Daily Management Review

$60 Billion Assistance For US Aerospace Industry Demanded By Boeing


03/18/2020




$60 Billion Assistance For US Aerospace Industry Demanded By Boeing
The severe economic impact on the aerospace manufacturing industry of the United States because of the coronavirus pandemic has prompted Boeing Co to give a cal for a $60 billion assistance package to the industry to stay afloat.
 
There were reports earlier this week about “tens of billions of dollars” in loan guarantees being sought by Boeing from the US government because of an impending liquidity crunch due to the impact of the coronavirus pandemic on the aviation sector of the country.
 
The company “supports a minimum of $60 billion in access to public and private liquidity, including loan guarantees, for the aerospace manufacturing industry,” said Boeing spokesman Gordon Johndroe in a statement later.
 
There were no details provided by Boeing about how much of that amount in loan guarantees would be for itself and how much of it would go to the company’s suppliers. It was also not clear whether any of the more than $60 billion loan called for would be given by banks without a guarantee from the government.
 
Reports also claimed that Boeing has already approached lawmakers and requested them for support for its liquidity needs of a significant amount and has also conceded that it is not in a current position to raise that amount given the current market conditions.
 
Confirmation on negotiations with the government for short-term support was made by Boeing on Monday. Reports also suggested that the US President Donald Trump has said that support will be provided by the government. For Boeing, about 70 per cent of the revenue it generated goes in paying its 1,700 of its suppliers, the company has noted and has reportedly told US lawmakers that the entire US aviation manufacturing sector could simply collapse without any significant government assistance.
 
“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 time period of the coronavirus pandemic as well as the market conditions would determine the amount of aid Boeing needs. While the US Congress is debating on a stimulus and rescue package that could be more than $1 trillion, Congressional officials are also reviewing the cash needs of Boeing.
 
“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.”
 
At least $58 billion in loans and grants as well as additional tax changes have been demanded by airlines and cargo services in the United States and while a package of $10 billion has been sought airports.
 
In 2019, the total debt of Boeing was $27.3 billion which was double of what it had the year before primarily because of the compensation that it has had to give away to various airlines as well as because of the additional production costs for the 737 Max planes as the company was prevented from delivering the planes since March last year when they were grounded following two deadly crashes involving the planes.
 
(Source:www.wsj.com)






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