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Innovation: Boeing rolls out the Dreamliner |
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Written On: July/August 2007 |
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Written By: by Charles Henry Thomas |
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On July 8, Boeing rolled out its vaunted 787 Dreamliner during a celebration attended by employees, customers, suppliers and government officials. The event was broadcast live in nine languages to more than 45 countries, signaling Boeing’s return to the forefront of commercial aviation. Distinguished journalist and best-selling author Tom Brokaw served as the master of ceremonies. About 15,000 people attended the rollout at Boeing’s Everett, Wash., final assembly plant.
Boeing’s 787 order book is bursting at the seams with 677 contracts worth more than $110 billion. It got a healthy boost at the recent Paris Air Show when International Leases Finance Corp. ordered 63 new Boeing jets, including 50 Dreamliners.
The Boeing 787 Dreamliner, the world's first mostly composite commercial airplane, will use 20 percent less fuel per passenger than similarly sized airplanes, produce fewer carbon emissions, and will have quieter takeoffs and landings.
In late August or September, the 787 will lift off on its maiden flight. Don’t expect any aerobatics over Lake Washington, though.
In 1955, Boeing test pilot Tex Johnston performed an unscheduled aileron roll in the Boeing 707 prototype during Seattle’s Seafair, much to the surprise of Boeing executives and prospective customers watching from the ground. The 707 performed perfectly and the maneuver not only captured the world’s attention, but jump-started sales, as well.
If all goes well, the Dreamliner will conclude its flight test program in May 2008, followed shortly thereafter by FAA certification and delivery of the first 787 to ANA (All Nippon Airways).
The 787’s success is pivotal to both Boeing and Washington. Forced to lay off more than 20,000 workers during the airline industry slump following the 9/11 attacks, Boeing has now stabilized its workforce and its comeback is boosting our state’s economy.
Today, things are bright for Boeing, Puget Sound and Washington. Our state seems insulated from the slight downturn in the national economy and tax revenues are rolling in at record rates. Hopefully, that comfortable feeling will last. If history is any indication, it won’t.
Global competition
The modern business world is global in scale and extremely competitive. Fifty years ago, Boeing competed head-to-head with McDonnell Douglas and Lockheed in commercial airplane manufacturing. It seemed American companies had a perpetual lock on the market and the technology that drove it.
The Europeans thought differently. As it became clear that cooperation was the only way for European aircraft manufacturers to compete with the U.S. giants, Airbus was established in 1970 as a consortium of French, German—and later—Spanish and British companies. When the passenger airplane market took off in the 1960s, Boeing was a Seattle-based company that built all of its airplanes in Renton and at Boeing Field. At that time, most people thought outsourcing parts for the 707 and 727 meant they were made in Wichita, Kansas.
Today, most of Boeing’s 787 components are made in Korea, Japan, Italy, France, China, Australia and the United States. The fact is, Boeing now assembles—not builds—airplanes in America. Parts, and even entire sections, are flown, railed and shipped by sea to Paine Field in Everett. That trend will continue as worldwide competition for airline sales becomes more intense.
Airbus still a formidable threat
While Boeing’s resurgence overtook Airbus last year, Airbus was the leader in 2004 and 2005. Boeing entered this year’s Paris Air Show comfortably ahead in orders for the year (417 versus 201 for Airbus). But before the show started Airbus unveiled more than $30 billion in orders, some of which analysts expected would go to Boeing, according to Reuters News Service.
When the show ended Airbus came away with 425 firm orders, many for the A350 XWB—a key competitor to Boeing’s hot-selling 787. Airbus reportedly logged more than 300 commitments for aircraft, as well.
Almost lost in the show’s footnotes: Canada’s Bombardier unveiled plans to invest $100 million in China’s ARJ21-900 regional jetliner and Brazil’s Embraer announced a $3-billion deal with Japan Airlines and Germany’s Lufthansa for smaller airplanes similar to the ones Horizon Airlines flies.
$2.8-trillion market
Between 2006 and 2026, airlines around the world are expected to order 28,600 new planes totaling $2.8 trillion. About one-third of those new airplanes will replace existing, less fuel-efficient fleets while the rest will fly on new routes.
Cash-strapped airlines are in a race to replace current fleets with modern, fuel-efficient planes. Boeing estimates that 80 percent of the commercial airplanes flying today will be retired in the next 20 years. As fuel costs rise, airlines will have no choice but to cut operating costs and shop for the best value in new aircraft.
The stakes for Boeing and Airbus are huge and the competition fierce. Both are wary of manufacturers in China, Brazil and Canada who are attempting to capture a share of the regional airline business. Those routes are currently dominated by Boeing 737s and Airbus A320s, but things can easily change. Just ask automakers in Detroit.
High stakes for Washington
The stakes are enormous for Washington as well. Our state is well positioned to take advantage of the Boeing surge as long as we are cost-competitive and business friendly.
Because of Boeing and other Washington-based companies like Microsoft, Starbucks, Costco and Schweitzer Engineering Laboratories, Washington is enjoying record tax revenues and is one of the few states with a positive foreign trade balance. In other words, Washington exports more than it imports and our economy is poised very well for the future.
Washington is the second leading state in exports per capita, according to the 2007 WashACE Redbook, published by the Washington Alliance for a Competitive Economy. But our ranking is even more impressive when you consider that the number one state, Vermont, is very small. Vermont exports only $4.2 billion, equivalent to $6,805 for each of that state’s 625,000 citizens. Washington produces $40 billion in exports—$6,035 for each of our state’s 6.3 million citizens.
That same WashACE report also shows our state’s glaring weaknesses. Four years ago, some of those shortcomings caused Boeing to consider other locations for their 787 assembly plant.
"Washington continues to be a high-cost state, a fact that AWB and business leaders continue to point out to elected officials through WashACE," said AWB President Don Brunell.
"Competitiveness is a moving target. Other states and nations want Boeing and other companies to locate factories there," said Brunell. "They covet the family-wage jobs with good benefits and the revenues those plants generate. We simply cannot assume that because Boeing is assembling its aircraft in Washington today, they will in the future. If costs are too high and our businesses are not competitive, jobs will slip away."
Costs matter
Boeing continues to issue those same warnings. In 2002, then Boeing Commercial Airplane CEO Alan Mulally told lawmakers in Olympia that unemployment costs in Washington were the highest of any Boeing location. Mulally stressed that, despite the company’s 100-year history in the state, Washington could not assume the company would stay—a point that was made painfully clear in 2000 when Boeing moved its corporate headquarters to Chicago.
In 2003, Gov. Gary Locke and state lawmakers approved a series of "competitiveness" bills to convince Boeing to assemble the 787 in Everett. The package included major unemployment insurance reforms which were largely reversed in 2005. Last year, lawmakers approved another UI reform bill that took some of the sting out of the 2005 reversal, but that legislation may not survive a challenge by the U.S. Department of Labor.
Meanwhile, Washington’s unemployment taxes remain the nation’s highest. Employers, on average, pay $865 per worker each year, compared to the national average of $317.
Union organizers target suppliers
Last year, union leaders pushed a bill that essentially leverages its organizers' influence with non-union Boeing suppliers. It died midway through the session, but will be back in 2008. If that legislation is adopted, aerospace-related companies with fabrication plants in our state could lose tax credits and other incentives granted in the 2003 competitiveness package if they don’t bow to union organizing pressure.
If unions are successful in tying the state’s incentives to union organizing, they won’t stop with aerospace. They will go after other manufacturers, including those in the very high-tech sector that our state elected officials are hoping to entice.
So, while we all are encouraged by the Dreamliner’s debut, we should remember that it took a lot of heavy lifting to make sure Boeing put the "Made in Washington" label on the 787. Keeping that label should be our primary goal.
Boeing’s corporate headquarters were moved out of Washington. The rest of Boeing’s operation can be moved, as well, if unions and elected officials aren’t careful.
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