777X still makes sense in Everett, analysts say

  • By Dan Catchpole Herald Writer
  • Monday, November 18, 2013 5:44pm
  • Business

EVERETT — Aerospace industry experts say that while economics point to Everett for building the Boeing Co.’s new 777X, the company’s troubled relationship with unions might drive the decision.

The company will decide where to build its new wide-body jet in three months, Boeing CEO Jim McNerney said Monday at the Dubai Air Show.

Boeing won’t learn anything new in that time, but it will give states time to put together incentive packages in their efforts to land the production line, according to industry analysts.

“We have a number of alternatives,” McNerney told reporters in Dubai, adding that the goal is to find sites that provide a competitive price and low risk. “We are going through an evaluation right now.”

The Machinists union at Boeing voted last week against an eight-year contract extension with benefit concessions, such as trading worker pensions for 401(k) plans, in exchange for placing 777X final assembly in Everett and a $10,000 signing bonus, among other promises.

Boeing representatives reportedly flew to competing sites the day after the vote. Losing the 777X could be a huge blow to Everett, Seattle and the Puget Sound area, where Boeing was founded in 1916.

Possible other locations include South Carolina, Texas, southern California, Utah, Alabama and Georgia.

Building the plane is expected to directly create about 20,000 jobs as well thousands more created indirectly.

Production is slated to start in 2017, with the first plane being delivered three years later, according to Doug Alder, a Boeing spokesman.

“There’s no economic argument that I can think of for leaving Puget Sound,” said Richard Aboulafia, an aerospace analyst with Teal Group, a Fairfax, Va.-based consultant.

The 777X is hugely important to Boeing’s future in the commercial airplane industry, where it faces competition now from Airbus with Russia and China looking to get more market share in the next decade, experts say.

After formally unveiling the plane on the opening day of the Dubai Air Show, Boeing announced airline orders for the 777-8X and 777-9X worth nearly $100 billion at list price.

After Boeing’s experience with the 787, which saw three years of delay before the first delivery, the company’s margin of error for delivering the 777X is “between zero and none,” Aboulafia said.

Everett and Puget Sound offer the least production risk, noting its trained workforce, developed infrastructure and state support, and none of that is going to change in three months, he said.

The company’s search window does give other states enough time to put together incentive packages to match Washington’s offer to extend tax breaks worth nearly $9 billion along with money for workforce training.

The only location with a comparably skilled workforce, production facilities and shipping capacity is Long Beach, Calif.

The state is constantly “working with Boeing to expand all facets of its activities in California,” said Brook Taylor, a spokesman for California’s Office of Business and Economic Development.

He declined to comment on any incentive package California might put together to lure Boeing.

“States are going to react very quickly on this,” said Scott Hamilton, an aerospace analyst with the Issaquah-based Leeham and Co.

Like Aboulafia, Hamilton said Everett makes the most sense for building the 777X in terms of the economics.

But Boeing leaders’ dislike of organized labor could be a bigger factor, he said.

His sources in the company told him that is what drove the company’s decision to launch a 787 production line in North Charleston, S.C., Hamilton said. “The economic argument for Charleston wasn’t there, according to them.”

That could drive their decision on 777X, he said.

Bloomberg News contributed to this report.

Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com.

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