Boeing is cutting about 10% of its work force and slowing production of planes to deal with a downturn in business that started with the grounding of its best-selling jet and has accelerated because of the coronavirus pandemic. (April 29)
Boeing chose borrowing instead of a bailout.
The aircraft maker said late Thursday that it had decided not to pursue assistance from the federal government amid a financial crunch caused by the coronavirus and its 737 Max safety crisis.
Instead, the company issued a massive bond offering totaling $25 billion. The debt deal included seven tranches with maturities in the range of three to 40 years.
That infusion of cash is expected to help the company withstand the financial storm caused by a global slowdown in travel, which has led airlines to postpone plane purchases, and the losses caused by the temporary grounding of the 737 Max.
Boeing also announced earlier this week that it would cut about 10% of its workforce, which totaled more than 160,000 employees at the end of 2019. Those cuts will include layoffs, buyouts and the elimination of empty positions.
Boeing reported “robust demand” for its bond offering, which it said “reflects strong support for the long-term strength of Boeing and the aviation industry.”
Coronavirus, 737 Max crises wreak havoc: Why Boeing might not need a bailout
Congress had included up to $17 billion in aid in the Coronavirus Aid, Relief, and Economic Security (CARES) Act for a potential Boeing bailout, viewing the company’s survival as crucial to national security and economic health. In addition to airplanes, Boeing also makes products for the U.S. military as a major aerospace defense contractor.
Boeing said the existence of the CARES Act aid helped provide “confidence in the market” for the bond deal.
“As a result of the response, and pending the closure of this transaction expected Monday, May 4, we do not plan to seek additional funding through the capital markets or the U.S. government options at this time,” the company said in a statement. “We will continue to assess our liquidity position as the health crisis and our dynamic business environment evolve.”
USA TODAY reported in April that Boeing might not need a bailout due to other financial measures the company had taken and could yet take.
Earlier this week, Boeing posted its second consecutive quarterly loss after turning a profit for more than 40 straight quarters. The company posted a loss of $641 million in the first quarter, compared with a profit of $2.15 billion in the same period a year earlier. The company’s first-quarter revenue fell 26% to $16.9 billion.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
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