Business Columns & Blogs

You’ve got more riding on Boeing’s next plane than you might think

For now, Renton is the only place Boeing makes the 737, but how long it keeps that monopoly will depend on how much more capacity Boeing can squeeze out of it, how long the company believes the market will justify high production rates and the financials of building another 737 line elsewhere.
For now, Renton is the only place Boeing makes the 737, but how long it keeps that monopoly will depend on how much more capacity Boeing can squeeze out of it, how long the company believes the market will justify high production rates and the financials of building another 737 line elsewhere. AP

Boeing has been having a good Paris Air Show, at least judging from the orders and commitments it has received, especially for the 737 Max 10, planned for introduction about 2020.

It also has been chatting up a new plane, variously referred to as NMA (new market airplane or new mid-sized airplane) or the 797. With a seating capacity of about 220 to 270 seats, the new plane would fill what Boeing believes is a market gap between the 737 family and the 787, with an opportunity to open up routes that don’t work economically with a larger plane.

Boeing hasn’t made a final decision on the plane, which would be heavy on composite content, but it certainly seems to be leaning that way.

So this is all good news for the region that still builds most of its planes, right?

Here comes the “yes, but …” transition. Continued customer interest in Boeing planes is good for this region, not just at Boeing facilities such as Frederickson, Renton and Everett but for the network of hundreds of suppliers, vendors and subcontractors that rely on Boeing work.

That part of the economy could, frankly, use a little bolstering locally.

Lost amid the noise generated by the Seattle tech sector is the fact that Boeing employment in the region continues to erode. In May, Boeing employment in Washington dropped to 68,685. In the same month a year ago, it was 77,114, and it had been above 80,000 as recently as August 2015.

Some of that is because of lulls in certain programs — Boeing knows about market cycles and product life cycles for commercial aircraft — but some also is due to shifting of work to locations outside the Puget Sound region.

For now, Renton is the only place Boeing makes the 737, and so far the company has been able to accommodate a series of production-rate increases there. How long Renton maintains that monopoly will depend on how much more capacity Boeing can squeeze out of it, how long the company believes the market will justify high production rates and the financials of building another 737 line somewhere else.

The bigger issue will be with the 797. Will it be built at one of its assembly facilities in the Puget Sound region or in South Carolina? Maybe Boeing will try a new state like Texas. Or perhaps it will spread the work out to one of its biggest markets – China.

That sets up this state for another round of a competition with which it has become familiar, if not exactly comfortable, and the ensuing debate over economic incentives (i.e. tax breaks) offered vs. economic returns received.

It’s one thing to grumble and vow to impose much more stringent conditions next time, and the Legislature has been indulging in a bit of that in its last few sessions. It’s quite another to carry through when next time arrives and pressure mounts from the company, the electorate and competing regions, with the looming fear of not just losing out on the next project but possibly what the region currently has.

And it’s not just those who work for Boeing, or who might want to someday. It’s those who own, operate and work for those hundreds of aerospace suppliers, vendors and subs who rely on Boeing for revenue and employment.

By then, maybe everyone in this region will be working for Amazon and won’t care if aerospace goes the way of forest products as a significant economic contributor.

Or perhaps governments will start taking seriously edicts from the World Trade Organization that Washington state and the United States should stop subsidizing Boeing and the Europeans should stop subsidizing Airbus (stop that laughing right this minute).

By then, Boeing’s management and operating philosophy might change.

Already the company is making sustained noises about bringing more production work in house. That’s partly a club to beat more price concessions out of suppliers, but it’s also a recognition that mass outsourcing hasn’t exactly worked out as hoped or planned.

The company could even latch on to the radical notion that having facilities and an experienced workforce is preferable to chasing after a shiny incentive package somewhere else.

By then airplanes might look entirely different, be built by robots or have been replaced by some other technology.

So enjoy the moment, in that it signals some continued success for the region’s aerospace sector. But keep in mind that even though new airplanes take a long time to develop, “by then” is likely to arrive much sooner than people expect — and could show up in ways they hadn’t anticipated.

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

  Comments