By Don C. Brunell
As we launch into 2020 and the ensuing decade, Boeing faces very strong head winds, which are major concerns for those of us living in the Pacific Northwest.
Things are vastly different now. In my first column of 2019, I wrote that Boeing was poised to have its best year ever. It had strong tail winds propelling it. It would build upon a very successful 2018. Its 737 Max was selling like hot cakes to hungry airlines and plans were in the works to expand production at the Renton assembly plant. The new composite wing 777X would fly its maiden test flight and go into service in 2020.
Today, Boeing is halting (hopefully temporarily) its 737 production. It delayed flight testing of its 777X and has a new CEO Dave Calhoun. Until the Federal Aviation Administration (FAA) and other government regulators around the world approve Boeing’s safety modifications, the aircraft will not return to service. There are about 500 grounded 737 Max jets worldwide, Bloomberg noted, with about 400 undelivered aircraft in storage.
The company’s financials are stretched. For the airplane’s manufacturer, it’s all getting very, very, very expensive. In the third quarter of 2019, according to an earnings report on Oct. 23, the plane’s continued grounding cost Boeing $900 million, bringing the total to $9.2 billion, Quartz reported.
“Even if no employees are laid off at Boeing, ceasing production will still cut into the nation’s economic output because of Boeing’s huge footprint in the manufacturing sector. Through October, the U.S. aerospace industry’s factory output has fallen 17 percent compared with the same period last year, to $106.4 billion, in part due to previous 737 Max production cuts,” FOX 4 News, Dallas, reports.
The 737 Max crisis has helped Boeing’s main competitor, Europe’s Airbus, which saw deliveries surge 28 percent during the first half of the year. Boeing deliveries fell 37 percent despite strong 787 sales and production.
For Washington, a healthy and vibrant Boeing is vital to our state’s economy.
A PricewaterhouseCoopers (PwC) global study of aerospace manufacturing attractiveness found the United States is top rated and within our country, Washington is the best.
The study reaffirmed that “Washington’s economy and industry size are heavily tied to Boeing’s commercial aircraft business.” Boeing Commercial Airplane Co. is based in Renton. PwC pointed out that our state also is home to 1,400 aerospace-related businesses and has the highest concentration of aerospace jobs in the country.
Washington topped the state rankings in categories of industry, infrastructure and economy. Texas finished second with its strong economy and favorable tax policy. It has a more diverse aerospace manufacturing base than Washington with Airbus, Lockheed Martin, Boeing, Bell Helicopters, Textron and Gulfstream located there.
Boeing has mammoth manufacturing facilities in the Puget Sound Region that are unlike any other in the world. The 66,000 workers solely assembly every Boeing jet used by airlines. Only Charleston, S.C., shares 787 production.
Once back in service, airlines and their pilots must be confident the aircraft is safe to fly and convince passengers to fly in it.
Boeing has queried thousands of travelers around the globe four times since May, and found that the skepticism surrounds the Max. Among U.S. travelers, just 52 percent said they would be willing to fly on the plane.
Calhoun’s top priority is to convince regulators, airline customers, the flying public, and even Boeing employees that he has things back under control. “It will be difficult, and any missteps could send Boeing’s stock plummeting. The risks outweighs the rewards for investors,” Barron’s reported.
Boeing must restore its reputation by weathering the storms and finding strong tailwinds. Failure is not an option!
Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at theBrunells@msn.com.