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Aerospace suppliers and analysts remain confident in Boeing’s 787

Friday, January 25, 2013   (0 Comments)
Posted by: Samantha Bowers
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Published by the Puget Sound Business Journal on Jan 25, 2013, 3:00am PST

Aerospace suppliers and analysts remain confident in Boeing’s 787

Emily Parkhurst Staff Writer- Puget Sound Business Journal


While the future of Boeing’s 787 Dreamliner remains in question and the brand new fleet sits grounded worldwide, analysts and the people who run local aerospace companies are confident that the industry-leading company that makes the jets will remain strong.

The Dreamliner is a "small but important subset of aerospace in our community,” said John Monroe, chief operating officer of the Economic Alliance of Snohomish County and a former Boeing executive.

Monroe said he can’t imagine any near-term impact on the local aerospace industry as long as the 787 program isn’t delayed too long by electrical problems that have prompted a federal investigation.

The Federal Aviation Administration grounded the planes last week — and governments worldwide followed suit — after serious problems on two planes with the new lithium-ion batteries that are a selling point for the lighter, energy-efficient jets.

Investigators have yet to identify what caused an electrical fire on one plane and a battery meltdown on another. And when the investigators do determine a cause, a possible strike by Boeing engineers could further delay any necessary repairs.

Boeing spokesman Marc Birtel said the company has formed teams of hundreds of experts who are working around the clock to resolve the issues with the Dreamliners. Boeing will not deliver any 787s until the FAA approves a fix and that fix is implemented, he said.

So far, the company has not slowed production. And airlines are holding to previously placed orders for 799 Dreamliners; 49 planes have already been delivered.

With so much of the region’s employment tied to Boeing, any updates from the company, investigators or airlines are being put under a microscope.

"We as a community need to be as supportive as we can,” Monroe said.

The aerospace industry is responsible for approximately 30 percent of all Snohomish County wages and, Monroe said, that does not count the "multiplier effect” of the aerospace industry, which he estimates creates one additional job for every aerospace job.

More than 94 percent of Washington state’s 97,300 aerospace workers are in King and Snohomish counties, according to preliminary 2012 data from the Washington Department of Employment Security. While not all of them work for Boeing the huge company is a major customer for many of the smaller companies that supply anything from plastic airplane windows to emergency lighting to the machinery used to build the planes.

The optimism among Boeing suppliers stems in part from the fact that the Dreamliner is still early in production and because there are plenty of other planes to work on. While Boeing has stepped up production of the Dreamliner after years of delays, it also has dramatically increased the pace of assembly for the 737, stretching to meet strong demand.

Stephen Gear, president of Tacoma-based Bradken Energy Products, said the Dreamliner’s troubles should have minimal impact on his company because "the financial impact (of the Dreamliner) to Bradken is more long term than short term.”

Bradken is Boeing’s leading supplier for a specialized cast mold and dies that are used to form the titanium and composite materials in the fuselage in the Dreamliners. Because the molds have a long working life span — five to 10 years before they need to be replaced — and Bradken has already delivered $1 million worth of them to the Dreamliner program, it would be a long time before the company felt the effect of slowing Dreamliner sales.

Gear estimated that if airlines were to cancel or defer orders for the planes, it would cost Bradken about $350,000 per year at its Tacoma sites. That’s a relatively insignificant amount compared to the company’s annual sales of $80 million.

Mark Peabody, the executive vice president of Astronics, an airline accessory electrical supplier with a production line in Kirkland, said that despite Boeing’s huge presence and influence here, the aerospace industry is fairly diverse.

"For us, a very small part of our sales are to Boeing directly,” Peabody said.

Investors seem to share local aerospace leaders’ optimism. Boeing’s stock price has barely dropped 2 percent since the grounding.

But one unresolved issue looms large: Repairs to the plane’s electrical systems could be further delayed if members of the engineers union go on strike.

Negotiations between the Society of Professional Engineering Employees in Aerospace (SPEEA) and Boeing were not going well before the 787 was grounded, and talks ended Jan. 17 without an agreement.

Now, as SPEEA prepares for a vote on the contract in early February, union officials have said that if Boeing does not accept the union’s "best and final offer” — which essentially extends the existing contract for another four years — a strike is "highly possible.”

Boeing has given no indication it will budge on its own offer, which would extend the contract for existing Boeing employees but would eliminate the pension system for new employees, replacing it with a 401(k). The union described the offer as showing Boeing’s "growing disrespect for the engineers and technical workers who are essential to working issues and restoring confidence in the 787,” although the union council members, elected to represent union members in the workplace, have not yet made a recommendation on which way to vote.

Birtel said the company has a "contingency plan” should SPEEA go on strike, but he would not elaborate on the details.

Scott Hamilton, an aerospace analyst for Leeham Co. who sits on the board of the Pacific Northwest Aerospace Alliance, said the impact from a strike would depend on how long it lasts.

"A couple of days would be inconsequential,” he said. "A lengthy strike would be another matter.”

He said that while the machinists union, the International Association of Machinists and Aerospace Workers (IAM 751), is prohibited by contract from honoring picket lines, he still expects that a strike by SPEEA would generate "sympathy actions” that could slow 787 production.

For example, he said, the machinists could tag certain items in the production line so they require engineers to review them, which would mean the items could not be delivered until an engineer signed off.

It wouldn’t be the first time a strike affected the 787. In 2008, Boeing partially blamed a 58-day machinists strike for delays to Dreamliner deliveries.

Delivery of the 787 has already been delayed for years, thanks to a variety of factors, including issues with the lightweight carbon fiber body of the planes. (See timeline, page 36.)

Monroe, of the Snohomish County economic group, remains confident that Boeing will "identify the problem, and if it requires a design change, get that quickly completed, tested and certified.”

Still, he said, any struggles for Boeing are struggles for Washington:

"When things do not go as planned, we as a community feel the hurt and pain as well.”


eparkhurst@bizjournals.com | 206.876.5441


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