Boeing Co. (BA) - Get The Boeing Company Report shares surged higher Tuesday after it stuck to forecasts for mid-year return for the 737 MAX and investors bet a Senate coronavirus stimulus bill could steer billions towards the troubled planemaker.
Boeing CEO David Calhoun told CNBC that he still expects the flagship plane, which was grounded last year following two fatal crashes that took the lives of 346 people, to get FAA approval to return to service in early summer. The current Senate relief package, which could reach $2.5 trillion, is also likely to provide loan guarantees and grants to the U.S. aviation and aerospace industries, which have been ravaged by the global coronavirus pandemic.
"We're very close to the finish line," Calhoun said of the 737 MAX return, adding that there were "a lot of options for us in the private markets, but the credit markets have to be open" when asked about the planemaker's request for $60 billion in financial aid.
Boeing shares were marked 17.7% higher in early trading Tuesday to change hands at $123.51 each, a move that still leaves the stocks with a March decline of around 55%.
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. Boeing 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.
A loan guarantee lifeline would likely fall short of what investors will need to lift Boeing back to its pre-coronavirus crisis levels, but it would mitigate near-term concerns for a cash crisis at the planemaker, whose credit rating sits just two notches above "junk" status at Standard & Poor's.
"We do have liquidity," Calhoun insisted" We have $15 billion in the bank and we are paying our suppliers, and with every dollar we acquire, 70 cents goes directly to the industry supply chain that underpins us."
"But we need to know that credit markets are open, not only to us, but to the entire supply chain," he added.
Still, Boeing's request for government cash, which followed a series of management failures, $43 billion in share buybacks and $17.4 billion in shareholder dividends over the past six years, continues to face opposition in Washington.
"I cannot support a move to lean on the federal government for a stimulus or bailout that prioritizes our company over others and relies on taxpayers to guarantee our financial position," said former U.N. Ambassador, and possible future Presidential candidate Nikki Haley, in a letter that marked her resignation from Boeing's board of directors last Thursday.
"The board and executive team are going in a direction I cannot support," the former South Carolina governor added.
Earlier this year, Boeing posted its first annual loss since 1997 as fourth quarter revenues plunged 39.7% to $17.11 billion and airplane orders nearly ground to a halt.
Boeing said MAX-related delay and grounding costs increased by $2.6 billion over the quarter, and just over $18. billion in total, while cash flow was measured at a negative $2.22 billion over the final three months of the year.