Mar 25, 2020 - Economy & Business

Corporate America balks at potential strings attached in relief package

Illustration: Sarah Grillo/Axios

Uncle Sam today will become Corporate America's lender of last resort, but it's still unclear if it also will become its activist shareholder.

Driving the news: We're still awaiting full text of the bipartisan deal struck last night between the White House and Senate leaders, including if there will be any straight equity or warrants tied to financial help for affected industries and companies.

  • Airlines and big companies like Boeing have fought hard against such a move, arguing that interest payments would be adequate financial upside for taxpayers.

Boeing CEO Dave Calhoun, a former private equity executive, yesterday told Fox Business that his company would refuse government assistance if it came with equity strings attached: "If they force it we just look at all the other options, and we’ve got plenty of them."

  • Boeing declined to tell Axios what any of those other options were. Weird, since there are "plenty" of them. It also couldn't reconcile the existence of such options with Calhoun claiming the government needs to support credit markets.

Ben Baldanza, former Spirit Airlines CEO and current JetBlue director, yesterday rejected proposals for Treasury taking equity in airlines during a CNBC interview, but repeatedly dodged when asked why.

  • We do know there will be stock buyback and CEO bonus prohibitions on the airline package. Plus added oversight, transparency, and worker protection provisions.

The bottom line: Corporate America is right that it didn't directly cause this problem, as Wall Street caused the 2008 crisis, so there is no need to be punitive. But neither did taxpayers, and they're the ones footing the bill after years of corporate stock buybacks and mediocre wage increases. It will be interesting to see where the Senate sided.

Go deeper

A lifeline emerges for the devastated airline industry

American Airlines planes parked at Los Angeles International Airport. Photo: Alex Tai/SOPA Images/LightRocket via Getty Images

Congress' massive $2 trillion coronavirus stimulus package includes $58 billion for U.S. airlines, half in grants to cover 750,000 employees' paychecks, and the rest in loans or loan guarantees to help them keep operating during the worst travel downturn in history.

Why it matters: With some 80 million U.S. residents under mandatory stay-at-home orders and the coronavirus pandemic continuing to spread, hardly anyone is flying these days. But when the public health crisis ends, airlines want to be able to take off again quickly.

Boeing's continued woes will add to coronavirus damage

Illustration: Aïda Amer/Axios

Somewhat forgotten in the evaluation of the current state of the U.S. economy is the ongoing debacle at Boeing, a flagship American company whose production shutdown led to the New York Fed estimating it would shave 20% off of 2020's GDP growth — and this was before the coronavirus outbreak. Things could be getting worse for Boeing.

Driving the news: A report is due this week from airline safety investigators to coincide with the one-year anniversary of the Ethiopian Airlines crash that was the second in six months for Boeing's 737 MAX jets.

Nikki Haley resigns from Boeing's board in response to bailout request

Nikki Haley on "Fox & Friends" in November 2019. Photo: John Lamparski/Getty Images

Former U.N. Ambassador Nikki Haley resigned from Boeing's board of directors on Thursday in protest of the company asking for federal aid amid fears of mass revenue loss due to the novel coronavirus.

What's happening: Boeing asked for a $60 billion bailout from the federal government on Tuesday.