Boeing’s chief executive told shareholders on Monday that it could be several years before the company pays a dividend again, as airlines wait for global travel to slowly return to pre-coronavirus levels.
David Calhoun said at the aircraft manufacturer’s annual meeting that the company would borrow money again in the next six months. It has already borrowed $13.8bn this year. After the coronavirus pandemic passes, Boeing would prioritise rebuilding its balance sheet.
“Our first priority is going to be to pay that back,” Mr Calhoun said. “So that process could take three to five years. I don’t know. I don’t want to predict futures. But it’s going to be a while before dividends come back as our number one priority.”
In January, 10 months after its grounding of the 737 Max following two fatal crashes, Mr Calhoun said that Boeing would not cut or suspend the dividend “unless something dramatic changes”. Since then, the coronavirus pandemic has caused revenue to plummet at airlines worldwide, leading them to seek government bailouts, and airlines have asked Boeing and rival Airbus to defer aircraft deliveries.
“Based on what we know now, we expect it will take two to three years for travel to return to 2019 levels and an additional few years beyond that for the industry’s long-term trend growth to return,” Mr Calhoun said.
Boeing paid out $24.6bn in dividends and bought back $43.4bn worth of shares over the past decade. It suspended the dividend in March as it sought $60bn in aid from the $2tn US economic relief bill to assist individuals and companies hurt by the pandemic. A total of $17bn was awarded to companies critical to national defence, a category that includes Boeing as it is a big defence contractor.
The Chicago-headquartered company was expected in March to have nearly $40bn in debt by the end of the first quarter. Analysts say that liquidity concerns are the primary reason its deal with Brazilian jet maker Embraer fell apart over the weekend.
While Embraer said on Monday that it planned to go to arbitration, Mr Calhoun said at the meeting that the two sides simply could not reach an agreement on “critical unsatisfied conditions” in the master contract.
“It is deeply disappointing, but we had reached a point where continued negotiation was no longer helpful,” he said.
Boeing shareholders also voted in favour of an advisory proposal that the chief executive and board chairman roles be permanently separated. The measure received 52 per cent of the vote after proxy advisers backed it this year, compared with 34 per cent in 2019 and 25 per cent in 2018.
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John Chevedden, the activist shareholder who advanced the proposal, said that while Boeing was not legally bound by the vote, ignoring it could lead to consequences next year, such as the proxy advisers opposing the company’s picks for chairman or the governance committee.
“It seems to be gradually dawning on investors that Boeing’s governance has been less than ideal,” said aerospace analyst Richard Aboulafia at Teal Group. “It's been two decades, but better late than never.”
Boeing shares closed 0.2 per cent lower in New York.
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2020-04-27 21:37:45Z
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