A glowing pitch to entice Boeing avoids some touchy issues

OLYMPIA — An alliance of labor, business and political leaders sought to remind the Boeing Co. last week why the company has always chosen to launch passenger airplane programs in Washington rather than elsewhere.

The alliance released a study intended to prove that Washington — with a skilled and productive workforce, extensive aerospace supply chain, low electricity costs and valuable tax incentives — offers Boeing the least-risky and quickest-to-profitability option for building the next aircraft on the corporate drawing board.

When those factors and a slew of others examined in the report are added up, Washington is head, shoulders and torso ahead of any other state that might desire to be the manufacturing home of the so-called middle-market airplane dubbed the 797.

“This is not a puff piece,” declared Gov. Jay Inslee at the rollout of the Aerospace Competitiveness Economics Study on Wednesday at a news conference in Seattle. “This is a scientifically rigorous report.”

Yet the 40-page document studiously avoids subjects which have stressed and strained ties between company executives and workers, as well as with some Democratic members of the Legislature.

There’s no mention of labor relations, which in recent decades have included divisive contract battles and strikes. Neither is there discussion of a political climate in which some lawmakers want to require Boeing to sustain a minimum level of employment if it wants to keep receiving tax breaks worth hundreds of millions of dollars each year. Nor is there much on the bevy of business and environmental regulations of concern to the company.

The report acknowledges these are “qualitative factors” with a potential value in calculating a state’s ability to positively support aerospace manufacturing. But they are not measured in the study.

“We’re not qualified to address those,” said Richard Aboulafia, vice president of the Teal Group of Fairfax, Virginia. He’s the report’s primary author and one of the world’s top aerospace industry experts. “It’s our job to provide the numerical analysis.”

Members of the Choose Washington New Middle-Market Airplane Council, which commissioned the study, said the lack of discussion of those factors doesn’t undermine the report’s conclusion. The council is an alliance of representatives from labor, aerospace, education and government.

“It doesn’t impact the efficacy of the report,” said Kelly Maloney, president and chief executive officer of the Aerospace Futures Alliance. “That report is a data point and acknowledges we have other areas to work on.”

Jon Holden, president of International Association of Machinists and Aerospace Workers District 751, said the report contains “everything that impacts what a company should take into account when they decide to locate an airplane in a particular area.”

Brian Bonlender, director of the state Department of Commerce, said: “This report is designed to demonstrate that we’re the best place to build” the new plane.

Nonetheless, such intangibles have always been part of the decision-making calculus of Boeing and thus cannot be ignored.

“Anything that has to do with costs is going to be important to Boeing,” said aerospace analyst Scott Hamilton, owner of Issaquah-based Leeham Co. “That absolutely includes labor costs and regulatory costs.”

Political climate matters, too, Hamilton said. Will there be a welcoming Legislature that says “what do you want, Boeing?” — or a hostile one that wants “clawbacks” of tax incentives based on employment levels.

In 2011, as Boeing pondered where to assemble the 737 Max, the Washington Aerospace Partnership commissioned a competitiveness study. Members of the partnership are pretty much the same folks involved in the current council.

Accenture Management Consulting produced a 122-page report. It identified many of the same advantages for Washington as did the Teal report: a highly productive and knowledgeable workforce and a network of existing Boeing and supplier facilities in the state that could provide the company with a faster return on its investment.

It also listed disadvantages, such as the effect of recession-driven cuts in funding to public schools and colleges, and higher wages, benefits, pensions and health care costs for workers.

And the report dedicated a full page to considering the potential impact of work stoppages.

“While the state can influence many competitiveness factors, the threat of work stoppages and delivery delays is an externality that may outweigh other considerations for a site selection,” the authors concluded. “Improvements to the management-labor culture on these areas would strengthen Washington’s competitive advantage versus other states.”

In 2013, labor relations and the political climate eclipsed the selection process for the home of 777X, a derivative of the 777 assembled in Everett.

Boeing invited states to submit bids. And Washington responded with a 165-page proposal.

But it might not have mattered much. Because from the outset, Boeing made it clear there was an open-and-shut case for Washington if the Legislature extended tax credits, which it did in November 2013, and if the Machinists union ratified a concession-laden contract extension, which it did in January 2014.

It is too early to know if Boeing intends to conduct a competition for the 797 in the same fashion. The existing Machinists contract runs through 2024.

“Our members would have their say. If, for example, it’s 2020 and they come to us, our members would have to vote to open up our contract prior to its expiration,” he said. “Our members are a big reason for the company’s success. Our members are not interested in giving concessions like we did in 2014.”

Council members did not intend for the report to look into this subject, he said.

“For this effort, we felt we should focus on those things we agree on — that the right place is here,” Holden said. “What we have in place here is an amazing aerospace infrastructure.”

Maloney of the Aerospace Futures Alliance had a similar attitude.

“There is a lot more from the perspective of the industry that needs to be done to win the NMA (New Middle-Market Airplane) for Washington state,” Maloney said.

One reason the state’s economy is doing well is because of Boeing and the aerospace industry, she said. That’s the focus of the report and should be the focus of the council’s effort.

“Washington can’t take Boeing for granted,” she said.

Jerry Cornfield: 360-352-8623; jcornfield@herald net.com. Twitter: @dospueblos.