Shares in Boeing fell sharply for a second day on Thursday as sweeping US travel restrictions, meant to curb coronavirus, heightened jitters about the company’s growing cash burn.
The 30-day travel restrictions, announced by President Donald Trump, are expected to increase financial misery for airlines, which are likely to defer or cancel jet deliveries, Boeing’s main source of revenue.
“Airlines are in cash preservation mode,” Cowen analyst Helane Becker said.
Boeing is fighting to preserve cash by freezing hiring and cutting expenses as the coronavirus outbreak compounds fallout from a year-long grounding of its 737 MAX following fatal crashes.
Grounding of the 737 MAX wiped billions off the company’s value and sparked lawsuits from bereaved families.
JP Morgan cut its long-term “overweight” rating on the planemaker’s stock, which lost more than half its value from a year ago, saying a dividend cut is possible.
“With Boeing likely to burn $5bn of cash this year and a less certain path to recovery, given the damage COVID-19 will do to operators, we think a dividend cut is on the table,” JPMorgan said in a client note.
Boeing shares were down more than 14% at $161.7.
Boeing was leaking around $1 billion monthly last year as a result of the MAX grounding. News this week that Boeing plans to draw down the rest of a $13.8 billion loan from February raises the prospect of tapping markets for cash, though analysts questioned the terms.
Moody’s said Boeing’s expected full use of the loan in 2020 would not affect a downgrade review.
“Factors other than an immediate cash need are the likely impetus for the draw at this time,” Moody’s said.
Boeing had a cash balance of $9.5 billion as of end 2019, the latest available figures and $7.6 billion at end 2018.
“We do not believe Boeing is facing a liquidity crisis,” Canaccord Genuity analyst Ken Herbert told clients.
Boeing’s total debt almost doubled to $27.3 billion in 2019, as it compensated airlines and grappled with additional production costs for the 737 MAX even as grounding prevented aircraft delivery.
Airlines are now demanding deferred deliveries and down payments for new jets, while some 400 737 MAX jetliners are in storage around the United States and Boeing compensates airlines for 737 MAX delays.
Spirit AeroSystems plans to resume production of 737 fuselages and Boeing is buying engines from CFM International, a joint venture between General Electric and France’s Safran.
Its principle source of cash on the commercial aircraft side is the 787 Dreamliner where weaker sales underscore weaknesses in the widebody market, industry sources say.