Boeing says it will need to borrow more money on coronavirus fallout

(Reuters) – Boeing Co (BA.N) will need to borrow more money over the next six months and does not expect to pay dividends again for years, as the U.S. planemaker wrestles with industry fallout from the coronavirus and the grounding of its 737 MAX jet, chief executive Dave Calhoun told shareholders on Monday at its annual general meeting.

Boeing is trying to bring its 737 MAX jet back into service after two fatal crashes, even as the aviation industry slumps because of the coronavirus, which has dried up demand for passenger air travel.

The company also canceled a $4.2 billion (3.4 billion pounds) deal for Embraer SA’s (EMBR3.SA) commercial aviation division over the weekend, prompting the Brazilian company to initiate arbitration.

Calhoun said Boeing expects it will take two to three years for travel to return to 2019 levels and an additional few years more for the industry’s long-term trend growth to return.

“We know we’re going to have to borrow more money in the next six months in order to get through this really difficult moment, to provide the right liquidity to the supply chain that represents our industry,” Calhoun said during the virtual meeting. “Our first priority is going to be to pay that back, the principle and the interest that goes with it.”

Boeing would continue ordering parts and services from its suppliers to ensure the smaller companies have enough business to keep them afloat during the downturn, he said.

“We have to keep that flow of money going to the supply chain so that they have some predictability around how they operate.”

Calhoun warned shareholders he is not confident Boeing will resume paying dividends in the medium-term.

“That process could take three to five years… It’s going to be a while before dividends come back.”

Earlier in the meeting, Calhoun said the company’s negotiation for Embraer’s regional jet-making division was no longer helpful.

FILE PHOTO: Boeing workers wear masks at the Boeing Renton Factory, where 737 MAX airliners are manufactured, as commercial airplane production resumes following a suspension of operations last month in response to the coronavirus pandemic as efforts continue to help slow the spread of coronavirus disease (COVID-19) in Renton, Washington, U.S. April 21, 2020. REUTERS/Jason Redmond

“We worked diligently for two years to finalize the transaction, but ultimately we could not come to a resolution around critical unsatisfied conditions for the deal,” he said.

Boeing also said each of the company’s 12 board nominees received a majority of votes from shareholders. Two proxy advisers, Glass Lewis and Institutional Shareholder Services (ISS), had recommended that Boeing shareholders vote against key board members to show objections to the company’s handling of the 737 MAX crisis.

Calhoun did not repeat the company’s long-standing timetable of a mid-year return to service approval by regulators for the 737 MAX that has been grounded since March 2019 after two fatal crashes killed 346 people. Reuters reported last week a key certification test flight may not occur until late May or later. “We remain confident in the MAX,” Calhoun said.

Reporting By David Shepardson in Washington and Allison Lampert in Montreal, Editing by Franklin Paul and Andrea Ricci

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