Boeing is sounding the alarm and pleading with Washington for a $60 billion bailout for the company and its aerospace suppliers.
The company’s stock plummeted nearly 18 percent on Wednesday amid growing worries about how the aircraft maker and defense contractor would weather a series of recent storms. The coronavirus outbreak has devastated global travel, delivering a blow to Boeing, which was already in a fragile state after the grounding of its Max 737 jets and setbacks to fixing and delivering KC-46 military tankers for the Pentagon.
President TrumpDonald John TrumpDe Blasio calls on Trump to deploy military to set up hospitals in New York Hillicon Valley: Facebook launches portal for coronavirus information | EU sees spike in Russian misinformation on outbreak | Senate Dem bill would encourage mail-in voting | Lawmakers question safety of Google virus website Trump signs coronavirus aid package with paid sick leave, free testing MORE and lawmakers have vowed to provide assistance to the company, even as other industries, including the airlines, line up for help from Washington. As a major employer, Boeing has long held clout in Washington and the company is marshaling those resources in what experts say is its toughest test yet.
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“It’s just an incredible confluence of factors that really put them behind the eight ball,” said Andrew Hunter, a former Pentagon official and now an expert with Washington, D.C., think tank the Center for Strategic and International Studies.
“Boeing probably would have weathered the 737 Max issues and other issues that they’ve had with production… but this crisis, in scope and scale is far beyond the others.”
The $60 billion bailout would be in the form of access to public and private liquidity, including loan guarantees, for the aerospace manufacturing industry, Boeing proposed on Tuesday.
“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,” according to a Boeing statement.
Boeing stressed that the long-term outlook for the industry remains strong, but stressed that it needs immediate relief until the coronavirus crisis passes. Boeing’s shares have shed over 60 percent of its value in the last month.
President Trump indicated that Boeing would get financial assistance on Tuesday and said that he considered it the best company in the world before it came under scrutiny over the safety of its 737 Max aircraft, which were involved in two deadly crashes. Governments around the world have grounded the planes, a situation which has already cost the company an estimated $19 billion, CNN reported.
“Yes, I think we have to protect Boeing. We have to absolutely help Boeing,” Trump said at the White House on Tuesday “Obviously when the airlines aren’t doing well then Boeing is not going to be doing well. So we’ll be helping Boeing,”
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Boeing thanked Trump for his commitment to help the company in its statement on Wednesday.
“We appreciate the support of the President and the Administration for the 2.5 million jobs and 17,000 suppliers that Boeing relies on to remain the number one US exporter, and we look forward to working with the Administration and Congress as they consider legislation and the appropriate policies,” the company said.
A spokesperson for the company declined The Hill’s request to comment further.
“They’re the only game in town when it comes to commercial plus defense aviation. There are some companies that do one and some companies that do the other but nobody else does both in America,” a lobbyist familiar with the industry told The Hill. “Are they the last U.S. company that’s too big to fail? Maybe.”
Boeing had already planned to cash out a $13.8 billion loan for costs relating to the 737 Max grounding, the Washington Post reported last week. It also planned to halt new hires but did not have plans for layoffs.
But despite Boeing’s prominence and the support from the White House, the level of help to give the company is certain to spark debate.
One defense industry lobbyist said the big topic of discussion has been how to determine the fair amount Boeing should receive from any relief package given the problems it experienced before the coronavirus outbreak.
Critics have lambasted Boeing over its handling of the 737 Max aircraft, with a congressional report released earlier this month blaming what House investigators called a “culture of concealment” at the company over safety issues.
Another contentious question is how much of any aid package should go to Boeing, when other aerospace companies are also struggling.
Textron Aviation, for example, on Wednesday announced four-week furloughs for most of its U.S.-based workforce. The furlough will affect more than 7,000 workers at the defense contractor which makes training aircraft for the Air Force.
“I think some people feel like it’s too much money being talked about for Boeing specifically,” the defense industry lobbyist said. “Boeing, I think, has asked for a lot of money to also make up for the problems that were of their own creation … they were already furloughing employees long before this crisis started.”
One asset for the aviation giant will be its close ties with lawmakers whose districts and states are home to Boeing’s large workforce. The company says it has over 138,000 employees at the Boeing company and subsidiaries.
The aerospace giant has long been a powerful voice in Washington, backed by a large lobbying team but whose clout was tested from the 737 Max crisis. Boeing spent over $13.8 million on lobbying in 2019, as they faced scrutiny from lawmakers and regulators about the safety of their aircraft.
And the company’s connections in Washington run deep—former acting Defense Secretary Patrick ShanahanPatrick Michael ShanahanEsper’s chief of staff to depart at end of January Defense chief calls on European allies to be wary of China’s investments, blasts Russia Pentagon chief approves 20 more miles of border wall MORE was a Boeing executive and the company’s top lobbyist, Timothy Keating, is a former staff director for the White House Office of Legislative Affairs under President Clinton.
“The fact that they have had enduring relationships with a lot of members of Congress and key leaders in government, that obviously helps them get people’s attention,” Hunter said.
Boeing’s sheer grip on the economy will also be a major factor in pushing their aid request.
“Their supply chain is present in all 50 states, they have tens of thousands of employees all across the country directly with Boeing – and then when you add in the supply chain it’s hundreds of thousands – I think that’s really what speaks,” Hunter added.
“When Boeing goes into a member of Congress’ office, usually it’s the ‘this is our facility in your state or district that employs thousands of your constituents.’ That’s what makes their message get heard and penetrate in a way that might not be so easy if they didn’t have as broad of a business base as they do.”
But Boeing will also have to compete for relief with other industries impacted by quarantines and closures due to the coronavirus.
U.S. airlines are seeking over $50 billion, while the tourism industry, represented by the U.S. Travel Association and the American Hotel and Lodging Association, has called for $150 billion in overall relief. Restaurants and retail are also seeking loans or direct financial relief.
Trump on Wednesday signed a coronavirus aid package that includes paid leave benefits and free testing. And lawmakers are already at work on the next package, a potentially $1 trillion stimulus bill.
A lobbyist said Boeing would have to fight for its share of that pie.
“Even Boeing will have a tough time getting something over the finish line,” the lobbyist said.
“Everybody’s asking for something and those that aren’t asking for something only aren’t because they don’t know how.”