A Boeing executive delivers good and bad news for Everett

EVERETT — Boeing’s cost-cutting measures could put Everett in the running to be the new headquarters for the company’s commercial airplane division, a Boeing executive confirmed on Tuesday.

Fallout from the coronavirus pandemic, including a steep decline in airline travel, has forced “some very difficult steps,” Bill McSherry, vice president of government operations for Boeing Commercial Airplanes, told participants at an Economic Alliance Snohomish County virtual gathering.

The pandemic is “driving us as a company, and us as an industry, to respond to the new normal here for the next few years,” McSherry said.

“When it comes to the aerospace industry — sadly, there’s no good news,” he said.

McSherry confirmed earlier reports that Boeing is evaluating whether to vacate the headquarters of Boeing Commercial Airplanes at Longacres in Renton. Should the Longacres buildings be abandoned, staff could move to Boeing Field in Seattle or the Everett campus.

McSherry suggested that both locations are possibilities. Company leaders are looking at putting key managers closer to the assembly lines in Everett, Renton and South Carolina, he said.

Boeing has already moved some employees to the Everett campus after it recently vacated a 338,577-square-foot office building it had leased in Mukilteo. Most employees who worked there are working at home, he said.

“Certainly, Boeing Commercial headquarters will always remain here in the Puget Sound region, but we do think our leaders will get closer to where our production and delivery facilities are,” McSherry said.

“We think we’re going to move to a more mobile leadership team. You may have an office, but it will be closer to production and will end up being out and about with various teams, more often … That is the direction we think we’re headed right now.”

The Chicago-based company is re-evaluating investments, spending and vast real estate holdings to conserve money “anywhere we can” and to ensure the jet-maker “survives the crisis,” said McSherry. He noted that Boeing did not take any federal relief funds but instead borrowed $25 billion from the capital markets.

“We are scrutinizing every aspect of our operations, every aspect of spending, to ensure we can bridge this gap with available funds,” McSherry said.

But all the cost-cutting measures in the world can’t revive Boeing’s commercial airline order book.

Sales of wide-body jets, which dominate international travel routes flown by Boeing aircraft, aren’t expected to rebound for years.

That means the Everett assembly plant at Paine Field, where the company’s biggest planes are made, will see a continued lull.

Domestic travel has risen in recent months to 49% of 2019 passenger levels, but global travel is just 12% of what it was a year ago, McSherry said.

International flights are expected to be the last sector of airline travel to recover, a scenario that could put the largest wide-body passenger jets, built in Everett, on the tail end of any recovery.

When long-haul travel picks up, Boeing’s 787 series — to be produced exclusively in South Carolina beginning next year — will lead the recovery, followed by the larger Everett-built 777 and 777X planes, McSherry said.

Airline travel isn’t expected to resume normal, pre-COVID-19 pandemic levels until 2023 or 2024, McSherry said.

In the meantime, the Everett assembly plant at Paine Field will continue to produce the 767 freighter, the KC-46 Pegasus tanker and the 747 — though the latter program is due to end in 2022.

The 777 will be produced at a rate of two per month next year, down from a combined rate of five per month. When output might increase is unknown.

The drastic decline in air travel due to the pandemic was behind Boeing’s decision to consolidate production of the 787 Dreamliner in South Carolina, McSherry said.

“We and our competitors have had to reduce production in several commercial programs,” McSherry said, pointing out that rival Airbus has also significantly reduced production of passenger jets.

The 787 decision was a business move driven by lower rates of production and the reality that the largest 787, the -10, can only be built at Boeing’s South Carolina plant.

“We simply must be able to build the 787-10 — and therefore it had to be in Charleston, nothing more and nothing less,” McSherry said.

The 787-10’s mid-section, which is assembled in North Charleston, is too big to fit inside the 747 Dreamlifter, which ferries 787 components from Japan, Italy and South Carolina to Everett. “It cannot get to Everett — you therefore cannot consolidate into Everett, you must consolidate into Charleston,” McSherry said.

Questions about what Boeing’s next airplane model might be — what it might look like and whether it could fill space that will be vacated by the 787 next year and the 747 in 2022 — were unanswered.

A year ago or more, Boeing was considering whether to produce what was being called the 797, a single-aisle or twin-aisle airplane that could fit in the product line between the 737 and the 787.

“We’ll have a better handle on what the market looks like coming out of the current trough we’re in,” McSherry said. “It’s something that won’t happen in the next year or two, and then we’ll just sort of see how the recovery goes.”

Everett Mayor Cassie Franklin, who spoke at Tuesday’s Economic Alliance meeting, said the 787 outcome “wasn’t a surprise.”

“The decision to consolidate was a business decision,” said Franklin. “And I know many of us here on this call today have to make similar difficult decisions this year. So I have no doubt that the impact of losing the 787 is going to be felt deeply in our city. We’re really sad to see the Dreamliner go, but we’re grateful to still be the proud home of the 747, 777X, and the 767, as well as their military derivatives and the composite wing center.”

Franklin said that after the decision, she and Snohomish County Executive Dave Somers met with McSherry and Stan Deal, the CEO of Boeing’s Commercial Airplanes division.

“Both stressed that this is Boeing’s home and will continue to be part of Boeing’s future long into the future,” Franklin said.

Boeing delivered 11 new commercial planes last month, mostly twin-aisle 787s, compared with 25 a year ago in September.

Through the end of September, Boeing had delivered 98 planes this year, compared with 301 in the same period last year.

Janice Podsada; jpodsada@heraldnet.com; 425-339-3097; Twitter: JanicePods