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Airbus is asking for government assistance, which raises the question of how bad the airline manufacturing industry will get. Not only has Boeing (NYSE: BA) been hurt by labor problems and a strike, but the most damage to its finances will come as airlines around the world cut orders already in place and stop making new orders.
According to the AP, "A senior Airbus official says the plane maker wants financing help from other European governments following a $6.4 billion aid package from France last month."
Is it imaginable that Boeing could need money? A year ago, no one believed that Detroit would need a dime.
Boeing currently carries $7 billion in long-term debt. Its revenue is falling. Last quarter it brought in a little over $12 billion and had an operating loss of $416 million.
What would it take to get Boeing into real trouble? Cancellations could certainly rise to 100 aircraft. Dubai's LCAL cut orders for 16 Dreamliners in December. Russia's S7 Airlines cut an order for the same number.
Boeing's stock is already a risk. There is no guarantee that it can be self-supporting if the airline business is severely crippled. And the federal government may think it is just as "strategic" to the US economy as the car companies are.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
2-22-2009 @ 11:45PM
crystalperido said...
Wonder what that would do to Boeing's case before the WTO..
2-22-2009 @ 10:46AM
Scott said...
Doug, you AP excerpt is a bit misleading. This infers that Airbus wants direct aid from the governments, and you go on to ask if Boeing should get aid from TARP.
In fact, what Airbus suggests is that other governments follow what France did and that is to provide money to banks earmarked for financing to Airbus customers--not to Airbus itself--in order to finance their purchases from Airbus. This is very different from what you implied, and very different than what you suggest for Boeing.
The US would be wise to follow the French model and provide money to banks to finance Boeing customers.