The Coronavirus Outbreak

By David Gelles and Natalie Kitroeff

The grounding of the 737 Max after two deadly crashes had already strained the company. The coronavirus is pushing it to the brink.

“We have to absolutely help Boeing,” President Trump said on Tuesday. 
“We have to absolutely help Boeing,” President Trump said on Tuesday. Credit...Gary He/Reuters

As the crisis caused by the coronavirus continues to spiral out of control, the vast ramifications of the global economy’s screeching to a halt are already on display at one of most important companies in the United States: Boeing.

Boeing is the nation’s largest manufacturer. It employs more than 100,000 people domestically and supports millions more through a supply chain that includes thousands of businesses big and small around the country. But Boeing’s stock price has dropped more than 40 percent in the last five days, and with the broader airline industry reeling, President Trump signaled Tuesday that he would strongly consider a bailout for Boeing.

“I think we have to protect Boeing,” Mr. Trump said. “We have to absolutely help Boeing. Obviously, when the airlines aren’t doing well, then Boeing is not going to be doing well. So we’ll be helping Boeing.”

On Tuesday evening, the company said it was in favor of an enormous government support package for airplane manufacturers like itself.

“Boeing supports a minimum of $60 billion in access to public and private liquidity, including loan guarantees, for the aerospace manufacturing industry,” Boeing said in a statement. “This will be one of the most important ways for airlines, airports, suppliers and manufacturers to bridge to recovery.”

Boeing was already coming off the worst year in its history because of the grounding of its 737 Max plane after two crashes left 346 people dead. Now the coronavirus is posing daunting new challenges. Airlines, faced with a precipitous drop in travelers, will not be ordering new planes for a long time and are refusing to take delivery of the ones they have already bought. Boeing cannot deliver jets to Europe or China. Supply-chain disruptions and social distancing measures may force it to shut down factories.

Boeing executives are trying to determine what to do if shelter-in-place orders, school closings or the virus itself makes it impossible to manufacture planes, said a person briefed on the deliberations, who spoke on the condition of anonymity to discuss internal matters.

In recent days, senior Boeing executives have made it clear to the White House and Congress that if the aerospace giant does not receive government assistance, it could decline rapidly, causing significant damage to the American economy.

The tumbling of its stock price has pulled down the markets in recent weeks. Even before the virus crisis took hold, Mr. Trump blamed the 737 Max for contributing to a drop in the gross domestic product.

The fallout from the virus poses Boeing’s greatest challenge since the Sept. 11, 2001, terrorist attacks, when it cut production in half and laid off tens of thousands of people. Company insiders say the pandemic is far worse, since it has touched every continent other than Antarctica and plunged nearly every airline worldwide into crisis.

“It’s not just Boeing,” said Susan Houseman, director of research at the Upjohn Institute for Employment Research. “Its supply chain may be irreparably damaged. There will be bankruptcies, companies will lose their workers, and they just can’t restart in six months.”

Boeing executives are furiously drafting contingency plans and trying to find a way to keep factories open and avoid mass layoffs or furloughs, three people familiar with the deliberations said. Executives from the medical, financial and human resources teams are monitoring developments constantly, and have identified several potential situations that could cause production to grind to a halt, one of the people said.

Boeing executives believe the most likely possibility is that the government effectively mandates a work stoppage, either by shutting down all nonessential businesses or instituting strict travel restrictions, such as border closures or shelter-in-place orders.

Factories could also shut down if too many employees at one facility become sick, raising the risk of community spread on the factory floor. And supply-chain disruptions could become so severe that Boeing does not have the parts it needs to make planes.

Boeing is bracing for a rise in absent workers, either because school closings force parents to stay home or because people are too scared to leave the house. Already, some workers have begun to stay home, one of the people briefed on the plans said.

Should plants have to shut down, Boeing could move them into a state of “suspended operations.” Under such conditions, some Boeing employees might still be paid. And if workers at the company’s factories in Washington State are sick, they may be eligible for the state’s paid family and medical leave.

Yet there is also the possibility that the sudden drop in demand for Boeing products leads to layoffs. In that event, executives would consult an internal ranking system known as the “retention totem,” a reference to the totem poles of the Native Americans of the Pacific Northwest, where Boeing was founded and still has its largest presence.

In the system, employees are put in one of three categories, from R1 to R3, based on how essential they are to the business, three people familiar with the system said. The lower the number, the less likely one is to get fired.

Mass layoffs would put Boeing in a very difficult position. Restarting production won’t be easy if the company has lost a significant chunk of its skilled mechanics and engineers.

But the company will need to cut costs and is running out of other options.

Borders are closing, and Mr. Trump has raised the prospect of cordoning off Washington, a move that would paralyze Boeing’s production. And with airlines around the world facing imminent bankruptcy, Boeing may soon face an abrupt drop in revenue.

Fifteen Boeing employees around the country have tested positive for Covid-19, the disease caused by the new virus. Suppliers are already having problems delivering necessary parts to Boeing; one, a major manufacturer of parts for the company’s 787 and 767 planes, is based in northern Italy, an epicenter of the outbreak. General Electric, which supplies 90 percent of all Boeing engines, also gets parts in Italy.

Mr. Trump is seeking a $850 billion stimulus package, which is expected to include relief for the aviation industry. For Boeing, the most likely result is that the government guarantees billions of dollars in loans that big banks would make to the company. If Boeing’s revenues run dry for months, such loans could allow it to keep paying some employees and suppliers.

Even before the prospect of government relief was on the table, Boeing was taking steps to fortify its finances. Last week, it drew down a credit line of $13.8 billion.

The impact of the pandemic on the aviation industry has already been profound. Demand for commercial airplanes has fallen sharply, and no one is sure when it will return.

Airlines around the world have also sharply reduced service, including American, United, Delta and major international carriers like Cathay Pacific and Lufthansa. Analysts believe that within months, many airlines may go bankrupt.

More immediately, Boeing is assessing its ability to continue day-to-day production. The company is working with Gov. Jay Inslee of Washington to figure out whether the prohibition on gatherings of more than 50 people applies to, say, a cafeteria that can seat 200 in the company’s plant in Everett.

On Tuesday, Airbus, Boeing’s chief rival, shut down factories in France and Spain in an effort to stop the spread of the virus.

Most analysts, bankers and executives believe Boeing will come through this crisis, partly because it’s viewed as too big to fail. Boeing is not just one of two companies in the world making commercial airplanes. It is also one of the largest defense contractors in the country and a producer of critical aircraft and equipment for the National Aeronautics and Space Administration.

“For Boeing to collapse and go out of business, it would be devastating to the economy,” said Scott Hamilton, an aviation consultant. “It will survive, in one form or another.”

  • Updated March 17, 2020

    • What is social distancing?
      It means minimizing contact with people and maintaining a distance of at least six feet between you and others. Avoid public transportation, limit nonessential travel, work from home and skip gatherings. This strategy saved thousands of lives both during the Spanish flu pandemic of 1918 and in Mexico City during the 2009 flu pandemic.
    • I’m young. Can I continue to socialize?
      Please don’t. There is no question that older people and those with underlying health conditions are most vulnerable to the virus, but young people are by no means immune. And there is a greater public health imperative. Even people who show only mild symptoms may pass the virus to many, many others — particularly in the early course of the infection, before they even realize they are sick.
    • Can I leave my house?
      It’s O.K. to go outdoors. The point is not to remain indoors, but to avoid being in close contact with others. When you do leave your home, wipe down any surfaces you come into contact with, avoid touching your face and frequently wash your hands.
    • Can family come to visit?
      That depends. If everyone in the family is young and healthy, then some careful interaction in small groups is probably OK. Elderly relatives and others at risk should stay away, at least for now.
    • Can I take my kids to the playground?
      Serious illness from this virus in kids is rare. But kids tend to touch their mouths, noses and faces constantly so parents, especially in higher-risk areas, may want to reconsider trips to high-traffic public areas like the playground. If you do go, playgrounds with few kids are ideal. Take hand sanitizer with you and clean any surfaces with disinfecting wipes before they play.
    • How long will we need to practice social distancing?
      That is a big unknown, experts said. A lot will depend on how well the social distancing measures in place work and how much we can slow the pandemic down. But prepare to hunker down for at least a month, and possibly much longer.