Name: Coronavirus Threatens To End America’s Long Run As A Leader In Commercial Aviation
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Coronavirus Threatens To End America’s Long Run As A Leader In Commercial Aviation

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BETAThis is a BETA experience. You may opt-out by&nbsp;Mar 19, 2020,The aviation industry is beset by a liquidity crisis that could bring an end to America’s century of global leadership in building commercial aircraft. The only way to avert impending disaster is for Washington to act quickly with grants, loans, tax breaks and whatever other tools are readily available to keep the supply chain from collapsing.This is not an exaggeration, and it isn’t just about Boeing. Airbus, Boeing’s principal rival in the jetliner business, is facing its own liquidity crisis as aircraft deliveries cease, the global supply chain seizes up, and bankruptcy beckons for many sources of essential production inputs.But Europe has never been averse to subsidizing Airbus. The company has received subsidies since its inception. Boeing has to operate in a different political environment, where government assistance of any company is viewed with suspicion—even if it is the nation’s biggest exporter.The reason Boeing tops the ranks of U.S. exporters is that it builds all of its planes in America. Over 80% of its suppliers are located here too, and most of the company’s revenues pass through to those suppliers when the industry is functioning normally.But these are not normal times. Even if there had never been a problem with the 737 MAX, the simple reality today is that nobody who has a choice is flying, and the last thing any carrier wants is to take delivery of more jetliners while much of the fleet it already operates is grounded.Recommended For You123Boeing’s cashflow has plummeted. Even if it made sense to keep producing new planes in the absence of demand, Boeing doesn’t have the kind of cashflow it needs to keep paying for General Electric engines, Collins Aerospace electronics, and all the hundreds of other pieces of equipment needed to make a jetliner whole.The collapse of share prices for Boeing and many of its top suppliers signals that Wall Street is doubtful about the industry’s future. Declining equity values further erode the financial options of corporate managers whose backs are to the wall.Everybody knows that the current crisis will end later this year if Americans do what the Centers for Disease Control are telling them to do. But the crisis in aviation may not end when the pandemic does, because suppliers are laying off workers in droves and finances are deteriorating from boardrooms to the family banking account.As that plays out, companies like Boeing may have no choice but to furlough skilled workers even though they are essential to engineering and production. Once that happens, the amount of time required to reconstitute a production line stretches out, and the opportunity grows for other players to fill the gap as global demand recovers.Yes, I am talking about China.Wall Street analysts can debate whether the nation’s economy faces the prospect of a V-shaped or U-shaped recovery, but for companies that participate in building commercial transports, an L-shaped outcome is all too plausible. In other words, the market doesn’t come back because no carrier has the resources to buy new planes, and Boeing is thus unable to remain price-competitive with subsidized foreign competitors.There is only one way to reduce the likelihood of disaster for Boeing and its 17,000 suppliers in the near term. The government needs to step in. It doesn’t have to be a giveaway. Of course there will be strings attached, and terms for recovering taxpayer funds. That’s what happened when Detroit needed to be bailed out a decade ago, and it can happen again.But the bottom line is that if Washington doesn’t act fast, this could be the end of the road for America’s long chronicle of success in building commercial aircraft. The system as we know it has begun to unravel, and once it is gone there may be no way to get it back.We’re talking about a global jetliner market worth trillions of dollars over the next two decades. Loaning the nation’s only surviving builder of jetliners and its suppliers $60 billion to stay in the game is a bargain. This is no time to be debating fine details. America’s future in the global aerospace market is on the line.Boeing and several of its suppliers contribute to my think tank—which is one reason why I know how dire the current situation is.my&nbsp;.&nbsp;

BETAThis is a BETA experience. You may opt-out by&nbsp;Mar 19, 2020,The aviation industry is beset by a liquidity crisis that could bring an end to America’s century of global leadership in building commercial aircraft. The only way to avert impending disaster is for Washington to act quickly with grants, loans, tax breaks and whatever other tools are readily available to keep the supply chain from collapsing.This is not an exaggeration, and it isn’t just about Boeing. Airbus, Boeing’s principal rival in the jetliner business, is facing its own liquidity crisis as aircraft deliveries cease,...

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Loren Thompson

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Coronavirus Threatens To End America’s Long Run As A Leader In Commercial Aviation

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