Published: Tuesday, April 14, 2009
AEROSPACE INDUSTRY
No emergency, just an alarmist study
I've tried to understand why Gov. Gregoire has declared an aerospace emergency. I thought the emergency might relate to the thousands of aerospace employees that will likely be laid off this year, or the danger of the refueling tanker contract may be awarded again to an aerospace conglomerate based in Europe. Alas, the emergency she refers to is an alarmist competitiveness study that leads to the inference that if Washington doesn't cough up all the goodies the aerospace industry wants, we won't be able to compete with a handful of other states for future programs.
The competitiveness study is off base on several counts. It asserts that Washington unemployment insurance rates are too high and unpredictable relative to competing states. The aerospace industry is dramatically cyclical in terms of revenue and employment. Our unemployment insurance system places more of the insurance cost on the employers with recent history of layoffs. I can't fault the aerospace industry for wanting low and predictable rates, but rather than the state revising the system to lift the burden, the obvious way to earn those low rates is to break the cycle of laying off their employees.
The study indicates that worker productivity at Airbus is superior and growing relative to Boeing by comparing revenue vs. headcount and airplanes delivered vs. headcount. What the study fails to acknowledge is that Boeing has more significant programs in development than Airbus. The study authors must be unaware the development costs of new programs are expensed as they occur while the revenue is not received until delivery, creating the appearance that costs are escalating while deliveries are stagnant. When the 787 and 747-8 begin delivering and the revenue is booked, those trends will reverse.
The governor should filter the recommendations of the study through the lens of her constituents. Washington may be facing an emergency in terms of the budget, but this aerospace competitiveness study really shouldn't be termed an emergency or used as an alarmist negotiating tool.
Greg Casey
Arlington
The competitiveness study is off base on several counts. It asserts that Washington unemployment insurance rates are too high and unpredictable relative to competing states. The aerospace industry is dramatically cyclical in terms of revenue and employment. Our unemployment insurance system places more of the insurance cost on the employers with recent history of layoffs. I can't fault the aerospace industry for wanting low and predictable rates, but rather than the state revising the system to lift the burden, the obvious way to earn those low rates is to break the cycle of laying off their employees.
The study indicates that worker productivity at Airbus is superior and growing relative to Boeing by comparing revenue vs. headcount and airplanes delivered vs. headcount. What the study fails to acknowledge is that Boeing has more significant programs in development than Airbus. The study authors must be unaware the development costs of new programs are expensed as they occur while the revenue is not received until delivery, creating the appearance that costs are escalating while deliveries are stagnant. When the 787 and 747-8 begin delivering and the revenue is booked, those trends will reverse.
The governor should filter the recommendations of the study through the lens of her constituents. Washington may be facing an emergency in terms of the budget, but this aerospace competitiveness study really shouldn't be termed an emergency or used as an alarmist negotiating tool.
Greg Casey
Arlington
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