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Boeing has faced a lot of setbacks since the Lion Air tragedy set off a string of bad 737 Max headlines and ultimately grounded the plane. Since then, Boeing was forced to drawdown its entire line of credit, announce a 10% workforce reduction, see its share price plummet over 60%, and brace for an abysmal self-reported travel forecast.
But here’s the thing…Boeing is basically too big to fail.
The FED de facto bailed out Boeing after it announced its junk bond etf purchase program, and isn’t going anywhere anytime soon. In fact, they balked at the US government wanting a bailout deal akin to what private money would demand when they couldn’t secure debt financing ( don’t worry the mere mention of Junk ETF buyouts provided enough cover for them to get a new fresh round of issuance because, we the taxpayer, will ultimately own that debt once the bank sells it off. So what do you think happened? Banks lined up to finance them once they knew they wouldn’t face counterparty risk by holding the bad debt if Boeing collapsed – we would).
Dave Calhoun, CEO of Boeing, has penned a just released statement which outlines the first wave of layoffs.
We’re notifying the first 6,770 of our U.S. team members this week that they will be affected. We will provide all the support we can to those of you impacted by the ILOs — including severance pay, COBRA health care coverage for U.S. employees and career transition services.
Strategically you can see the company is bracing for a “few years” of severe demand drop in commercial jets. This isn’t a new statement, and when Boeing first indicated the industry could take a few years to recover, JETS ( the global airline ETF ) plummeted on the news. Needless to say, airlines weren’t especially happy about it.
The COVID-19 pandemic’s devastating impact on the airline industry means a deep cut in the number of commercial jets and services our customers will need over the next few years,
Boeing is pushing ahead with the 737 MAX. Let’s see if they can actually get their act together. It’s one thing that the plane has crashed twice, and I can’t imagine the sorrow felt by the families of those affected, but the worst part has been the cover up and scandal surrounding the project. Even as Boeing was attempting to regain brand image…debris was found in the the fuel tanks of 737 MAX planes.
We’re moving forward with our plan to restart 737 MAX production in Renton, Washington, as our return-to-service efforts continue. And our Global Services team is changing its organization to ensure it is lean and focused on the post-COVID needs of its customers.
Now here’s the thing…if Boeing is laying off 10% of its workforce what do we think is going to happen to airlines. Much of the money that has been given to airlines has been contingent on keeping staff on the payroll, but as Larry Summers controversially stated… the airlines need to shrink to be viable. And it’s true, but it isn’t as politically viable as kicking the can down the road so we the taxpayer hopped right in and gave it a good ole Beckham free kick.
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