A company that helped Wichita become known as the Air Capital of the World is leaving.
Boeing, one of the city’s iconic manufacturers, said it will close its sprawling facilities in south Wichita by the end of 2013.
The decision ends Boeing’s 85-year history with the city and affects 2,160 workers in Wichita, their families and the community.
“It’s tremendously disappointing for a company that’s been here since” 1927, said Steve Rooney, Machinists District 70 directing business representative. “I never thought I’d see an Air Capital of the World without Boeing.”
For decades, Boeing was a major Wichita employer, and generations of Kansans worked there. During World War II, it became a vital center of military production, building trainers and the B-29 Superfortress.
The closing comes less than a year after Boeing and state officials celebrated the company winning a huge contract with the Air Force to build a new generation of aerial refueling tankers. Wichita’s site, according to Boeing officials, would be the finishing center for the tankers.
But Boeing officials said cuts to the nation’s defense budget and high overhead costs at the Wichita plant led them to Wednesday’s announcement.
“There is nothing else we can do in Wichita to survive this environment,” Mark Bass, vice president and general manager for Boeing Defense Systems’ Maintenance, Modifications & Upgrades, told workers in a mandatory employee meeting at the plant Wednesday morning.
Bass said in a statement released by Boeing that the decision to close the site “ultimately was based on a thorough study of the current and future market environment and our ability to remain competitive while meeting our customers’ needs with the best and most affordable solutions."
Engineering and program management work will move from Wichita to Oklahoma City, while production work will move to facilities in San Antonio. The tanker work will go to Puget Sound, Wash. Layoffs will begin in the second half of the year. Some employees will be offered jobs at one of the three other sites; others will not.
The mood was somber Wednesday at Boeing and around the city. Some employees said they weren’t surprised by the announcement.
“I think most people have resigned themselves to this happening,” said Chuck Younts, a flight avionics technician and 30-year Boeing employee.
“No matter how hard we work and how hard we try, there simply is not enough modification and support business to sustain Wichita,” Steve Wade, head of the Wichita operations, told employees.
Boeing primarily does maintenance and modification of military and government aircraft in Wichita, including work on presidential airlift programs, commonly known as Air Force One.
Sen. Jerry Moran said Boeing leaving is a blow to Wichita.
“It means more uncertainty and less job security for Kansas,” he said. “And that’s very sad.”
Less military work
Not long ago, Wichita had hopes the plant would grow after Boeing won a $35 billion Air Force tanker contract in February 2011 and said it would make Wichita its finishing center for the military air refueler.
But the military maintenance, repair and overhaul market has been flat or declining, Bass said. And defense budgets are shrinking.
Over the past five years, military programs at the Wichita plant have matured, come to a close or are winding down, the company said. It does not have enough business on the horizon to create an affordable cost structure to maintain and win new business.
Because of that, Wichita’s costs are uncompetitive and current work isn’t enough to sustain the entire site, Bass said.
Boeing said it began studying its Wichita operations in the middle of 2011, Bass said. It was completed in November and a decision was made Dec. 30 to close the site. It also studied its Oklahoma and Texas operations.
Costs are higher at the Wichita site, which has 97 buildings and covers nearly 2 million square feet, he said. Bass said it’s 70 percent more expensive to do work in Wichita than in San Antonio, when considering wages, infrastructure costs and the cost of doing business here.
At the same time, competition is fierce for maintenance work against competitors with smaller facilities and less overhead, Bass said.
Tanker work would have meant about 200 direct jobs at Boeing Wichita, Bass said. But had Boeing brought tanker work here, it would become unaffordable because the plant would close around it as the other work continued to erode, he said.
Local, state and federal government leaders said Wednesday that they were disappointed, saddened and even angered by Boeing’s decision.
“Probably every one of us knows someone who works there or who has worked there,” said Dave Unruh, chairman of the Sedgwick County Commission. “This is a very difficult reminder about how fragile and delicate the economic development climate is.”
Mayor Carl Brewer, who worked 20 years at Boeing, said Boeing’s decision would spur a redoubling of efforts on the part of local and regional economic development officials to recruit new business to the area.
And he raised the idea of economic developers starting a conversation with aircraft manufacturer Airbus about growing its presence here beyond its Old Town engineering center.
“It’s something we’ve never done before because the Boeing Co. was always here,” Brewer said.
Members of the Kansas delegation say Boeing should live up to its commitment to put tanker work in Wichita. The state’s congressional delegation worked for years to help Boeing secure the contract.
When Boeing won the contract, it said that the tanker would support 50,000 jobs at Boeing and its suppliers in the U.S. It said that about 7,500 of those jobs would be in Kansas, with an annual economic impact of $388 million. Several hundred of them were expected to be at the Wichita facility.
"The Boeing Company made a seven-year-long promise that if you do the right thing, help them compete, provide a good product for our soldiers and sailors and airmen, we will place that (tanker) work in south-central Kansas,” said U.S. Rep. Mike Pompeo, R-Wichita. “The folks in south-central Kansas did what they said they would do. The Boeing Company has not.”
He pledged a review of the documents surrounding the tanker award, searching for some kind of binding commitment to build the tanker in Wichita that the federal government can enforce.
"We will pursue it until the facts suggest that we are wrong," he said. "But it is absolutely the case that in completing a bid, you submit documents under oath to the federal government, you make public statements, you do lots of things that require you to speak accurately and truthfully. I think it’s important that we all come to a conclusion whether that was the case here."
It’s discouraging, Moran said, that Boeing’s CEO declined invitations to meet with Kansas officials and the congressional delegation, the union and employees to discuss what could be done to change the outcome.
“It does not appear at all that Boeing is at all interested in reaching a solution,” he said.
Bass said Boeing would not ask directly for incentives.
“That would be seen as not the right thing to do,” he said.
He said there were discussions with Gov. Sam Brownback, who asked what the state could do.
“That’s a hard thing to answer,” Bass said when asked whether there was anything that could have changed Boeing’s decision. “I don’t think there was enough that the state could do.”
Bass said the company wants to retain a good relationship with members of the Kansas delegation. And he said the company remains committed to Wichita.
He said the company could not produce the tanker without suppliers in Kansas; 24 Kansas suppliers on the program will provide elements of the plan as originally planned, the company said.
And the commercial side of Boeing will still spend more than $3.2 billion with 475 suppliers in Kansas as work ramps up on the 737 and other jets. Boeing’s largest supplier is Spirit AeroSystems, which builds parts of every Boeing jetliner, officials said.
“We have a tremendous amount of business here,” Bass said.
The good news is that the commercial aerospace industry is booming, Bass said.
“Right now, commercial aerospace is the place to be,” he said. “And that’s where you guys are.”
Boeing hasn’t requested any public tax incentives from the city of Wichita since 2007.
“Maybe that was a sign,” Brewer said. There are no city or county incentives pending that relate directly to the tanker program.
Allen Bell, the city’s director of urban development, said several Boeing industrial revenue bond issues remain outstanding, including the 2007 issue for $12 million. Bell said the city has issued IRBs to finance Boeing plant improvements and equipment over the last 30-plus years in order to provide 10-year property tax abatements on the improvements and equipment. Bell said the average annual IRB amount for Boeing over the past three-plus decades has been about $120 million.
Kansas state Rep. Jim Ward, D-Wichita, vowed that such incentives will be harder for companies to come by in the future.
“Obviously, we can’t always trust what companies tell us. So we should be much more vigilant in the future,” he said.
Jobs and buildings
Moving the work from Wichita will create about 800 jobs in Oklahoma City and from 300 to 400 positions in San Antonio, officials said.
Those positions will be filled by Wichita employees as well as local hires, Bass said.
Employees will receive more information from their managers on how the closure will affect them, company officials told them. Each received a packet of information before leaving the employee meeting, held in the company’s north hangar on South Oliver.
Boeing is providing employee assistance including retirement seminars, job search resources and financial counseling, as well as help finding jobs inside or out of Boeing, the company said.
The company will eventually divest itself of its large Wichita site. Bass said company officials have spoken with Spirit.
“They’re noncommittal at this point,” he said.
Spirit spokesman Ken Evans said Wednesday night, “At this time, we’re not interested in the facilities. They don’t fulfill our needs."
Suzie Ahlstrand, the interim president of the Greater Wichita Economic Development Coalition, said several questions must be answered before her group can begin marketing the Boeing property.
Long history in Wichita
Boeing has been part of Wichita’s fabric for decades.
During World War II, Boeing’s line of trainers and the B-29 Superfortress pushed the Wichita plant into the forefront of military activity. The city became one of the nation’s busiest military production centers. Boeing employed about 40,000 people at the time.
In 2004, the company — which employed 12,400 people in Wichita — said it planned to sell its commercial aircraft division here. It closed a deal with Onex Corp. the next year, forming Spirit AeroSystems.
At the time, Boeing officials said they had no plans to sell the military division and that it was committed to the city. But some Boeing workers and analysts wondered whether it would be a matter of time before Boeing pulled out entirely.