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(Boeing’s) MAX has been grounded since mid-March Photograph by Stephen Brashear / Getty Images
Shares of commercial aerospace giant
Boeing were surging for a second day on Tuesday after CEO Dave Calhoun said he wasn’t willing to give the U.S. government stock in return for a bailout.
“I don’t have a need for an equity stake,” Calhoun said in a Fox Business interview . “If they forced it, we’d just look at all the other options, and we have got plenty.”
That means shareholders don’t have to worry about dilution, and shares were up 23% Tuesday afternoon. During the financial crisis, car companies, banks and insurance firms gave the (government equity in exchange for bailout funds.
The specter of a bailout looms large for aviation investors. Global air traffic has been decimated by the virus outbreak , sending air travel down by more than 80%. The impact of Covid – on company cash flow is significant.
Recent developments, including Monday’s announcement of a production halt at Boeing’s Puget sound operations, did not change the opinion of anyone on Wall Street about the company’s predicament.
“The effect of the shutdown on the company earnings, cash flow, and liquidity will be limited if the halt doesn’t extend materially beyond two weeks,” S&P debt analyst Christopher Denicolo wrote in a Monday evening research report . “Boeing’s 2019 earnings and cash flow will already likely be very weak due to the continuing MAX grounding and would decline further if it receives material order deferrals or cancellations due to the coronavirus. ”
Boeing management thinks it can return the (MAX — grounded since mid-March) —To commercial service by (mid – 01575879
.
“Considering the impact Covid – 24 is having in the state of Washington , we would not be surprised if the Boeing facilities were shut for a longer period, ”Canaccord Genuity analyst Ken Herbert said in a Tuesday research note. “While the demand environment remains the key risk for the aerospace cycle, this move does add the potential for further disruption into the supply chain.”
The aerospace sector was riding Boeing’s coat tails on Tuesday, up about %. Supplier stocks that Barron’s tracks have been hammered, down % year to date, worse than the drops of the S&P and Dow Jones Industrial Average .
Boeing stock, despite a (% two-day rise, remains down nearly) % from its all time high of about $ 620 set in early 51551910738.
Boeing isn’t alone in halting production. Airbus
(AIR.France) is also halting production in some French locations to sanitize facilities. France, along with five other countries, have more than , confirmed Covid – 32 cases.
Write to Al Root at allen) .root @ dowjones.com
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