By Scott Hamilton
March 24, 2020, © Leeham News: Boeing CEO David Calhoun said the company has $15bn in liquidity and can survive in the short term, but federal aid is needed as long as the credit markets aren’t open.
The US Defense Department is working to accelerate payments to Boeing, which has a large defense business. Revenue at Boeing Global Services is down as airlines across the globe shut down or sharply reduced operations.
Calhoun made his remark on CNBC’s Squawk Box today.
Asked twice whether Boeing might be headed for bankruptcy without a federal bailout, Calhoun didn’t answer directly. But he said if the credit markets remained closed, Boeing would be in trouble eight months from now. Short-term, Boeing has liquidity, he said.
But the supply chain needs help. Seventy cents of every dollar Boeing receives in revenue goes to the thousands of suppliers serving the company, he said.
Boeing’s request for $60bn in federal aid is in part to pay the supply chain during the COVID-19 crisis.
Boeing’s own recovery plan before the virus crisis emerged relied in part on recertifying the 737 MAX and resuming deliveries.
Boeing previously predicted certification should come by mid-year. LNA believes this may slip a month of two, unrelated to the virus. But it is highly questionable whether airlines will want to take delivery of the MAX when recertification of the MAX is received. Calhoun didn’t address this question, saying only he expects deliveries to recover. Talks are underway with China about its orders and new orders, he said. Calhoun declined to predict if or when new orders might be placed by China.
This uncertainty further argues for a bailout. Asked how one should be structured, Calhoun said the simpler the better. CNBC asked about the criticism of stock buybacks; Calhoun said there won’t be any buybacks until after any bailout is repaid and Boeing’s balance sheet is restored to pre-MAX grounding levels.