Boeing Seeks U.S. Aid Plus Help for Suppliers, Airlines on Virus

[568]

So, Boeing wants help!

I am lost for words considering the amount of money from stock buy backs that went into the pockets of the execs.

https://finance.yahoo.com/news/boeing-seeks-u-aid-help-215325290.html

[Twitter]

How will the Covid virus affect Boeing Max and Boeing? Seemingly unconnected matters but:

Boeing is being asked to compensate airlines who can’t fly the Max while grounded. It has already made an agreement with Southwest. However these airlines to a large extent are grounded anyway, by the virus. A smart lawyer should be able to reduce the compensation there.

It is taking much longer than forecast to get the Max back in business. There should be less pressure on Boeing now to rush recertification. They have more time to do it right.

The Boeing designers might have to work from home.

The shop floor Max teams have been laid off for a while already.

The company should be in line for government Corona compensation. If it is, how will that affect the above?

There are for sure more implications - but will they survive better or less well in this crisis?

[Less Hair]

Purely concerning the MAX it will make life slightly easier for Boeing as the pressure to deliver those airplanes as fast as possible is now lower than before. However overall Corona will hit Boeing as well and weaken the aircraft demand in general for some time to come.

[568]

How will the Covid virus affect Boeing Max and Boeing? Seemingly unconnected matters but:

Boeing is being asked to compensate airlines who can’t fly the Max while grounded. It has already made an agreement with Southwest. However these airlines to a large extent are grounded anyway, by the virus. A smart lawyer should be able to reduce the compensation there.

It is taking much longer than forecast to get the Max back in business. There should be less pressure on Boeing now to rush recertification. They have more time to do it right.

The Boeing designers might have to work from home.

The shop floor Max teams have been laid off for a while already.

The company should be in line for government Corona compensation. If it is, how will that affect the above?

There are for sure more implications - but will they survive better or less well in this crisis?

"The shop floor Max teams have been laid off for a while already".

Not true if you are commenting on the Renton factory.
Many of the line assembly folks were tasked with other matters and are looking after the parked Max's, such as draining old CSD unit oil and replenishing etc. The P8 is also at Renton so work is still being carried out on that.

[tdracer]

Right, so lets put hundreds of thousands of people out of work to punish those execs. That'll show them :ugh:

[WHBM]

The Max recertification is dependent on the Canadian, European, etc authorities being a significant part of the approval. If they can't travel to the meetings or get to flight test the aircraft then it will be delayed.

[SMT Member]

Sure, help them out, but set conditions. The following should be in force until they've paid back the support in full:

No stock buy-backs
No payment of dividends
No bonus payments
Aid shall be earmarked to protect the employees; no lay-offs
No raiding of pension funds
Renumeration for executives set to a maximum of 10x the lowest paid employee
Government to gain ownership commensurate with the aid given, to be sold off when the markets eventually rebound

[568]

Right, so lets put hundreds of thousands of people out of work to punish those execs. That'll show them :ugh:

Right, so lets put hundreds of thousands of people out of work to punish those execs".

With respect, I actually didn't say anything about financial help just "lost for words" about the amount of money those execs made!

[Twitter]

The Max recertification is dependent on the Canadian, European, etc authorities being a significant part of the approval. If they can't travel to the meetings or get to flight test the aircraft then it will be delayed.

Yep - but the firm gets more time to ready the aircraft before any acceptance flight test, perhaps?

[tdracer]

Right, so lets put hundreds of thousands of people out of work to punish those execs".

With respect, I actually didn't say anything about financial help just "lost for words" about the amount of money those execs made!
An infinitesimally small amount of the money spent on stock buy-back went to the execs - over 99% directly benefited the general stockholders. In fact, run of the mill Boeing employees are among the largest stockholders - either through direct ownership or via their 401k accounts.
While the long term wisdom of stock buy-backs are open to debate, there is no question is an effective way to give back to the company stockholders when the company is highly profitable.

[wigbam]

Just imagine - a company fails after making astonishingly poor decisions, both financial as well as management ones for several consecutive years running. What a shock! Who would have thought? Some companies played it smart and saved the cash (Apple, for example) during good times, but instead Boeing chose to have a big non-stop party throughout the second half of the last decade. Now the chickens have come home to roost.

Yes, of course it would suck for employees if Boeing goes under, but why does it have to suck for some but not for others? Who chooses to decide which company is worthy of bailing out? As with thousands of bankruptcies which happened before and will happen after - the most precious know-how and worthy left-overs would most certainly be picked up by other companies and something good might come out of it. It's a cycle which was engraved into capitalism and that's what makes it function correctly. If you start interfering - it goes pear shaped pretty quickly. Funny enough I reckon that precisely due to the decision made during 2008-2009 to bail out a few "important" companies it must have encouraged big-boy execs to have a blast and don't plan properly during the following years. Deep down they always knew that "government had their back". So as a side note - yes, the legal framework should exist for past accountability in order for management board to be summoned, questioned and then executed prosecuted. But as the whole system is corrupt to the core there is no point in dreaming. Rant over.

In the end though, of course Boeing will be bailed out. Of course execs will get to keep all the bonuses. Of course Fed will print more money to socialize the losses. All in the name of the greater good and the so-called "Too Big Too Fail" club. Hence I would not worry about Boeing. At all. Even if MAX is scrapped altogether. They still will be fine.

[CurtainTwitcher]

Stock Buyback articles that may be interesting given Boeings current predicament.

Harvard Business Review: Why Stock Buybacks Are Dangerous for the Economy (https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for-the-economy) (soft paywall, 3 articles free)
Ben Hunt Epsilon Theory: When Was I Radicalized? (Boeing edition) (https://www.epsilontheory.com/when-was-i-radicalized-boeing-edition/) (soft paywall 3 articles free)
Ben Hunt Epsilon Theory: Yeah, It’s Still Water (https://www.epsilontheory.com/yeah-its-still-water/) (Texas Instruments buyback story) (soft paywall 3 articles free)

[568]

An infinitesimally small amount of the money spent on stock buy-back went to the execs - over 99% directly benefited the general stockholders. In fact, run of the mill Boeing employees are among the largest stockholders - either through direct ownership or via their 401k accounts.
While the long term wisdom of stock buy-backs are open to debate, there is no question is an effective way to give back to the company stockholders when the company is highly profitable.

Worth a read from a while back.

https://prospect.org/environment/make-passengers-safer-boeing-just-made-shareholders-richer./

"Boeing CEO Muilenburg has benefited immensely from the company's soaring stock price From 2015 through 2018, as Boeing's chairman and chief executive officer, Muilenburg banked $95.9 million in gross pay, though his annual salary never exceeded $1.7 million. Of this total remuneration, 51 percent consisted of realized gains from exercising stock options and the vesting of stock awards. Another 34 percent was nonequity compensation, based in 2013–2016 on Boeing's profitability and in 2017–2018 on a more complicated set of financial metrics. Just ahead of Muilenburg's ascent to the top management position, the company notified its shareholders in its proxy statement that, for the first time, “beginning in 2014, a significant portion of our named executive officers' long-term incentive compensation will be tied to Boeing's total shareholder return as compared to a group of 24 peer companies.”

Also worth reading.

https://www.worth.com/contributor/how-stock-buybacks-undermine-healthy-capitalism/


"So buybacks, apart from near-term benefits to executives who are compensated in company shares and options, are not great builders of value. Buybacks don’t add to the size of a company’s economic pie; they simply deliver a bigger slice of the existing pie to the largest shareholders, who are usually executives of the firm. Since the largest individual shareholders of any stock are typically executives of the firm, you can understand why companies promote buybacks that raise the value of their stock. But why aren’t more investors avoiding companies overspending on buybacks"?

[Willyboy]

An infinitesimally small amount of the money spent on stock buy-back went to the execs - over 99% directly benefited the general stockholders. In fact, run of the mill Boeing employees are among the largest stockholders - either through direct ownership or via their 401k accounts.
While the long term wisdom of stock buy-backs are open to debate, there is no question is an effective way to give back to the company stockholders when the company is highly profitable.

https://www.zerohedge.com/economics/ben-hunt-when-i-was-radicalized-boeing-edition

[Giant Bird]

If I was secretary to the treasury one of the conditions I would make on a bailout would be that in return for guaranteeing loans for Boeing that they grant the government
100 mill stock options to be exercised at the lowest closing price between immediately before the bailout and the day the loans are fully paid off, exercise able by the government for up to 5 years after the loans are fully paid.
That way

Boeing gets the cash to stay afloat and keep employing their employees and keeping buying parts from suppliers
Boeing gets to borrow the funds much cheaper than they would otherwise pay with their reduced capital base and lower credit rating.


Boeing conserves cash as there is no cash cost to Boeing in issuing the stock options to the government
The indirect cost of issuing the options is an opportunity cost in future stock price increases borne by the shareholders and executives who previously benefited from the share buy backs which helped weaken the company capital structure.
The government gets rewarded for its generosity in providing a financial guaranteed for Boeing by taking a profit on the options when the stock price recovers due to the government help.
When the share price recovers the shareholders have to share the gains with the government due to the stock options it holds.
When the government exercises their stock options Boeing gets a capital boost.

Boeing says they cannot borrow the money without government help. This is not strictly true. There is always someone who will lend you money. It is just the interest rate they want to charge you for the risk. In the case of Boeing the perceived risk gets higher ever day so does the interest rate.In retrospect when they went to the banks in January they should have borrowed more than the 13 b they took.

[Superpilot]

The American political system is intertwined with the needs and greed of top American businesses, they are one and the same. The big corps are the donors that then expect the lackeys to provide ROI. Just look at history, time and time again Banking, Oil & Energy and Aerospace/Defense gets away with capitalising the gains and socialising the losses (I borrowed that line from elsewhere).

[Jet Jockey A4]

The word from different sources say Boeing wants something like $60 billion in aid.

[ATC Watcher]

Buys back shares ? . they should have waited a bit ..Boeing stock went shortly below 100 $ at Wall street opening today . 1/4 of its value from September..:(

[HarryMann]

The max will be scrapped in the coming months. 30 years too late in my opinion.
that's a feeling I'm getting too.

[Jet Jockey A4]

I heard Air Canada cancelled 12 of their MAX deliveries and the word is they are not being replaced by other Boeing products.

[megan]

Right, so lets put hundreds of thousands of people out of work to punish those execs. That'll show themtd, I wonder, if like the banks, the execs will pay themselves a big fat bonus if the little people via the government bail them out, we, the execs, saved the company.

[alf5071h]

The request for aid, however couched, is the admission of reality.
Also, the time is opportune to play the 'Too Big To Fail' card based on the world virus situation and problems with 737 Max.

The balance of continuing with the 737 or not in the current economic situation, could be sufficiently close that the combined government - manufacturer judgement in considering both the short term work force, the long term future of commercial aviation, and US economic standing, is that it is time to 'pull the 737 plug'.
The virus provides an immediate excuse, now more understandable and acceptable publicly. The business case is changing to the longer term; share holders realise that there are few short term gains, and a better strategy is to plan for the future.

The question is how far ahead. Use government money for existing / future military / space programmes, or for the distant future with a new commercial aircraft, or both. If funding is available, then governments will dictate future projects, both military and commercial; drip feeding finance to support the immediate situation and laying foundations 15 years hence.

Aviation post virus is going to be very different. Airlines have managed so far without the Max; demand may not recover. Long haul are culling older aircraft and planning for revised demand; changing public perceptions of need to travel, and leaner and greener aviation.

[568]

The request for aid, however couched, is the admission of reality.
Also, the time is opportune to play the 'Too Big To Fail' card based on the world virus situation and problems with 737 Max.

The balance of continuing with the 737 or not in the current economic situation, could be sufficiently close that the combined government - manufacturer judgement in considering both the short term work force, the long term future of commercial aviation, and US economic standing, is that it is time to 'pull the 737 plug'.
The virus provides an immediate excuse, now more understandable and acceptable publicly. The business case is changing to the longer term; share holders realise that there are few short term gains, and a better strategy is to plan for the future.

The question is how far ahead. Use government money for existing / future military / space programmes, or for the distant future with a new commercial aircraft, or both. If funding is available, then governments will dictate future projects, both military and commercial; drip feeding finance to support the immediate situation and laying foundations 15 years hence.

Aviation post virus is going to be very different. Airlines have managed so far without the Max; demand may not recover. Long haul are culling older aircraft and planning for revised demand; changing public perceptions of need to travel, and leaner and greener aviation.

Yes indeed; business, people, global needs and aviation will certainly be changed forever after this crisis is over. The next virus that comes along may be more extreme so the world's governments' and WHO should plan for this now.

[WHBM]

Rather says it all, lost three-quarters of its value since last September, which was halfway through the grounding. Even Norwegian has not lost as much ! In normal times this would have been business page headlines.

https://cimg7.ibsrv.net/gimg/pprune.org-vbulletin/639x395/boeing_8d187ec79708713f06aef34d9fc3941d6047bda8.jpg

[etudiant]

Nikki Haley has resigned from the Boeing board, expressing her opposition to this bailout. https://www.flightglobal.com/airframers/nikki-haley-resigns-boeings-board-in-protest-of-coronavirus-aid-package/137420.article

[568]

Nikki Haley has resigned from the Boeing board, expressing her opposition to this bailout. https://www.flightglobal.com/airframers/nikki-haley-resigns-boeings-board-in-protest-of-coronavirus-aid-package/137420.article

Not a great loss IMHO.

[568]

Rather says it all, lost three-quarters of its value since last September, which was halfway through the grounding. Even Norwegian has not lost as much ! In normal times this would have been business page headlines.

https://cimg7.ibsrv.net/gimg/pprune.org-vbulletin/639x395/boeing_8d187ec79708713f06aef34d9fc3941d6047bda8.jpg

Sad to see but not surprising considering events passed.

[neville_nobody]

I would feel aggrieved if I were Bombardier and Boeing collected a government bailout.