As coronavirus continues to spread, Boeing can breathe a sigh of relief. They will not become a victim to the virus. Yesterday, President Trump said he would provide aid to Boeing to ensure its survival. Shares at the aircraft manufacturer dropped heavily yesterday before the announcement but recovered slightly after the President’s comments.
The President’s comments
On Tuesday President Trump said that he would help Boeing financially as it struggles to cope with the impact of the viral outbreak. In comments made to reporters, he recognized that Boeing was already in a difficult position due to the grounding of the 737 MAX aircraft and that this was a second setback for the company.
A reporter asked if he would be willing to support aircraft manufacturers as well as airlines. The president replied that, “Yes, I think we have to protect Boeing. We have to absolutely help Boeing.” He continued to say that “Obviously when the airlines aren't doing well then Boeing is not going to be doing well. So, we'll be helping Boeing."
However, he did not specify if this support would be extended to other manufacturers despite the fact that the reporter mentioned General Electric.
Government support
Passengers airlines in the US have asked the government for a support package of $50 billion. Airports have asked for $10 billion. Boeing has confirmed that it is asking for a bailout package of $60 billion. This includes loan guarantees for the aerospace industry. The President has not confirmed how much he is willing to give Boeing specifically.
In response to the President’s comments, Boeing said,
"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 airline manufacturer made it clear what it would use any government funding for, saying,
“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.”
Boeing’s current situation
Although Boeing is presenting a very positive outlook, its shares yesterday were painting a very different picture. Within one hour of the market opening in New York, Boeing’s value dropped by 22%. It lost over $16 billion, perhaps as much as $57 billion.
The President’s comments were reassuring for Boeing and it recovered in the markets to close down at $5.47. But its troubles are not over yet. Before the virus hit Boeing was valued at $190 billion. This is a huge decline from the previous estimation of $250 billion.
The manufacturer is still struggling due to the two fatal crashes which caused the FAA to ground its best-selling MAX jets. In a strange twist of fate, the chaos of the aviation industry may end up helping Boeing. Not only is the virus a huge distraction from the MAX crashes which have dominated aviation headlines for the past few years, but as time moves on, we are getting closer and closer to the MAX being recertified.
If Boeing can get the FAA to sign off on the jets return to the skies before airlines are fully operational again then Boeing will be poised to take full advantage in the industry's recovery. As workers are allowed to return to their jobs, the production line may well start up again. The delays could mean that the MAX is ready to return with the lifting of travel restrictions.
Although there are obviously still complications with recertifying each individual MAX, the aviation industry could see some very exciting times ahead.