By Tracy Rucinski and Eric M. Johnson
CHICAGO/SEATTLE (Reuters) – Shares in Boeing Co <BA.N> fell sharply for a second day on Thursday as sweeping U.S. travel restrictions on Europe, meant to curb the spreading coronavirus, heightened jitters about the company’s growing cash burn.
The 30-day travel restrictions, announced by U.S. President Donald Trump on Wednesday, are expected to deepen financial misery for airlines, which are likely to defer or cancel jet deliveries, Boeing’s main source of cash.
“Airlines are in cash preservation mode,” Cowen analyst Helane Becker said.
But Boeing is fighting to preserve cash by freezing hiring and cutting expenses as the coronavirus outbreak compounds fallout from a year-old grounding of its 737 MAX following fatal crashes.
The year-old grounding of the 737 MAX has wiped billions off the company’s value and sparked hundreds of lawsuits from bereaved families.
J.P. Morgan cut its long-term “overweight” rating on the planemaker’s stock, which has lost more than half its value from a year-ago, while 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 that COVID-19 will do to operators, we think a dividend cut is on the table,” J.P.Morgan said in a client note.
Boeing shares were down more than 14% at $161.7 in the afternoon.
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 it will have to tap markets for cash, though analysts questioned the terms they would get.
Moody’s said on Thursday Boeing’s expected full use of the loan during 2020 would not affect a downgrade review of the company.
“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 nearly doubled to $27.3 billion in 2019, as it compensated airlines and grappled with additional production costs for the 737 MAX even as the grounding prevented it from delivering the aircraft to buyers.
Airlines are now demanding to defer deliveries and downpayments for new jets, while some 400 737 MAX jetliners remain in storage around the United States and Boeing is compensating airlines for 737 MAX delays.
Spirit AeroSystems <SPR.N> plans to resume production of the 737 fuselage in March and Boeing is buying engines from CFM International, a joint venture between General Electric <GE.N> and France’s Safran <SAF.PA>.
Its principle source of cash on the commercial airplanes side is the 787 Dreamliner, but weaker sales underscore weaknesses in the widebody market, industry sources say.
(Reporting by Tracy Rucinski in Chicago and Eric M. Johnson in Seattle; Editing by Marguerita Choy and Nick Zieminski)