Is the Boeing Co. being penny wise and pound foolish by taking on the Machinists union on pensions?
That’s the question posed by an article in the current issue of BusinessWeek that is creating a buzz among strikers. The magazine whipped out its calculator and determined that the strike is costing Boeing $90 million a month, while it would only cost $29 million a year to bump International Association of Machinists pensions up to the rate the union’s bargaining team asked for – about $90 million over the three years the new contract would run.
That’s far short of the $1 billion Boeing has claimed it would have to pay out to meet the demands the Machinists made at the bargaining table.
“If it’s only $90 million – holy cow!” exclaimed T.M. Sell, a Highline Community College professor and author of a book on Boeing. “Go grab the checkbook and buy a clue.”
But that’s the question: Is it only $90 million?
“I don’t know what to make of it,” said Teal Group analyst Richard Aboulafia. “Both sides might be posturing.”
Boeing “isn’t going to have a direct comment” on the article, spokesman Chaz Bickers said.
However, to calculate the cost of raising pensions, you have to look at the cost beyond the three years of the contract, Bickers said.
And observers only have to look to Boeing’s customers in the U.S. airline industry to see how big pension obligations can pull down profits, he added.
BusinessWeek was critical of Boeing Commercial Airplanes chief Alan Mulally’s approach to the contract talks.
In hindsight, “Mulally and Boeing Human Resources Vice President Jerry Calhoun clearly underestimated the Machinists’ desire for traditional pensions,” BusinessWeek reported.
The magazine maintains that “even matching the union’s full pension demand” would only cost Boeing $360 million over three years – an increase of about 3 percent a year, which would about keep up with inflation.
“Whatever the exact figures, the sums causing the impasse are essentially rounding errors for a company that hauls in $54 billion in annual revenues,” BusinessWeek reported.
This battle of dueling calculators is perhaps not surprising. We’re well into the third week of the strike, and both sides are angling for support.
Given that, “it’s in the interest of both sides to posture,” Aboulafia said.
In other news, an aviation industry magazine is reporting that Boeing is considering two larger versions of its new 787 jetliner in response to interest from two airlines, Emirates and Qantas.
According to Flight International, one would be a longer, stretched version – tentatively designated the 787-10 – while the other would be a beefed-up version capable of carrying a heavier load of fuel aloft.
Boeing spokeswoman Yvonne Leach acknowledged that studies are under way.
“I’m not going to deny we’re looking at it,” she said. “If the market tells us to look at something, we look at it.”
But before the company moves ahead, “we have to know there’s a market out there,” Leach continued. Boeing’s not likely to work up a whole new 787 model for just one customer.
In June, just before the Paris air show, 787 program chief Mike Bair said Boeing wasn’t much interested in pursuing anything larger than the 259-seat 787-9, which itself will be a stretched version of the basic 787-8.
For starters, he said, Boeing already has a couple of really good 300-seat planes, the 777-200ER and 777-200LR. Making the 787-9 any bigger could cut into the 777 market.
At that point, only one airline – Emirates – was expressing any interest in a larger 787.
Enter Qantas. The Australian airline is looking to buy as many as 100 long-range, wide-body jets – a deal worth more than $15 billion at list prices. Before the end of the month, Boeing expects to submit Qantas a bid for a mix of 777s and 787s.
For an order that large, Leach acknowledged, Boeing would more than happy to take another look at the idea.
Reporter Bryan Corliss: 425-339-3454 or corliss@heraldnet.com.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
