system
Next in order is suggesting to congress relief for flight schools and independent flight instructors. What happened to American ingenuity? Boeing and others asking for a handout? Shiiit!
Next in order is suggesting to congress relief for flight schools and independent flight instructors. What happened to American ingenuity? Boeing and others asking for a handout? Shiiit!
Well, no billings means no cash flow which means no money for payroll which means no paycheck which means layoffs. Pretty straight forward.
Bad management = burden to their workforce and taxpayers. Simple as it gets.
Boeing is reaching the end of a very long string of bad luck - mostly self-inflicted. They have a point about maintaining cash flow to their suppliers.
Of course, they could turn to the private sector for bridge loans, or have an emergency short term bond issue at, say, 20% interest. Either of these would cause extreme pain during the recovery and would likely result in ousting the board of directors - hence the request for a $60B liquidity injection from the government.
Not bad luck - bad management.
After Blowing $4.5 Trillion on Share Buybacks, Airlines, Boeing, Many Other Culprits Want Taxpayer & Fed Bailouts of their Shareholders
by Wolf Richter • Mar 17, 2020 •
Chapter 11 bankruptcy that wipes out shareholders is the correct solution for collapsing share-buyback queens. US airlines already know this from experience. It works.
By Wolf Richter for WOLF STREET:
The Trump administration is putting together a rumored $850-billion stimulus package that will include taxpayer funded bailouts of Corporate America, according to leaks cited widely by the media. Trump in the press conference today singled out $50 billion in bailout funds for US airlines alone. A bailout of this type is designed to bail out shareholders and unsecured creditors. That’s all it is. The alternative would be a US chapter 11 bankruptcy procedure which would allow the company to operate, while it is being handed to the creditors, with shareholders getting wiped out.
For an interesting comparison, read the other article about how Quantas is dealing with the situation. Deferring the shareholder dividend, no pay for upper executives and the board members, and no bonuses for same. Plus, they are working with other companies to see if there are ways to employ their furloughed employees. Interesting contrast.
I’m not necessarily supporting the bailout, but before you adopt the “screw the shareholders” chant, you might want to check your 401K, IRA or mutual fund portfolios. You might just be one of those shareholders. Just sayn’… It’s a complicated world.
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When you and I get behind and need money we sell stuff off. It’s time for Boeing to sell off many of the business, patents and such. They’ll raise the $60 million if they wanted too.
There should never be any bailouts that do not wipe out 100% of shareholder and bond equity.
Agree.
@Klaus M, you write “$60 million”. The article says Boeing is asking for “$60 billion”. Those two numbers are different, by a factor of 1000.
Cord, Auburn, Studebaker and AMC went bust. The world kept turning. Let Boeing go bust and let a new Company arise from the rubble Boeing itself created. The loss of McDonald-Douglas as a competitor to Boeing hurt the aviation community. The loss of Boeing will be just a ripple in the ocean of time and progress. Government has no business bailing out Boeing or any other mega-company. Let the chips fall where they may.
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Because, Mark, in most cases the taxpayer is also the stockholder. As I said, I’m not lobbying for the bailout, I’m just saying that we don’t all need to piously pound the drum for letting the bastards fail when it will impact us too. It is complicated, because most 401Ks and mutual funds make investments without your input, with the goal of making you money. Can you tell me that you would sell a mutual fund because it owned Boeing or United as a portion of its portfolio? Bankruptcy is a pebble in a pond that ripples far beyond the company that goes under. It extends into suppliers and vendors that may also die in the process even though they were not complicit in Boeing’s mismanagement. Bailouts are a poor way of addressing the problem, but at this point they may be the only tool the government has to stop the bleeding.
F-15s, etc. The government is not going to let Boeing go out of business.
If circumstances become extreme ( ! ), Boeing may get broken up into several more-narrowly-focused companies. Airbus, too. Kind of like telling GM that they can make passenger cars, but not dump trucks.
But, really - what would that accomplish? Be careful what you ask for…
Amen, Yars. The law of unintended consequences.
There should be some middle ground. Give Boeing the $60B it is looking for in exchange for a 50% equity stake in the company. In three years the taxpayers could exit the position for double their investment. It would be at least a 50% haircut for investors that bought in at the frothy top, but would also maintain a reasonable amount of value for the long term shareholders that may have bought in years ago.
Otherwise, I am sure China would love to buy Boeing out of bankruptcy for ten cents on the dollar. I mean if you are REALLY going to let the chips fall where they may. Or do you draw the line somewhere in regard to no government intervention in the free market?