BA Boeing Co

By Doug Cameron 

Boeing Co. took steps to preserve cash as the coronavirus pandemic and delays in the recertification of its 737 MAX aircraft exact a mounting toll on the aerospace giant.

The Chicago-based company said Wednesday that it would freeze hiring and nonessential travel, and place new limits on overtime.

A person familiar with its plans said Boeing also would soon draw down the remainder of a $13.8 billion loan that it secured last month.

Those steps are in response to challenges including what is estimated to be a nearly $20 billion bill related to the freeze in MAX production and compensation to customers of the aircraft, which has been grounded for about a year following two fatal crashes.

"It's critical for any company to preserve cash in challenging periods," said Chief Executive David Calhoun and Chief Financial Officer Greg Smith in a staff memo reviewed by The Wall Street Journal.

Boeing's shares ended Wednesday down 18% at $189.08, valuing the company at $106.5 billion. The cost of credit insurance for Boeing debt rose by two-thirds from the previous day's close, reflecting concerns about the company's cash position and widespread negative market sentiment.

The MAX jet has been grounded since March 2019 following the second of two crashes that together claimed 346 lives. Boeing halted production of the passenger jet in January. Its inability to deliver new MAX jets has pressured liquidity and forced the company to take on additional debt. Boeing secured a $13.8 billion bank loan last month.

Its latest moves don't reflect any changes to Boeing's forecast that the MAX will be ready to return to service by the middle of this year, the person said.

Federal Aviation Administration chief Steve Dickson told lawmakers in Washington on Wednesday that his agency has no specific deadline for allowing MAX jets back in the air. But increasingly he is linking that decision to bolstering public confidence once the fleet is ungrounded.

"We have no choice," he said in a recent speech to airport officials. "If the public is not confident in their aviation system, they simply will not fly."

On Wednesday, Mr. Dickson said in testimony to the House Appropriations subcommittee that the FAA is moving to increase expertise and staffing in offices that oversee delegation of authority to plane manufacturers to vet the safety of aircraft and onboard systems. He said the agency had to look more carefully at how sophisticated automated flight-control systems interact to affect the safety of new airliner designs.

Mr. Dickson said the MAX will be tested by a group of 16 U.S. and foreign airline pilots with a broad range of experience -- the first use of regular airline crew members rather than specialized pilots working for safety authorities in such a process. He called it "the most thorough review that any airplane has ever had in the history of aviation."

Boeing reported 46 canceled jet orders for February, including 11 MAX planes for Air Canada and moves by other carriers to switch from the grounded aircraft to other planes.

Boeing also booked new orders for 18 planes, resulting in a net loss of 28 orders. Boeing lost more than 200 MAX orders last year, though it still has a backlog of around 4,500 jets.

Air Canada has 24 MAX jets in its fleet. The airline had planned to expand its fleet to 50 MAX 8 aircraft and 11 MAX 9 planes, but confirmed Wednesday that it had canceled the latter. "Air Canada is fully committed to the Boeing 737 MAX aircraft," a spokesman for the carrier said.

Some customers have also swapped out the MAX for orders of wide-body jets. Air Lease Corp. last month agreed to take a third batch of 787 Dreamliners to replace some of its 135 outstanding MAX orders. Oman Air also swapped out an order for 10 MAX jets for four 787s.

Boeing reported cancellations for four 787s last month but booked net orders for 13 of the jets. The company delivered 17 planes last month, including a dozen 787s, one 777, three 767s and a single military version of the 737. Rival Airbus SE delivered 55 jets in February but secured no new orders.

The head of AerCap Holdings NV, the world's largest aircraft leasing company, said Tuesday that it had become "well-nigh impossible" to deliver aircraft to countries severely affected by the coronavirus, largely because of travel restrictions on flight crews.

AerCap CEO Gus Kelly said at an industry conference that he expected carriers wouldn't be able to receive new planes for up to three months.

BOC Aviation Ltd, a Chinese-owned aircraft lessor, said it had agreed with Boeing to reschedule its 87 outstanding MAX orders. It has pushed back the next planned delivery until the final quarter of 2020, and said in an investor update that all of its aircraft deliveries this year have been placed. The rest of the MAX jets on order are now coming through 2023.

BOC had already received six of the grounded jets, leased to carriers including Icelandair.

--Andy Pasztor and Kim Mackrael contributed to this article.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

March 11, 2020 19:00 ET (23:00 GMT)

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