Boeing Extends Historic Gains, But Bailout Questions Persist After Senate Passes $2 Trillion CARES Act

Boeing had resisted the idea of handing equity to the government in exchange for bailout cash, but lawmakers have added a provision in the CARES Act that could do just that.

Boeing Co  (BA) - Get Report shares extended gains Thursday amid questions over conditions linked to what could be a $60 billion aerospace industry bailout spearheaded by the world's second-largest planemaker.

Senate lawmakers voted 96-0 in favor of a $2 trillion coronavirus relief bill, known as CARES, which will direct around $454 billion in loans and grants to industries hit by the spread of the global pandemic. Around $58 billion has been earmarked for the airline industry, but with strict conditionally such as a freeze in layoffs, limits on executive pay and the suspension of dividends and share buybacks.

Crucially, the bill -- which is expected to pass the House on Friday -- will allow, but not require, the government to take equity stakes in any firm that seeks cash from the CARES fund, a condition Boeing CEO David Calhoun has resisted earlier this week even as he sought $60 billion to protect what he said were 2.5 million jobs across Boeing's 17,000-strong supply chain.

"The bill's access to public and private liquidity, including loans and loan guarantees, is critical for airlines, airports, suppliers, and manufacturers to bridge to recovery," Boeing said in a statement Thursday. "Boeing's top priority is to protect our workforce and support our extensive supply chain, and the CARES Act will help provide adequate measures to help address the pandemic." 

"We have also taken a number of measures for affordability and liquidity as we navigate the challenges our industry currently faces, including foregoing pay for our CEO and board chairman, suspending our dividend until further notice, and extending our existing pause of any share repurchasing until further notice," the statement added.

Boeing shares were marked 12.3% higher in early trading Thursday, following the 24.3% surge yesterday -- the biggest single-day gain in history -- to change hands at $178.24 each, the highest since March 11 and a move that boosts its market cap past $100 billion. 

Boeing said last week that it needs a "minimum" of $60 billion in government aid in order to support the U.S. aerospace industry's 2.5 million jobs. The planemaker didn't indicate which portion of the aid it would need directly, but noted that it relies on at least 17,000 suppliers around the country and holds the position of the biggest U.S. exporter.

Calhoun, however, told Fox Business News Tuesday that if the government "forced" it to hand over an equity stake in exchange for bailout cash, it would "look at all the other options" it has, adding "we have got plenty."

He later told CNBC Wednesday that the firm has both liquidity and "$15 billion in the bank", but needed assurances that "credit markets are open, not only to us, but to the entire supply chain."