Odds and ends: A350-1000, A380 orders coming; NLRB action starts today

A350-1000: We broke the international news that Airbus and Rolls-Royce were going to modify the design of the A350-1000 to increase the range of the airplane. Now, the ever-thorough Flight Global has this story with a fair amount of detail that leaves the two companies little left to announce at the Paris Air Show next week.

A380 orders: When we did the Paris Air Show outlook for affiliate AirInsight, we indicated that Hong Kong Airlines would likely place the order for five A380s that had been expected at the Zhuhai Air Show but failed to materialize. It’s now been confirmed by the airline. Aspire Aviation takes a look at the rationale.

Boeing, the NLRB and the IAM square off today for the first day of what is likely to be a long hearing on the IAM complaint to the National Labor Relations Board that Boeing opened 787 Line 2 in Charleston (SC) in retaliation for the 2008 57-day strike by IAM. The NLRB associate general counsel’s recommendation the the hearing examiner and the board that Boeing shut down Line 2 and place it in Seattle is an impractical, ridiculous suggestion and Boeing, even while acknowledging it is likely to lose at the NLRB, vows to appeal all the way to the US Supreme Court if necessary.

At the same time, the IAM’s suggestion that Boeing guarantee future airplane work in Seattle is impractical and ridiculous, and Boeing certainly was right to reject a “guarantee.” The IAM demanded this in 2009 (as well as Boeing neutrality for unionization efforts at all its plants across the country) as condition to accept a long-term contract revision sought by Boeing to put Line 2 in Everett. It was impractical then, as we opined, and it is impractical now. Business climate issues in Washington State and earthquake potential make it impossible to “guarantee” anything.

We believe both sides are guilty of the ugly atmosphere that led to the 2008 strike. Both sides have made strides to improve relations. But the IAM International office in Washington (DC) has a national agenda that interferes with the true progress of the Local that could be achieved.

We fear this new battle will poison the atmosphere for the 2012 contract negotiations.

One point we take strong issue with on Boeing’s part, begins with this summary from the New York Times article:

Boeing has acknowledged that the fear of labor disruptions factored into its thinking, but it said the main reason for moving the line was South Carolina’s lower production costs. Starting pay at the South Carolina plant is $14 an hour, while starting pay in Washington is $15 an hour, rising to an average of $28 an hour.

This is so much poppycock. At the time, Boeing’s rhetoric was entirely about labor and strikes. Boeing repeatedly told the Washington Governor, the state’s Congressional delegation, the top executive of Snohomish County, the media and the union that the consideration of Line 2 was all about labor and that the state and local governments could do nothing by way of offering economic incentives (as Boeing now assets was the motive in its legal filing in response to the complaint). Production stability was the message.

Whether this crossed the line of retaliation in the legal context is a matter of law we can’t address. But Boeing is taking a legal argument today that is 180 degrees from what it was saying then. We absolutely agree that Boeing needs production stability and in 2008 opined that a five year contract made sense (Boeing and the IAM settled on a four year deal, up one year from the traditional three year contracts). Boeing in 2009 wanted to extend it to 12 years and the IAM offered 10, conditioned as noted above, on impossible demands.

On an investors’ day webcast, Boeing CEO Jim McNerney said he was optimistic next year’s contract negotiations will be successful despite the NLRB complaint. He wants to hit the “restart button,” he says. We hope he’s right. But we fear both sides have once again retreated into their corners.

22 Comments on “Odds and ends: A350-1000, A380 orders coming; NLRB action starts today

  1. The complaint to the NLRB by the IAM was originally filed in 2010, but then they asked it be delayed until the SC plant was near completion. The root of the IAM claim isn’t really about guaranteed production work for IAM members in Washington State. It is about unionizing all Boeing production employees, no matter what state they happen to be in. In other words it is all about union dues, and the union spending the money anyway they see fit.

    The NLRB Judge has already ruled the 3 SC Boeing employees that joined Boeing side have no standing in court. So the judge is saying this complaint has nothing to do with employees in a ‘right to work state’, but only applies to unionized employees and guaranteeing unionized employees rights to future work over that of non-unionized employees.

    The union doesn’t care that Boeing has spent about $1B in the new facility with tooling and training costs, etc. In fact they had the NLRB wait on their complaint until Boeing had already spent that much money in SC and is ready to open the facility. I’ll bet the IAM drops its complaint if Boeing would allow them to unionize the SC employees. That would still leave the Washington unionized employees without the second B-787 line, and whatever else Boeing decides to build there.

    If the Boeing facility at CHS (a joint use field) is not allowed to begin producing B-787s, then it will cost Boeing more due to a slower production and delivery rate on the Dreamliner. It will take years just to get an approved EIS in Washington State. A new Washington B-787 facility would not be available to begin production for another 5-8 years.

    • “The complaint to the NLRB by the IAM was originally filed in 2010, but then they asked it be delayed until the SC plant was near completion.”

      What is your source for this, TopBoom? IAM is on record earlier that that expected the NLRB to issue its complaint last November and that Boeing delayed the process.

  2. Oh please, isn’t this just another round of the pot calling the kettle out?
    Boeing will accuse the IAM of nefarious dealings, and since it’s (mainly) made up of Boeing employees, why expect anything different from the IAM towards Boeing?
    I’d say cooperation is always better for any corporation, but what do I know.

    I personally don’t get why anyone would want to live in a “right to work” state – But than again, I live in a corner of the world where unions do work.

    • Good points ikkeman! The IMO ridiculously named “right-to-work” laws that’s so prevalent below the Mason-Dixon line is nothing but a clever way of deception. By allowing wages and regulation levels converge at the seemingly lowest possible denominator, these states — in a “race to the bottom” — want to attract all sorts of businesses to relocate production in their states. Unfortunately, too many companies seem to have few, if any moral qualmsof maximising profit at the expense of decent working conditions for blue-collar workers in particular. Of course, cities and countries around the world are competing with each other to attract businesses, and it’s nothing wrong with that. However, certain minimum standards should IMO be the common denominator. In the EU, for example, there are specific standards in relation to labour and environmental laws that all EU member states have agreed upon by treaties and which must be honoured. Despite these regulations and the huge labour cost differential between most Asian countries and the EU in particular, industries in the EU nevertheless remain competitive globally due to higher productivity and competitive strengths such as innovation, quality, creativity, design or fashion.

      Using the “right-to-work” term makes sense in developing countries where too often disregard and contempt for the right to work has led to large parts of the population being threatened, and where worker’s fundamental right to work and for their right to descent work has been curtailed. Therefore, using the “right-to-work” term in such a frivolous manner as they’re doing it below the Mason-Dixon line, in particular, IMO is nothing but an affront to millions of workers in the third world who are deprived of a minimum level of job security and decent working condiditons.

      Finally, you correctly pointed out that unions do seem to work in Europe. This, due in part to the fact that as with society in general, unions have progressed over time. Most, if not all workers realize that in today’s global competitive environment, the long term viability of the company in which they are employed, is hurt by a long strike. Most, if not all European unions will thus tend to work in constructive cooperation with management. This leads to an environment with much less confrontation than what seems to take place in the US.

      • Huh???? I live in a ‘right to work’ state (Texas). Before I retired, I was making more money than the union guys at AA. I also had better benefits.

        Perhaps you missed it, but even in this economy right to work states have been adding jobs, and great paying jobs, with good benefits. States like California, Massachusetts, New York, Washington, Michigan, Nevada, Illinois, etc. (all heavy unionized states) have been loosing jobs.

        The big difference between right to work states and unionized states is a much lower tax rate and a business friendly enviornment.

        There is a reason why Boeing, when they were looking for a place to build their new assembly plant was mainly in right to work states like South and North Carolina, Texas, Oklahoma, etc. It has to do with the tax base and the quality of the available workforce.

      • if I may, the only reason to look at “right to work” states is shortsightedness and short-term greed.

        Don’t misunderstand – I do not support the notion of a mandatory union – but the workforce does have to have collective representation to their employer. In the end, the workforce as a whole has a very vested interest in the longevity and long term viability of a company. This makes them a great option to counterweight the usually shorter term interests of management and stock holders.

        I think the term is “you get what you pay for”. No, a SC mechanic is no worse than a Seattle counterpart – but he generally does care less for the company he works for, because the company cares less for him.

        of course all of these are gross simplifications, but any exception will be said to prove the rule, and on average I think it works out this way.

      • ikkeman, may I add that ongoing processes whereby employers and employees can reach agreements over the ever-changing conditions of industrial work is quite important if societies are to function efficiently. Whether labour unions can fulfill the role of monitoring conditions, raising issues and reaching agreements with management, or whether specific situations need non partisan mediators to help resolve difficult issues, remains to be seen. In either case, successful negotiations depend on the ability of representatives of both management and workers to work together harmoniously for the benefit of all involved.

  3. KC, good for you that you were making more money than the union guys at AA. 😉

    This paper basically destroys the notion put forth by “right-to-work” (RTW) advocates that RTW, supposedly, boosts economic development across the board.

    Does ‘Right-to-Work’ Create Jobs? Answers from Oklahoma
    http://www.irle.berkeley.edu/cwed/wp/right_to_work.pdf

    Here are some important and quite lengthy excerpts. Sorry for posting all of this but I do believe it’s quite relevant to the discussion about the 787 FAL in SC. NB: The sentences underlined in black is of my doing!

    Misleadingly named right-to-work (RTW) laws do not, as some unfamiliar with the term may assume, entail any guarantee of employment for those ready and willing to work. Rather, they make it illegal for a group of unionized workers to negotiate a contract that requires each employee who enjoys the benefit of the contract to pay his or her share of the costs of negotiating and policing it. By making it harder for workers’ organizations to sustain themselves financially, RTW laws aim to restrict the share of state employees who are able to represent themselves through collective bargaining, and to limit the effectiveness of unions in negotiating higher wages and benefits for their members. Because it lowers wages and benefits, weakens workplace protections, and decreases the likelihood that employers will be required to negotiate with their employees, RTW is advanced as a strategy for attracting new businesses to locate in a state.

    This report examines the track record of right-towork laws in boosting employment growth. In particular, we examine in depth the experience of Oklahoma, which in 2001 became the most recent state to adopt an RTW law. The majority of RTW states enacted their laws more than 30 years ago; the second-most recent statute adopted is that of Idaho, passed in 1985. Because economic conditions have changed greatly in the past decades, and because better data are available for more recent years, the case of Oklahoma is particularly illuminating regarding the potential impact of such laws on states considering them. Despite ambitious claims by proponents, the evidence is overwhelming that:

    • Right-to-work laws have not succeeded in boosting employment growth in the states that have adopted them.

    • The case of Oklahoma – closest in time to the conditions facing those states now considering such legislation – is particularly discouraging regarding the law’s ability to spur job growth. Since the law passed in 2001, manufacturing employment and relocations into the state reversed their climb and began to fall, precisely the opposite of what right-to-work advocates promised.

    For those states looking beyond traditional or lowwage manufacturing jobs – whether to higher-tech manufacturing, to “knowledge” sector jobs, or to service industries dependent on consumer spending in the local economy – there is reason to believe that right-to-work laws may actually harm a state’s economic prospects.

    As described above, whatever advantage manufacturers may have once sought by locating in a right-to-work state has been undercut by the increasing ease of locating facilities in even-cheaper jurisdictions abroad. On the eve of Oklahoma’s referendum, one scholar of location decisions warned that “right-to-work laws are a welcome mat for companies who care most about low-wage, unskilled labor and who are committed to a region only until they are able to relocate someplace where the laws protecting workers are even weaker.” Not only did right-to-work fail to bring manufacturers into the state, it also failed to keep them there.

    But the most steadfast and generous backers of right-to-work policies are corporate employers, not individuals who typically spend their waking hours devoted to the defense of employee rights. Moreover, even those advocates who articulate a libertarian insistence that one should be able to work where one wants without any dues requirement seem to limit this principle to the case of unions. Right-to-work devotees are not engaged in parallel projects to declare a “right to live” where one wants – insisting on the freedom to live in a gated community without having to pay homeowner association dues – or a “right to practice law” – demanding that, as long as one passes the bar exam, lawyers should not be required to be dues-paying members of the bar association in order to represent clients in court. But if the principle of freedom from dues is only about the workplace, it seems likely to be driven primarily by anti-union animus rather than any broader principle or economic strategy.

    It is, of course, perfectly legitimate for advocacy organizations to promote anti-union policies simply out of hostility to collective bargaining. But for state legislators, it is important to distinguish between passionate advocacy and economic reality.

    Hailing the “Oklahoma Model” as a prescription for depressed job markets, the National Right to work Committee insists that “the experience of Oklahoma…furnish[es] strong evidence that economically troubled states could greatly accelerate their job and income growth by passing Right to Work legislation.”

    It is unclear what evidence the Right to Work Committee believes establishes this fact. The volume of evidence examined in this report, both from previous scholarly research and from direct analysis of the data from Oklahoma, all points to the opposite conclusion: No matter what measure one uses, there is simply no evidence that right-to-work has increased job opportunities for Oklahomans. With declining manufacturing, a slowdown in firms coming into the state, and an acceleration of those abandoning the state for Mexico or China, Oklahoma provides no evidence-based model for economic regeneration.

    The right-to-work strategy seems particularly ill-suited to the type of higher-skill, higher-wage industries that Oklahoma and others are now aiming to recruit. As it has become more difficult to keep low-wage manufacturers in the United States, policymakers have focused greater attention on developing “high road” industries that are less susceptible to offshoring. Such industries, however, are the least likely to be influenced by laws aimed at undermining union bargaining power.

    Both the State New Economy Index and the Kentucky study finding education to be the single most important factor in Southern economic development point to the fact that if right-to-work has an impact at all, it will be in attracting lower-wage employers, whose business model relies on narrow profit margins and less-skilled labor. The better employers – offering jobs with higher pay and benefits – look for educated employees with advanced skills. They are operating on a different business model, which assumes they will pay employees relatively well in return for a workforce that produces much higher value.

    • German workforce organisation works similar to “Right to Work” and has lead to
      high productivity _and_ satisfactory worker income and benefits.
      ( OK Germany has “Mitbestimmung” legislated independently of unions )

      IMHO the “mandatory union” setup is a rather medieval concept.
      It lacks balance as unions have a very high blackmail lever at hand.

    • No, that’s not the point at all. The point is all about union membership and union dues.

      I don’t want to put everyone in shock, but I agree with Uwe that mandatory unionization is a medieval concept.

      BTW, the Wisconsin Supreme Court just threw out the legal challange to the new collective bargining law in Wisconsin. This clears the way for the new law to take effect. That happen last night.

      • Well, many continental European countries, including Austria, the Netherlands, and Sweden, have a social market economy where collective bargaining over wages is done on the national level between national federations of labour unions and employers’ organizations.

        As for the state of Wisconsin, check out “what a prank call proves about Wisconsin”:

        http://voices.washingtonpost.com/ezra-klein/2011/02/what_a_prank_call_proves_about.html

        The critique many conservatives have made of public sector unions is that they both negotiate with and fund politicians. It’s a conflict of interest. Well, so too do corporations, and wealthy individuals. That’s why Murphy — posing as Koch — was able to get through to Walker so quickly. And it shows what Walker is really interested in here: He is not opposed, in principle, to powerful interest groups having the ear of the politicians they depend on, and who depend on them. He just wants those interest groups to be the conservative interest groups that fund him, and that he depends on.

  4. I can see Cathay, United and TAM converting some of their A350-900’s to the upgraded -1000 version.

    Then we have the Euro flag carriers sitting on the fence; AF-KLM, BA-IB and the LH group.

    A predictable side kick of the RR Trent upgrade will be RR offering this engine for a new 777- 200 or -250 version. Boeing will stay loyal to GE, if they offer a similar or better engine. . Curious what GE will have to say in Paris. The GE90-115 is great for the 777-300ER, but not forever. 777 backlog: ~300, 7 a month, just under 4 yrs. No reason to sit back.

  5. ikkeman :if I may, the only reason to look at “right to work” states is shortsightedness and short-term greed.
    Don’t misunderstand – I do not support the notion of a mandatory union – but the workforce does have to have collective representation to their employer. In the end, the workforce as a whole has a very vested interest in the longevity and long term viability of a company. This makes them a great option to counterweight the usually shorter term interests of management and stock holders.
    I think the term is “you get what you pay for”. No, a SC mechanic is no worse than a Seattle counterpart – but he generally does care less for the company he works for, because the company cares less for him.
    of course all of these are gross simplifications, but any exception will be said to prove the rule, and on average I think it works out this way.

    That is painting non-union employees and their employers with a very broad brush. You do know some of the best places to work in the US have a non-union, or mostly non-union workforce? Even in the airline buisness, airlines like WN and DL have a mostly non-union workforce and do very well. Boeing will still have some 80% to 85% of their workforce unionized after the SC plant is running at full capacity.

    Other great US non-unionized companies to work for include SAS Software, Google, Dreamworks, Boston Consulting, Qualcomm, Edward Jones, and many others. In fact 22 of the top 100 companies in the US are great companies to work for. They have HHQs all over the US, not just the south.

    There are also bad companies to work for, from an employees prospective, and I am not talking about Boeing.

    You say you don’t understand, yet also say employees must have a collective representation to their employer. In some cases I agree with you, in many others I disagree.

    • as I said, the exception proves teh rule.
      I guess it depends largely on your general outlook on poeple: if you feel humans are normally fair and altruistic there is no need to organize a power block to oppose your employer – he’s already taking care of your best interests.
      I feel differently.

  6. OV-099 :Well, many continental European countries, including Austria, the Netherlands, and Sweden, have a social market economy where collective bargaining over wages is done on the national level between national federations of labour unions and employers’ organizations.
    As for the state of Wisconsin, check out “what a prank call proves about Wisconsin”:
    http://voices.washingtonpost.com/ezra-klein/2011/02/what_a_prank_call_proves_about.html

    The critique many conservatives have made of public sector unions is that they both negotiate with and fund politicians. It’s a conflict of interest. Well, so too do corporations, and wealthy individuals. That’s why Murphy — posing as Koch — was able to get through to Walker so quickly. And it shows what Walker is really interested in here: He is not opposed, in principle, to powerful interest groups having the ear of the politicians they depend on, and who depend on them. He just wants those interest groups to be the conservative interest groups that fund him, and that he depends on.

    You forgot to mention this……

    “To Walker’s credit, he doesn’t say anything incriminating. When Murphy/Koch offers to plant demonstrators, Walker declines. The worst you can say is that when Murphy/Koch makes a lewd comment about Mika Brzezinski, Walker doesn’t challenge him on it. But that portion reads to me as Walker politely grunting in response to an odd provocation. I imagine politicians are pretty good at gently moving the conversation along when their contributors say crazy things.”

    If I were Gov. Walker, I wouldn’t take any calls from democrat senators either. They walk out on the responsibilities for elected office, fled to another state (just like the Texas senators and assemblymen did in 2004). and incited near riots with their daily phone calls to union “leaders”.

    The story is all about a “gonzo journalist” and his attempt at deception of a sitting Governor. A “gonzo journalist” has no objectivity.

    • Sorry, not relevant. It was you who mentioned Wisconsin in the first place. The example of the Governor merely illustrates my point about the seemingly increasingly divisive tone of US domestic politics which in the long run, may seriously hamper US industry competitiveness in the global marketplace

      http://www.nytimes.com/2011/03/22/opinion/22cronon.html?_r=1

      Mr. Walker’s conduct has provoked a level of divisiveness and bitter partisan hostility the likes of which have not been seen in this state since at least the Vietnam War. Many citizens are furious at their governor and his party, not only because of profound policy differences, but because these particular Republicans have exercised power in abusively nontransparent ways that represent such a radical break from the state’s tradition of open government.

      Perhaps that is why — as a centrist and a lifelong independent — I have found myself returning over the past few weeks to the question posed by the lawyer Joseph N. Welch during the hearings that finally helped bring down another Wisconsin Republican, Joe McCarthy, in 1954: “Have you no sense of decency, sir, at long last? Have you left no sense of decency?”

      Also, it’s duly noted that you haven’t responded to the paper, form which I posted excerpts, which debunks the notion that supposedly, “right-to-work laws have succeeded in boosting employment growth in the states that have adopted them etc. 😉

  7. Also, OV-099, just because something works in Europe, doesn’t mean it will work in the US, and visa-versa.

    • That’s true, of course, but IMO both Boeing and the IAM might be able to work together more “harmoniously”, for the benefit of all involved, if they both took a hard look on how their counterparts in Europe are doing it.

      • I agree, there could be some more give and take on both sides.

  8. OV-099;

    “Sorry, not relevant. It was you who mentioned Wisconsin in the first place. The example of the Governor merely illustrates my point about the seemingly increasingly divisive tone of US domestic politics which in the long run, may seriously hamper US industry competitiveness in the global marketplace

    http://www.nytimes.com/2011/03/22/opinion/22cronon.html?_r=1

    How could the section of the Wash. Post you quoted, but the section I qouted, from the same story not be relevent to what you were trying to say?

    Remember, it was the democratics who ran away from their responsibilities to help the unions, not the GOP senators and governor.

    As far as the opinion peice in the NYT, it is only an opinion, no more valid, or invalid than your’s or mine.

    Gov. Walker had a plan to balance the state budget, the democrats did not. They only wanted to continue to get union support for their own reelections, leaving the Wisconsin taxpayer to cover the costs of this years and future years budgets, all the while the state union employees sit in the cushy well paying and benefit jobs.

    This is the same thing the IAM is demanding from Boeing.

  9. This is getting increasingly off topic, my fault as well, I guess. 🙂

    Look, the political landscape of Wisconsin nor the State Governor’s vitriolic behaviour is not really of great interest to me. Wisconsin is just an example of yet another state which has enacted RTW laws under a cloud of distrust, suspicion and divisivenes, which btw, is symptomatic of the seemingly ever increasingly dysfunctional relationship between between labor unions and employers in the US.

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