WASHINGTON (Reuters) - Boeing Co on Tuesday called for a $60 billion lifeline for the struggling U.S. aerospace manufacturing industry, which faces huge losses from the coronavirus pandemic.
Reuters first reported that Boeing was seeking “tens of billions of dollars” in U.S. government loan guarantees and other assistance as faces it a looming liquidity crunch due to the coronavirus’ impact on the aviation sector, two people briefed on the matter told Reuters.
Boeing spokesman Gordon Johndroe subsequently said the company “supports a minimum of $60 billion in access to public and private liquidity, including loan guarantees, for the aerospace manufacturing industry.”
Boeing declined to say how much of that would be for the planemaker versus loan guarantees for its suppliers; it was also unclear if U.S. banks would loan any of the more than $60 billion without government backing.
The U.S. planemaker has told lawmakers it needs significant government support to meet liquidity needs and it cannot raise that in current market conditions, the people said.
Boeing confirmed Monday it was in talks with the administration about short-term support, while U.S. President Donald Trump said Tuesday the U.S. government would provide support. Boeing has noted that typically 70% of its revenue flows to its 17,000 suppliers and has told lawmakers that without significant assistance the entire U.S. aviation manufacturing sector could collapse.
“This will be one of the most important ways for airlines, airports, suppliers and manufacturers to bridge to recovery. Funds would support the health of the broader aviation industry, because much of any liquidity support to Boeing will be used for payments to suppliers to maintain the health of the supply chain,” Johndroe said.
The amount of aid Boeing needs remains in flux based on market conditions and how long the crisis lasts. Congressional officials are reviewing Boeing’s cash needs as Congress considers a stimulus and rescue package that could top $1 trillion.
“Boeing got hit hard in many different ways,” Trump said at a press conference Tuesday. He said he would also help suppliers like engine maker General Electric Co. “We have to protect Boeing... We’ll be helping Boeing.”
Boeing’s stock has been plummeting. After falling 24% on Monday, it fell another 4.4% Tuesday to close at $123.92. Boeing is down more than 60% over the last month as the coronavirus pandemic slashed travel demand worldwide. S&P Global downgraded Boeing’s credit rating on Monday and lowered its free cash flow expectations for the company.
Boeing has been struggling to win approval from regulators for its 737 MAX to return to service after two fatal crashes in five months. The plane has been grounded since March 2019.
U.S. airlines and cargo carriers have said they are seeking at least $58 billion in loans and grants along with additional tax changes, while airports have sought $10 billion.
Boeing confirmed on Tuesday that it had completed the drawdown of the rest of a $13.8 billion line of credit it had secured last month.
Boeing’s total debt nearly doubled to $27.3 billion in 2019, as it compensated airlines and grappled with additional production costs for the 737 MAX even as the grounding prevented it from delivering the aircraft to buyers.
Reuters on Tuesday reported Airbus has about 16 billion euros ($17.60 billion) in cash and needs some 5.5 billion euros a month, a person familiar with Monday’s discussions said.
Industry sources said that even before the coronavirus crisis squeezed its finances, Boeing had been providing financial support to a number of suppliers to help them ride out the shutdown of 737 MAX production as well as paying airlines compensation for the delay in delivering MAX planes.
The focus on design problems as a key factor leading up to two fatal crashes that led to the grounding has left the planemaker exposed to potential shareholder lawsuits from partners and airlines at risk from the MAX shutdown.
Reporting by David Shepardson in Washington; Additional reporting by Alexandra Alper in Washington and Tim Hepher in Paris; Editing by Lisa Shumaker and Cynthia Osterman
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