Please ensure Javascript is enabled for purposes of website accessibility

Boeing CEO Rejects Talk of Government Equity Stake

By Lou Whiteman - Mar 24, 2020 at 2:57PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

He still wants a bailout, but not at any cost.

Boeing (BA 2.28%) 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.

An aircraft on the assembly line.

Image source: Getty Images.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Boeing Company Stock Quote
The Boeing Company
$139.84 (2.28%) $3.12

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.