| The most successful viruses — the high-growth ones like coronavirus — don't kill their hosts … at least not often. Same goes for companies. On the spectrum of price to value, there's always a point of diminishing returns — a level beyond which customers will still pay, but probably shouldn't. If the new iPhone is too expensive, the next upgrade may be longer in coming. If a car loan is usurious, the dealer won't see the borrower again. COVID, of course, has shifted this point drastically down the scale. Most executives now have a clear and impossible calculus: How much pain can I take; and how much can I pass on? Consider the jet giants. Airbus and Boeing have years of orders on the books, fairly ironclad contracts spliced into the massive financial engineering required to get a nine-figure tube of metal out of the factory and off the ground. At the start of the year, Boeing alone had $377 billion in orders, but those contracts tend to get less ironclad in bankruptcy court. In the economic ecosystem, this relationship is a model of symbiosis. There are, essentially, only two producers in the space and only a few dozen customers — each side making massive capital decisions years in advance. Every time Airbus or Boeing develop a new plane, they bet the company. Every time an airline signs a big order, it does the same. It only makes sense that each side props up the other from time to time. But the share-the-pain equation trickles all the way down the spending spectrum. Consider gyms in the COVID era, which seem to have two options: keep charging subscribers for a service they can't (or may not want to) use or hawk the dumbbells and shut it down. Some of the big chains, it seems, have decided on the former and triggered the ire of legions of gym rats banished to doing burpees in their basements. Other customers have been told to try to recoup their final monthly payments in bankruptcy court, which sounds like a workout and a terrible one at that. Thankfully, strategy doesn't have to be that binary. As in any negotiation, there is likely more middle ground than either side might realize. Payments can be delayed, contracts paused indefinitely. Concessions to customers, ideally, can be tied to longer or more lucrative deals that kick in later. Consider the ski industry, which rushed out aggressive programs to keep people buying season passes for the coming COVID winter. Two of the sport's giant, Alterra Mountain Co. and Vail Resorts Inc., not only vastly loosened policies allowing customers to back out of purchase agreements, but offered forms of insurance against COVID shutdowns. In some cases, the concessions will help cash flows two seasons out. With B2B companies, this kind of thing is called a "customer operating partnership," which roughly translates to "get as cozy as you can." Boeing lends money to its customers much like a car dealership; last year, it granted in $419 million in plane financing. Meanwhile, about 1 percent of its costs go to "fleet support," a kind of roadside-assistance plan for the likes of Delta. Just a few months ago, plane-makers were gearing for smooth skies. Boeing reckoned the market would soak up 44,000 new planes in the next two decades, worth $7 trillion. Needless to say, it is now resigned to taking some pain. In the second quarter, both Boeing and Airbus burned through more than $5 billion in cash. Airbus is reducing production, but also asking airlines to stretch out delivery schedules, lest they cancel orders entirely. "It's more about finding ways to deal with the situation together," CEO Guillaume Faury told Bloomberg. No doubt those are tricky conversations, particularly in Europe and the U.S. where close to half of planes in airlines fleets are still sitting in storage. Boeing has also scaled back at the factory, essentially taking a chunk of pain from its customers and shifting it to its employees and suppliers. "I don't want to predispose any answers," CEO Dave Calhoun said on an earnings call, "because we don't have any."  Featured in Bloomberg Businessweek, Aug. 10, 2020. Subscribe now. | 
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