Lawmakers have inserted in the Senate’s $2 trillion stimulus package a little-noticed provision aimed at providing billions of dollars in emergency assistance to Boeing, the aerospace giant already under fire for deadly safety lapses in its commercial jets, three people with knowledge of the internal deliberations said.
The carve-out is separate from the $58 billion the Senate package is providing in loans for cargo and passenger airlines, as well as the $425 billion in loans it is allocating to help firms, states and cities hurt by the current downturn. Congressional aides cautioned that the Senate bill was still going through last-minute revisions and could change.
A Boeing spokesman declined to comment. The company previously said in a March 17 statement that at “least $60 billion” is needed to support the broader aerospace manufacturing industry, suggesting that the aid package should include a mix of “public and private liquidity, including loan guarantees.”
In a Tuesday interview on Fox, Boeing chief executive Dave Calhoun said he would not be willing to give the government an equity stake in the company in exchange for a bailout, implying the company would accept assistance only on its own terms. President Trump has said he would support the idea, suggested by his economic adviser, of taking an equity stake in companies that receive assistance in the package.
“If they force it, we just look at all the other options, and we’ve got plenty of them,” Calhoun said.
In its public statements, the company has said it needs the funding to sustain some 2.5 million aerospace-industry jobs and 17,000 suppliers. That includes numerous niche aerospace suppliers who provide aircraft parts to the company. Many of them are small businesses for which orders from Boeing are the primary source of revenue.
“The long term outlook for the industry is still strong, but until global passenger traffic resumes to normal levels, these measures are needed to manage the pressure on the aviation sector and the economy as a whole,” a Boeing spokesman wrote in a statement last week.
The International Association of Machinists, a union that represents aerospace industry employees, has also said there should be financial assistance for the aerospace industry. The union estimates 500,000 jobs could be at risk, according to a letter it distributed to members of congress.
The company employs more than 150,000 people worldwide, including about 70,000 in the Puget Sound area of Washington state.
The possibility that the aerospace giant would be in line for special federal assistance has already stirred public controversy, with the former U.N. ambassador under the Trump administration, Nikki Haley, resigning from the company’s board over its decision to seek public assistance.
Trump continues to view Boeing as a critical company with private and defense links that he wants to see supported, although he has at times been unclear privately about how he wants to handle the situation, one senior Republican said. Trump has said repeatedly over past weeks that the federal government would step in to help Boeing, despite criticisms from some nonpartisan experts that federal lawmakers should avoid singling out individual firms for assistance.
“Probably I would have considered [Boeing] the greatest company in the world prior to a year ago. Now they get hit 15 different ways,” Trump said in a March 17 news conference, alluding to problems with the now-grounded 737 Max jetliner. “It was coming along well, and then all or a sudden this hits,” Trump said. “So we’ll be helping Boeing.”
The insertion of the special provision came after a flurry of lobbying about the massive stimulus package, one of the largest pieces of legislation taken up in the modern history of Congress.
It also emerged late in negotiations. On March 18, the Treasury Department released a two-page memo with its request for the stimulus package. It included $50 billion in loans for the airline companies and $150 billion for other sectors of the U.S. economy experiencing “severe financial distress” because of the coronavirus pandemic.
Last Thursday, Senate Republicans released their own version of the stimulus package, which included a similar amount for the airlines and other “eligible businesses” hurt by the downturn. The bill also contained several provisions designed to improve the short-term cashflow of businesses that receive government contracts related to coronavirus response, mirroring an earlier policy change put in place by the Department of Defense.
But after a weekend in which numerous lobbying groups tried to influence the legislation, a new provision in the bill emerged early this week for businesses “critical to maintaining national security.” The $17 billion in funding is for loans and loan guarantees, not direct grants. But low-interest government loans can help companies avoid worse outcomes, such as bankruptcy or consolidation, and are considered a special form of emergency federal relief.
Boeing is the likeliest recipient of the aid based on the language in the Senate proposal, according to Dan Grazier, a national security expert at the nonprofit Project on Government Oversight, who reviewed the relevant section of the legislation.
“Boeing would be the obvious manufacturer to receive funds through this,” Grazier said.
Boeing is most likely to qualify for the funding because it has a significant commercial airplane business that has been impacted by the global travel slowdown, he said. Most defense firms do not have significant commercial businesses.
Grazier said Boeing appears to be “leveraging the crisis to help its bottom line” and noted that Boeing’s financial challenges “obviously predate coronavirus."
The Senate legislation specifies a few conditions for qualifying for the loans, such as short-term limits on executive compensation and prohibitions on dividends and buybacks, provisions reflected in the other emergency assistance the Senate is pushing for large firms affected by the economic crisis.
Democratic lawmakers have pushed for more limits on the funding, including protections for workers’ health-care benefits and pension funds, but have largely been rebuffed, according to one person with knowledge of the deliberations.
Boeing’s request for public funds has ignited controversy internally, with members of Boeing’s board of directors differing on whether to seek public help.
Haley, the former South Carolina governor who joined Boeing’s board early last year, implied in her resignation letter that it would be unfair for Boeing to receive public assistance while small businesses suffer. She said offering bailouts to specific companies is “not the role of government.”
“While I know cash is tight, that is equally true for numerous other industries and for millions of small businesses,” Haley wrote. “I cannot support a move to lean on the federal government for a stimulus or bailout that prioritizes our company over others.”
Some advocates of government oversight, too, have bristled at the prospect of Boeing receiving public help.
Jordan Libowitz, communications director for the nonprofit advocacy group Citizens for Responsibility and Ethics in Washington, noted that Boeing “has a whole giant team of lobbyists focused on getting them money in a way that ordinary Americans don’t,” said Libowitz, adding that Boing contributed to President Trump’s inaugural fund.
Craig Holman, a lobbyist with the advocacy group Public Citizen, said companies such as Boeing are likely to have more options available to them in private capital markets. Boeing could “get a loan from the bank to get through these hard times,” Holman said. “The workers, the people who are laid off or get sick, have no such options.”
Steve Ellis, vice president of the advocacy group Taxpayers for Common Sense, said Boeing should get public assistance only if it can’t find help anywhere else.
Boeing “is certainly better positioned to weather the storm than other companies, and any assistance should be about helping the people in Washington state who are sheltering in place in Washington state and unable to go to the facilities and work the lines,” Ellis said.
Boeing recently drew down the full amount of its $13.8 billion bank loan early, citing fears about access to cash moving forward. It also halted all new hires.
But some budget experts said many large companies were likely to recoup the loans being made available, and warned that a direct grant would represent a more harmful subsidy.
“In TARP, the money got repaid,” said Brian Riedl, a budget expert at the libertarian-leaning Manhattan Institute, referring to the bank bailouts authorized by Congress during the 2008 financial crisis. “And here there’s even more basis to assume it will be repaid because the loan recipients are, hopefully, not going into a long financial drop.”
However, Boeing’s financial future is far from certain. The potential financial assistance comes at a time when Boeing’s business seems to be under threat from all directions. For more than a year, it has been working with regulators to recertify the 737 Max jet, which the Federal Aviation Administration ordered grounded a year ago when faulty flight-control systems played a role in two deadly crashes. A Washington Post investigation later found that the company’s board had largely prioritized speed of production and spent little time on safety concerns.
The inability to deliver the 737 Max took a heavy toll on Boeing’s business last year, leading it to new financial lows. It finished 2019 with $76.5 billion in annual revenue, a 24 percent drop from the previous year. Dennis Muilenburg, who was fired for poor performance in light of issues with the Max, left the company with a $62 million payout.
Boeing’s business is further threatened by the near-total shutdown of air travel in recent weeks because of international travel bans and work-from-home policies meant to contain the virus. Industry analysts increasingly believe the ongoing crisis will cause airlines to defer purchases as they struggle with financial challenges of their own.
Teal Group aerospace analyst Richard Aboulafia said he thinks Boeing will face bankruptcy, mass layoffs, or both if it doesn’t get any public assistance.
“No planes are in the sky and therefore airlines don’t want new planes at all. So what happens to the factories? Either you pay them to stay open or they become a part of the biggest financial catastrophe in 100 years,” he said.
Responding to some critics’ suggestion that Boeing should get a loan on the private market, Aboulafia said “they could do that for three or four months before bankruptcy took them.” He described Nikki Haley as “the single worst corporate board member ever.”
Boeing is taking aggressive measures to contain the financial fallout from the pandemic, which erased two-thirds of the company’s stock value in less than a month. And it is struggling to contain a coronavirus outbreak of its own, which has spread to at least 32 Boeing employees, a Boeing spokesman confirmed Monday.
On Monday, the company halted production at its factories in the Puget Sound region of Washington state, the global epicenter of its commercial jet production, after the death of an employee at its Everett assembly plant who had coronavirus.
Robert Costa contributed to this report.
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