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As it pleads for help in Washington, Boeing Co. is mapping out a series of drastic steps it may have to take to conserve cash during a swift and dramatic collapse in demand for air travel that’s threatening the company’s survival.

The aircraft maker was already reeling from the grounding of its 737 Max following two crashes, costing it billions of dollars in compensation to customers. Now it’s evaluating layoffs, a production pause and reductions to its research budget among a range of cost-cutting options, people familiar with the matter said.

Adding to the financial squeeze from the coronavirus crisis: Boeing’s factory in Everett, Washington – the company’s largest – faces a growing risk of shutdown because of an outbreak among workers, said one of the people, who asked not to be named because the deliberations are private.

Boeing is pressing lawmakers for an aid package of at least $60 billion, mostly for the company but partially for suppliers. As the maker of the F-15 fighter jet and the only American manufacturer of large passenger jets, it’s one of the few American companies that could be considered a national champion.

But the reputational blow from the 737 Max grounding is a potential hurdle to its ability to secure the funding. That effort met with another challenge Thursday when Boeing disclosed the abrupt resignation of board member Nikki Haley. The former Republican governor of South Carolina, who later served as President Donald Trump’s ambassador to the United Nations, said she disagreed with the bailout request.

“I cannot support a move to lean on the federal government for a stimulus or bailout that prioritizes our company over others and relies on taxpayers to guarantee our financial position,” Haley wrote. “I have long held strong convictions that this is not the role of government.”

Boeing rose less than 1% to $98.60 at 9:42 a.m. in New York. The shares tumbled 70% this year through Thursday, the biggest drop on the Dow Jones Industrial Average.

Growing Pressure

While a decision on layoffs or other cash-saving measures isn’t imminent, according to the person familiar with the matter, the belt-tightening preparations reflect the intensifying pressure on Boeing and its customers. Deutsche Lufthansa AG has pared its flight schedule to 1955 levels, while Delta Air Lines Inc. and American Airlines Group Inc. are parking a combined total of more than 1,000 jets as U.S. passenger carriers seek their own $50 billion bailout.

“Covid-19 is the biggest threat of all time to the airline/aerospace ecosystem and augurs sharp production cuts and liquidity issues” for Boeing, said Cai von Rumohr, an analyst at Cowen & Co. “It’s hard to tell where the stock may bottom.”

Boeing directors are likely to suspend the dividend at an April 30 board meeting, von Rumohr said in a report Thursday.

Activist investor Bill Ackman, the head of Pershing Square Capital Management, said this week that Boeing won’t survive without government help.

If airlines halt progress payments for jets on order for the next six months, the company might need another $25 billion to cover the costs of keeping suppliers afloat, Myles Walton, analyst with UBS Group AG, said in a March 18 report.

Max Reimbursement

Boeing faces a slow recovery from the grounding of the Max, its best-selling plane and a critical source of profit. With the virus devastating airlines by sapping travel demand – and cash conservation now a top priority – the manufacturer may opt to extend a 737 production pause that began in January and make sharp cuts to its its workforce, von Rumohr said.

“How many Max are they really going to be able to deliver this year?” he said in an interview. Even if airlines have begun to recover by midyear, when Boeing estimates the Max ban will be lifted, “traffic will be lower, they’ll all have less money than they expected.”

The thousands of newly parked jetliners may wind up changing how Boeing compensates Max customers, von Rumohr said. Some airlines had sought reimbursement for flights they lost after a grounding that began more than a year ago after two deadline crashes. Because of the pandemic, they now have too much capacity, eliminating such losses.

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