Leading aerospace manufacturer Boeing has seen better days. The coronavirus pandemic, ravaging all sectors of the economy, has hit transport worst of all. Boeing’s customers—airlines—unanimously report cratering traffic numbers. The carnage hasn’t taken long to trickle up the system, with Boeing responding to evaporating demand by announcing closures of two of its manufacturing centers in Washington and South Carolina.
Fortunately, help should be on the way. The federal government views the domestic air travel industry as structurally important, particularly Boeing given its role as a supplier to the military. In the massive $2 trillion stimulus package passed late last month, over $17 billion was earmarked for firms critical to national security. Those funds would go a long way in allowing Boeing to take care of its employees and maintain a semblance of normality until demand eventually recovers. However, the company’s top brass has yet to make a decision on whether to accept the aid.
On its face, that sounds outrageous. Why would a company so directly impacted by the ongoing pandemic refuse significant short-term assistance? The answer seems to hinge on the terms of the funding agreement with the Treasury Department. The fly in the ointment appears to be the possibility of the government taking an equity stake in the planemaker in exchange for the $17 billion in relief. Chief Executive Dave Calhoun has come out in strong opposition to any such agreement. He recently suggested that as long as credit was available elsewhere, a cash-for-equity swap with the government would be off the table. The company is still waiting on clarification from the Treasury Department on the specifics of a deal and has withheld any final decision so far.
Meanwhile, of course, Boeing’s normal operations have ground to a halt. It announced that production at its Washington facility would be suspended indefinitely in light of the virus’ ongoing threat. Washington state legislators have drafted a letter to the company to address this choice. Given the impact this decision has on the company’s employees and the state’s broader economy, the letter argues that Boeing should accept the aid to protect its workforce. It goes on to request specific measures with regard to how the company manages its payroll throughout the crisis.
Other than Calhoun’s initial commentary, Boeing has remained mum. It has reportedly retained two investment banks as advisors as the company looks to raise between $10 and $20 billion to maintain liquidity during the crisis. The $17 billion for defense companies is certainly being evaluated as an option, but the company could also look elsewhere within the $2 trillion bill for more favorable terms. Its ultimate funding decision could have enormous ripple effects for the broader aerospace industry for decades to come.