Boeing (NYSE:BA) CEO David Calhoun said Tuesday that the company could reject any aid package that requires the government taking an equity stake in the company, drawing a line in the sand less than a week after requesting a $60 billion bailout for the commercial aerospace industry.
Commercial aerospace figures to be hit hard by the COVID-19 coronavirus pandemic. Airlines globally are scrambling to cut flights and ground aircraft due to deteriorating travel demand, which will likely lead to reduced new aircraft and spare part sales in the quarters to come.
Boeing has responded by suspending its dividend and closing some of its manufacturing footprint, and on March 18 called on the government to provide liquidity to the company and its suppliers in order to prevent any long-term disruptions to the supply chain.
Speaking on Fox Business on Tuesday, Calhoun reiterated his call for federal support, but said he might reject aid if it required selling an equity stake to the government. "If you attach too many things to it, of course you take a different course," Calhoun said.
Boeing has about $15 billion in available liquidity, and still has a $25 billion-in-sales defense business that should hold up better in a commercial downturn. In theory, that should give the company enough cushion to get through the pandemic response, but Boeing could still face a cash crunch later in the year if airline operations are unable to normalize.
While Calhoun is likely at least in part negotiating in public, he has a point in saying that some of Boeing's suppliers likely need the assistance more urgently than Boeing does. Spirit AeroSystems (NYSE: SPR), a one-time Boeing subsidiary that still generates upward of 75% of its sales from its former parent, appears much more vulnerable to a prolonged commercial aerospace downturn than Boeing would be.
Similarly, suppliers like Triumph Group (NYSE: TGI) have considerably less wiggle room on their balance sheet than Boeing does.