Boeing, US Airlines Soar After Senate Deal with Billions in Support

The Senate's coronavirus relief bill has set aside $50 billion in support for ailing U.S. airlines, with the potential for billions more in loans to struggling planemaker Boeing.
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Boeing Co.  (BA) - Get Report shares extended their run of gains Wednesday, lifting the planemaker to the highest levels in nearly two weeks, follow last night's Senate aid package agreement and more reports that is grounded 737 MAX jet is primed to return to service later this summer.

The Senate's coronavirus relief bill, which was agreed by lawmakers late last night and will be voted on later today by both Houses of Congress, will provide around $500 billion in direct loan support to key industries such as aviation and aerospace amid the ongoing damage wrought by the global coronavirus outbreak.

Investors were also encouraged by a report from Reuters which suggested the planemaker could re-start production of its grounded 737 MAX aircraft in May, This followed comments from CEO David Calhoun yesterday that indicated Boeing is still planning on the flagship carrier's return to service sometime in the early summer.

Boeing shares were marked 18% higher in early trading Wednesday to change hands at $150.77 each, the highest since March 13 and a move that takes its five-day surge past 52.5%.

U.S. airline shares were also on the march, with American Airlines  (AAL) - Get Report rising 9%, and rivals Delta Air Lines  (DAL) - Get Report and United Airlines  (UAL) - Get Report gaining 7% each as investors bet that the Senate aid package would bolster the finances of the country's decimated commercial carries with $50 billion in direct support,

The International Air Transport Association, also known as IATA, said Tuesday that carriers around the world could lose $250 billion in revenues this year as travel restrictions and border closings hammer international demand. 

"We would ask the governments to act fast in providing financial relief to airlines,"  said IATA director general Alexandre de Juniac. "Some countries have done it and that is a positive sign."  

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.