Cash-Heavy Boeing Gets State Aid
Despite the worst slump in aviation history, Boeing's airliner division is "strongly profitable" according to its CEO and is characterized as being "awash in cash" by the Dow Jones Newswire. And with $500 million handouts like the one the state of Kansas turned over last week, the financial future of the sales-challenged company would appear to be as rosy as it's ever been. CEO Phil Condit filled in Dow Jones on the secret of its financial success, saying cost-cutting was the key but branching into financing, in-flight broadband service and air traffic management is keeping the largest aerospace firm in the world in fine shape. It's estimating cash reserves of $2.5 billion for this year. So, why, you might ask, is Kansas being asked to risk $500 million of the people's money to prop up operations in that state? The answer, it would seem, is jobs: their creation and their maintenance. Boeing is Kansas's biggest employer and the state apparently wants to keep it that way. The legislature approved selling $500 million in bonds on behalf of the company to shore up the Wichita plant's bid to help build the 7E7 jetliner. In exchange for the bonds, the company must hire 4,000 employees. Boeing has to pay back the $500 million but it will be interest-free because the state is allowing the company to use payroll taxes it normally turns over to the government to pay the interest. As part of the same package of legislation, the state government also pledged to balance its budget.