Airline stocks have been devastated over the onslaught of the coronavirus pandemic. However, it’s not just the airline agencies themselves that have suffered. Plane manufacturers have been hard hit as well as demand for new planes is expected to see a major decrease in the coming months.
Boeing (NYSE:BA) in particular has had one of the worst months in the company’s history, something which has prompted its management team to make some extreme decisions.
In a short announcement on Friday, the company stated that it would be undergoing some significant changes in order to help manage its cash flows. For one, the planemaker would be suspending all dividend payouts going forward. Back in 2019, Boeing paid out $4.6 billion in dividends, but considering its financial problems, it has decided it would be better to keep that money instead. Additionally, CEO David Clahoun, as well as Chairman Larry Kellner, would be giving up all compensation for the rest of 2020.
“Boeing is drawing on all of its resources to sustain operations, support its workforce and customers, and maintain supply chain continuity through the COVID-19 crisis and for the long term,” said the company in a brief press release on Friday. The company had already suspended a stock buyback program earlier last year. Other senior executives will still be paid, although it’s expected that there won’t be any corporate bonuses.
Boeing had asked for support from the U.S. government, hoping that the Trump administration would pass a $60 billion aid package to prop up the aerospace industry as a whole. Unfortunately, Republican Senators have ended up challenging the economic stimulus bill, leading to something of a stalemate until things resolve themselves.
While other plane manufacturers have been hard hit, the coronavirus pandemic is particularly painful for Boeing considering that its already recovering from the year-long suspension of its fast-selling 737 Max jetliners. Boeing’s stock fell by around 3.3% in light of the news, extending what’s already been a major downturn for the company.
Over the past month, shares of Boeing have plummeted by around two thirds, erasing almost $100 billion in the company’s market cap. As the coronavirus continues to spread around the world, with the U.S. becoming the third-most infected country, it’s expected that Boeing will continue to struggle in the months to come unless some sort of stimulus package from the federal government is signed.
Boeing Company Profile
Boeing is the world’s largest aerospace and defense firm. With headquarters in Chicago, the firm operates in four segments, commercial airplanes, defense, space & security, global services, and Boeing capital. Boeing’s commercial airplanes segment produces about 60% of sales and two-thirds of operating profit, and it competes with Airbus in the production of aircraft ranging from 130 seats upwards.
Boeing’s defense, space & security segment competes with Lockheed, Northrop, and several other firms to create military aircraft and weaponry. The defense segment produces about 25% of sales and 13% of operating profit, respectively. Boeing’s global services segment provides aftermarket servicing to commercial and military aircraft and produces about 15% of sales and 21% of operating profit. – Warrior Trading News
