- Order Reprints
- Print Article
The U.S. Senate passed a multi-trillion-dollar stimulus bill—the CARES Act—late Wednesday. The stimulus act includes much-needed support for workers and many industries, including the hardest hit sectors of the economy such as air travel.
(ticker: BA)—one of the two dominant aircraft makers—is supportive of the bill.
“We thank the Administration, especially the President and Secretary Mnuchin, as well as Congress for working together to take swift bipartisan action to support the American economy,” the company said in a news release published immediately after the vote was passed. The company goes on to cite the 2.5 million aviation-related jobs as well as 17,000 aerospace suppliers that will benefit.
CARES, short for Coronavirus Aid, Relief and Economic Security, includes $500 billion in aid for U.S. businesses in the form of direct assistance or loan guarantees. Some detail is lacking, but the government can guarantee loans, buy securities directly from companies or buy securities in secondary markets, such as the stock market.
It isn’t clear that Boeing will take bailout dollars. CEO Dave Calhoun said earlier this week Boeing won’t take special support if it comes with too many strings attached. The press release reiterated that idea: “We have also taken a number of measures for affordability and liquidity as we navigate the challenges our industry currently faces.” Boeing—in addition to taking on more debt in March—recently cut executive pay as well as suspended its dividend and stock buyback activity.
Still, federal loan guarantees and payments to the aviation industry is good news for Boeing. It wants its customers to be healthy. And Covid-19 is the worse episode in the airline industry’s history.
“Nearly 6,000 planes are now in storage at [about] 600 sites around the world,” wrote Vertical Research Partner analyst Rob Stallard in a Wednesday research report. That’s roughly 25% of the global commercial jet fleet. It isn’t a perfect equation, but in one sense those planes need to get back in the air before Boeing can sell more jets to global air carrier in a post-coronavirus world.
Within the $500 billion in aid for U.S. businesses is $25 billion carved out for airlines, $4 billion for cargo carriers and $17 billion for industries critical for national security. Boeing isn’t named specifically, but it is a huge defense contractor, one of the industries critical for national security.
Defense contractors have been hit hard by the stock market downturn, but nowhere near as hard as commercial aviation. Stock in defense firms, excluding Boeing, are down about 19% year to date, better than the comparable drops of the
Dow Jones Industrial Average
Boeing shares, on the other hand, are still down 47% year to date after an epic four day rally which sent shares from under $100 to more than $170.
Aerospace suppliers Barron’s track are up on stimulus news too, but shares remain down about 43% year to date.
Airlines, to round out the aviation-related stock impacts, are down about 47% year to date. Like Boeing, the sector has rallied ahead of the stimulus passage.
(AAL) shares, for instance, jumped 35.8% Tuesday and another 10.6% Wednesday.
American shares are up another 3.4% on Thursday, but investors shouldn’t expect another huge jump today. The stock market, after all, is forward looking. In fact, U.S. stock futures didn’t move much in response to the Senate bill moving to the House.
Boeing stock was up 10% Thursday morning. The S&P 500 and Dow were up about 3%.
Write to Al Root at email@example.com