreciate how the administration and Congress are engaging with all elements of the aviation industry during this difficult time.”
Boeing has declined to reveal how much aid it is seeking, but made it clear that the United States aviation industry that “supports over 2.5 million jobs and 17,000 suppliers – is facing an urgent challenge resulting from the coronavirus pandemic.” A White House official has confirmed the talks with Boeing, and President Trump said in a tweet on Monday, “the United States will be powerfully supporting those industries, like Airlines and others, that are particularly affected.”
Potential Layoffs
According to Bill Dugovich, a spokesman for the Society of Professional Engineering Employees in Aerospace (a union that represents Boeing employees), the company does not plan to lay off any employees. However, Boeing Chief Executive Dave Calhoun revealed that the company is trying to properly address “the pain our customers and suppliers are feeling” and that furloughs and lay off were a “real possibility.” As of now, the company has implemented a hiring freeze and has put a hold on all new hires pending a review of its current “priorities and critical needs.”
BA is a prime example of corporate greed, mismanagement, and corruption. They caused the deaths of hundreds of innocent civilians as a result of their greed and haste to stay ahead of the competition at any cost. The US government should only bail out the critical components of the company that are responsible for military equipment production, but the rest should be left to fend for themselves. As a taxpayer, I do not want my $$ going towards keeping a company like this afloat. Their survival will hinge on cleaning up their act, which stinks like the south end of a north-bound yak at the moment.
The US government made money on the bailout of the banks in the 2008-2009 crisis. People think the banks got free money, but they didn't. For example, Bank of America took money from the US government and from Berkshire Hathaway (Warren Buffet's company) and paid interest, gave share options and gave shares. A single share of Bank of America today represents a smaller fraction of the company than it did before the 2008-2009 crisis. In addition, Bank of America paid a ton of money to the federal government in fines. A similar deal should be made with Boeing: Yes, they get survival money, but under terms that are expected to make money for the government if Boeing survives. And, yes, this will necessarily be at the expense of existing shareholders who will see their fractional interests in the company diluted. But considering the alternatives it is a win-win for all.
Look no matter how one feels about Boeing and the crap that happened in the past they are an intricate part of our industrial base here in the US. Hold executives accountable, Yes don't provide aide NO. Now as Trump as floated the US Government should take a position in these companies, stock or ownership position NO, debentures or other marketable instruments YES, these can be sold later on after we get to the other side of this crap. Think folks are you that say no to Boeing what will it "look like" with Boeing gone?Divest Embraer WHY cmd320 tell me one valid reason either market financial or otherwise?
Boeing also spent $43 billion over the last six years on stock repurchases to shore up the price of the stock. Of course, that stock is worth substantially less now compared to the time they bought it. But it shows atheists continued pattern of Boeing valuing shareholders more than the flying public. The funds from those repurchases would have funded a very nice Emergency Fund. No to Being bailout, but because of their presence as a defense contractor, they’re going to be TBTF (too big to fail) and they’ll eventually get their bailout.
No sympathy for Boeing at this point. They played with fire, cut corners in an effort to cut costs, and many have paid for it with their lives or their livelihood. In addition Boeing should be required to divest Embraer to increase competition.