Boeing, Airbus may end up 'storing' 200 new planes in the desert

Posted Nov 12th 2008 5:25PM by Joseph Lazzaro
Filed under: Industry, Boeing Co (BA)

In the quarters ahead, new autos may not be the only inventory item piling up.

A 'really big ticket item' -- new commercial airplanes -- may start piling up, as well. Boeing and Airbus may end up with as many as 200 new planes without buyers in 2009 because airlines are unable to obtain funds to pay for them, due to the credit crunch.

In the second half of 2008, banks and other sources of capital decreased lending to airlines -- and to just about everyone else, it seems -- on concerns the loans won't be paid back. Other banks are decreasing lending primarily as a means of rebuilding damaged balance sheets.

The lending cutback may create a funding gap of about $65 billion at Boeing next year, and a $20 billion gap at Airbus. Boeing Capital Corp., the airplane manufacturing giant's financing unit, is expected to make $1 billion in loans to customers in 2009.

Boeing's (NYSE: BA) shares fell $1.45 to $42.52 Wednesday, while shares of Airbus's parent EADS closed up 10 euro cents to 12.10 euros on the Paris Exchange.

Boeing / Economic Analysis: Another negative ripple from the credit crunch. The last thing Boeing, which lost about $100 million per day during its two-month strike, needs is the inability of airlines to obtain bank loans for ordered planes. Further, the last thing the U.S. needs is for one of its highest-value-added products -- and best-performing export sectors -- to hit a slump, due to lack of financing. Hence, if financing does not return, a way must be found to ensure that airlines get the loans they need to buy airplanes.

One potential solution: U.S. Treasury Secretary Henry Paulson Wednesday announced the possible use of TARP bank rescue funds to free-up consumer credit markets, including car loans, student loans, and credit cards. Well, if airlines cannot obtain financing for jetliners, the Bush Administration / incoming Obama Administration should make funds available to the airlines for this purpose: the United States cannot tolerate the freezing-up of one its few functioning, growing, high-value-added sectors -- commercial airplane manufacturing.

Tags: Airbus, BA, Boeing, commercial aviation, credit crunch, credit markets, EADS, exports, inthenews, TARP, U.S. Treasury

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Reader Comments (Page 1 of 1)

11-12-2008 @ 6:52PM

Kent said...

Isn't this just great?! What else can go wrong? I don't think Congress realized the consequences from their bad decisions on the mortgage market would have on economy. Thanks Barney and thanks Dodd/Schumer. Barack really needs to get tough with Congress as he now must represent the people and not his partisan Democrats. The U.S. government needs a financial solution : have banks issue promissory notes to pay these aircraft companies and discounted by the FEDS even if it eats into Boeing's profit margins. Better that than dead inventory.

11-12-2008 @ 9:12PM

Michael said...

Kent is sure right on the money. Yeah. lol Money.$$$ What keeps the economy going. Still, this was inevitable with what has been going on in the world y'all. Look at the reality of this. Not just here at home are we sucking hind tit. It is world wide and it ain't gonna be better for quite some time. Unions to include the one at Boeing have caused as much damage to our country as the banks and financial sector. Unions have driven work out of the country. Our auto industry sucks and so does much of our other industry in the good ole USA. Unions have decimated themselves. And is it so hard to see? Look at Toyota.. No unions there and they get paid really well and put out a quality product with high resale value. For that matter the same with other foreign cars. US made products don't make it and that is because they are low quality. What happened to pride in workmanship? With unions it is Socialism at it's worse. The employees have no incentive to even work or do quality work. All get paid the same and all get pay raises no matter if they are a dumb lazy as or what ever. Get rid of unions, pay people for talent and give raises based on merit. Produce or hit the road. Should say the same to Obama..... Do what is right or move over and let Palen handle it....... Like that you turkeys? ha ha.

11-12-2008 @ 10:22PM

MeggaWhats said...

A 'really big ticket item' -- new commercial airplanes -- may start piling up, as well. Boeing and Airbus may end up with as many as 200 new planes without buyers in 2009 because airlines are unable to obtain funds to pay for them, due to the credit crunch...........
Like to see the repo guy bring that one back to the lender.

11-13-2008 @ 2:55AM

BHarrison said...

Hmmmm . . . As the article states: "One potential solution: U.S. Treasury Secretary Henry Paulson Wednesday announced the possible use of TARP bank rescue funds to free-up consumer credit markets, including car loans, student loans, and credit cards."

That sounds "nice"; but who is going to take on that indebtedness during these difficult times of unemployment and economic distress? Everyone knows that they need to reduce their levels of indebtedness; but we need "spending" to revitalize the economy . . . somewhat of a quandary, isn't it? It appears that these "solutions" are contrary to each other. A "broken economy" is a very difficult and complex thing to "fix".

11-13-2008 @ 3:05AM

BHarrison said...

A key point to remember is that the CEOs and upper management of these corporations have been paid "untold BILLIONS of dollars" in exorbitant salaries, bonuses, and other compensations while they irresponsibly mismanaged the coportations using the pyramid and Ponzi schemes, and the FRAUD of "creative accounting practices" to DEFRAUD the investors. And many (most) of these CRIMINAL CEOs are STILL running those corporations, and EVEN RUNNING THE BAILOUT PROGRAM.