On March 17, 2020, the American aircraft manufacturer, Boeing, asked the US federal government for financial help as airlines, hotels and other industries were simultaneously requesting for the same amidst the COVID-19 crisis. While some of the other companies, such as airlines, will likely get direct government grants to mitigate the catastrophe, Boeing said it was instead looking primarily for loan guarantees, which can lower the cost of borrowing.

In the 2008-09 recession, the US government took stake in numerous companies in return of financial aid amidst the cataclysm. Boeing CEO, David Calhoun, was asked earlier this week about the prospect of the government taking a stake in Boeing in return for financial help, to which, he stated Boeing was not in favour of such a move. Post this announcement, the Boeing stock has plunged by 10.3% at $157.50.

On March 25, 2020, David Calhoun said Boeing could survive without a taxpayer bailout and wouldn’t accept government help if an equity stake was mandated.
In a recent interview, he stated:

‘Boeing would look at all the other options, and we’ve got plenty of them. If they attach too many things to it (the government assistance), of course you take a different course.’

In response to Calhoun’s public statement, the USA Treasury Secretary, Steve Mnuchin, on March 27, 2020, stated that Boeing would not be getting any help from the government amidst the coronavirus crisis. After the Senate voted to approve a $2.2 trillion stimulus bill for US based businesses, Mnuchin said:

‘I can only comment on what they have said publicly, which is Boeing have no intention of using the programs. That may change in the future.’

The conditions that would be attached to Boeing receiving government assistance are not immediately clear. However, Treasury Secretary Steve Mnuchin has stated the government could take stakes in airlines that get stimulus grants, a move similar to that seen in the financial crisis a decade ago. The U.S. aerospace industry, which includes Boeing and its smaller suppliers, is eligible to receive a piece of the financial stimulus bill, worth at least $60 billion, to help them thrive amidst this fiasco.

According to reports, Boeing has an estimated $15bn in liquidity, which it could use to get through the coronavirus crisis. The aerospace giant drew down a full amount of $13.8 billion loan, that it had seeked from the government a few weeks ago, and has suspended its dividend to preserve cash. The fact that most airlines have bigger problems right now than getting the MAX in the air, also gives Boeing enough cushion to sort out the 737MAX debacle; a blessing in disguise!

However, analysts are sceptical about Boeing’s refusal of the government assistance – Canaccord Genuity analyst Ken Herbert said he expects Boeing to eventually take the government aid, even with unattractive strings attached, as airline demand is speculated to continue to fall for months to come, given the fact, that Boeing has already had quite a rough ride in the past year or so.

It would be indeed interesting to see how Boeing plans it way through this crisis. Keeping the Government at bay by not accepting the taxpayer bailout might help Boeing to preserve its autonomy, however, how long can Boeing sustain? Having already faced a multitude of predicaments, does it have enough gas left in the tank to tackle another, and far grave calamity?

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