As a record production year winds down at Boeing, executives shrug off analysts’ worries about a possible downturn and express full confidence in busy years ahead for Washington state’s aerospace industry.
With massive production hikes planned and a wave of worker retirements on the horizon, Pat Shanahan, Boeing vice president in charge of airplane programs, said the company expects to hire 20,000 to 30,000 people in Washington through the end of this decade.
At the same time, Boeing is making big investments in new automation equipment that promises to transform the nature of blue-collar production jobs for those future hires.
Inside the Renton 737 jet assembly plant, where two assembly lines each pump out 21 airplanes every month, construction crews are installing the foundation for a third – the new 737 MAX line that will begin production in 2015.
On a tour in December, Shanahan predicted the Renton plant won’t miss a beat executing Boeing’s ambitious plan: “Going to 52 a month, introducing the MAX and changing our manufacturing process, all simultaneously.”
In the adjacent 737 wing facility, a shiny, new 25-foot-tall automated wing-panel fastening machine is being put through its paces to gain certification for initial operation in the spring.
Boeing is installing eight of these multimillion-dollar machines – designed and built by Electroimpact of Mukilteo – to make possible its plan for the astonishing Renton ramp-up to 52 jets per month, triple what it was a decade ago.
Meanwhile in Everett, construction is well along on two buildings that will house production of the Boeing 777X wings and fuselage. There, too, new advanced automated systems will pump out ever more airplanes.
Ramp-up at Airbus
Airbus, equally bullish, has ramp-up plans parallel to Boeing’s.
Barry Eccleston, president of Airbus Americas, said he sees no waning of the prolonged aviation boom.
“We’re not seeing any weakness in the order book or any slowdown in the ordering rate,” Eccleston said.
The way both prime manufacturers paint a glowing picture of the industry’s prospects was lampooned at an industry conference last year by Adam Pilarski, a respected industry veteran and senior vice president with consulting firm Avitas, who started his presentation by playing a “Lego Movie” song: “Everything is Awesome.”
“That’s exactly how Boeing feels,” Pilarski said in a year-end interview. “But airplane financiers respond: ‘What are you talking about?’”
Wall Street analysts have repeatedly warned that production rates for the Airbus A330 and for Boeing’s 777 may need to be cut back severely before the end of the decade if the plane builders can’t find customers for the last of their current models as major upgrades are readied.
At the Airbus investor conference in London this month, executives presented slides showing the worst-case scenario of having to drop A330 production from 10 jets per month today to six per month for a couple of years.
That’s possible because Airbus has lots of empty delivery slots for the current model in the two years before it introduces a new A330neo in 2018.
Bridge to 777X
Boeing faces a similar issue with its star widebody jet, the 777, produced at a rate of 100 per year in Everett. The 777X, a major upgrade, is due in 2020.
Over the next six years, Boeing needs to win about 350 new orders for the current 777 to keep production humming until the 777X arrives.
In addition to these model-transition issues, Pilarski has a broader concern: “a reasonable chance of increased cancellations and deferrals” after years of airlines ordering more planes than the market requires.
This month, Air France-KLM management said it will defer five 777s due to be delivered in 2015 and 2016.
While acknowledging that Boeing’s business is booming right now, he puts the chances of a production downturn by 2020 at 50-50.
“If I were Boeing, I’d be happy,” Pilarksi said. “But there may be some dark clouds on the horizon.”
Boeing executives brush aside such talk.
Vice president of marketing Randy Tinseth agreed that some legacy European flag carriers indeed find themselves “at a crossroads” because of competition from the Gulf carriers. But he said the company’s order book is so large and diverse – a backlog of more than 5,700 airplanes – that individual deferrals have minimal impact.
John Wojick, sales chief at Boeing Commercial Airplanes, insisted Boeing won’t have to “significantly change” the current 777 production rate.
Such optimism is backed by Boeing’s stellar manufacturing and sales performance in 2014.
“This year, Boeing is probably going to outdeliver Airbus in single-aisle jets for the first time since 2002, and we’re going to smash them on widebodies,” Wojick said. “It’s not even close.”
It’s true that by the end of this month, Boeing will have eclipsed Airbus in the number of airplanes delivered in 2014.
Heading to yet another all-time-high production year from local factories – and for the first time with significant added help from Boeing South Carolina – Boeing will beat Airbus in deliveries of larger widebody jets by a wide margin.
At the end of November, the U.S. jet maker had delivered 89 more widebody jets than Airbus this year.
Airbus makes gains
Still, Airbus can point to significant strategic progress in 2014.
In the smaller-airplane segment, its A320neo family of jets continues to outsell Boeing’s 737 MAX family.
Eccleston said the Airbus advantage there is primarily due to its largest model, the A321neo, outselling the largest Boeing model, the 737 MAX 9.
Many analysts see the A321neo as the superior plane in this specific matchup. It carries more passengers and has better takeoff performance.
Boeing’s Wojick insisted that the vast majority of sales will go to the respective medium-sized variants – the 737 MAX 8 and the A320neo – and said Boeing wouldn’t be planning to build 52 jets a month if not totally confident in the MAX.
“This race has a long way to go,” said Wojick.