Remember the good old days when we could just talk about how incompetent Boeing was and get collectively angry that the MAX still hadn’t returned to service?
That was a month ago.
Things couldn’t be any more different right now. Oh sure, we can still talk about how incompetent Boeing is, but the MAX grounding isn’t top of mind for anyone, not even Boeing. In fact, plunging demand means airlines are thrilled that the company still hasn’t been able to get the airplane back in the air. If they can’t get the airplane delivered, they don’t have to pay for it.
In other words, to repurpose a horribly-racist (mis)quote attributed to General Philip Sheridan:
Think about Southwest. That airline should have had more than 70 MAX airplanes flying by the end of 2019 and more than 100 by the end of this year. None are flying today. This was an enormous problem, to the point that in the airline’s 2019 10-K filing, it put this as a risk factor:
Boeing no longer manufactures versions of the 737 other than the 737 MAX family of aircraft. If the 737 MAX aircraft were to remain unavailable for the Company’s flight operations, the Company’s growth would be restricted unless and until it could procure and operate other types of aircraft from Boeing or another manufacturer, seller, or lessor, and the Company’s operations would be materially adversely affected.
Growth being restricted? This coronavirus laughs at your suggestion, Southwest. Now, the risk factor should read something like:
If Boeing actually gets the MAX flying again and starts delivering the airplanes, the Company will be forced to pay for those airplanes. Were that to happen, the Company’s finances would be materially adversely affected.
Southwest isn’t alone in this boat, of course. All of the big guys in the US save Delta have MAXs on order and would most assuredly be thrilled to not have to take them right now. Of course, this isn’t limited to the MAX in terms of airline desire. The last thing an airline wants is to take delivery of ANY new airplane right now. For the MAX, that’s easy. For others, not so much.
In a week when American announced it would ground more than 130 of its widebody airplanes, it actually took delivery of one, a 787, from Boeing. The airline can’t just walk away because times are tough.
This brings me to a great bailout solution for the airlines. When’s the last time you heard about the FAA working to get the 737 MAX back in the air? It’s been awhile. If the FAA just says it won’t certify the MAX for a year, then the airlines get a huge benefit. Ok, ok, it’s not enough to actually match the $58 billion that the airlines collectively say they need, but hey, it could be part of a package. Or not.
Of course, then Boeing would have more reason to ask for a bailout. To be clear, it has already done that. It wants $60 billion for aerospace companies, mostly in loan guarantees, and mostly for itself. That’s a bold ask for a company that has done nothing but shoot itself in the foot time and time again over the last couple of years.
The MAX fiasco has put Boeing up at the top of the “easy to hate” list of companies. If that were a list put out by Capitalism Sucks magazine, then it wouldn’t be much of a concern. But there isn’t a lot of love for Boeing out there from anyone right now. You would think it would get positive press for having its CEO and board chair walk away from their salaries, but instead, it gets coverage like this:
If there’s one thing that Boeing has going for it right now, it’s that it falls squarely into the despised “too big to fail” category of companies. It is hugely important to the American economy both from an employment and a trade perspective. So what can be done?
The bailout discussions have been ongoing, and it’s entirely possible something may be announced before this post goes live despite an inability to come to an agreement in Congress when I wrote this yesterday. The most rational proposals I’ve seen floated are around the idea of supporting the economy instead of the company.
That means supporting workers and supporting trade/commerce by keeping the companies operating. It doesn’t mean supporting the owners of the company nor its creditors. Dilute them and give the people (via the government) a big old stake in Boeing at a cheap price. Then when the time comes to sell, the people make a lot of money. This is how the airline loan guarantees worked after 9/11 and it’s how the auto bailouts worked. This shouldn’t just apply to Boeing. It could and should apply to airline bailouts as well.
That all sounds well and good, but this is Boeing, and Boeing is exceedingly powerful. It wouldn’t shock me to see the company find a way to wiggle out of any responsibility at the top even though that’s where the problem has been since long before this coronavirus was even on anyone’s radar.
In the meantime, the airlines wait and hope that they don’t have to take any 737 MAXs anytime soon.
