August 4, 2016 (c) Leeham Co.: With the news that Boeing may terminate the 747-8 program, effective around 2019 when the current backlog expires, the obvious
question arises: what happens to the assembly line space now occupied by the massive airplane?
Given that the State of Washington elected and appointed officials generally view Boeing in a reactive rather than a proactive mode, an open letter to them seems appropriate.
It’s imperative that Washington officials begin planning now for some lean times ahead for the Everett plant. Waiting until 2019 is too little, too late.
Gov. Jay Inslee
Bill Bryant, Candidate for Governor
Incumbents and Candidates for the State Legislature
Employees of the Washington State Department of Commerce
Ladies and Gentlemen:
At long last, Boeing acknowledged what many aerospace analysts on Wall Street, Leeham Co. and Leeham News and Comment (LNC) predicted for many years: the end of the iconic 747 program will happen sooner than later.
In its federal SEC filing for the second quarter, Boeing said it is “reasonable” that the program could be terminated. Orders only extend to 2019, the company said. This means it is almost certain that before the end of the decade, production of the 747-8 will end.
Ending the production means losing jobs directly associated with the assembly of the 747 at the Everett plant. Indirect jobs in Washington will also be at risk. The large 747 assembly bay at Everett becomes vacant.
The obvious question is, what happens to this space and the jobs that are associated with the 747 program?
Washington State cannot rest on its laurels and figure that the current Boeing 7-Series programs at Everett will fill the space or take up the slack.
The only new, albeit prospective, program Boeing may have to fill the 747 space is the New Mid-range Airplane (NMA) for the so-called Middle of the Market sector.
Boeing continues to develop the concept of the plane and gauge market demand. Generally, this concept evolved into a replacement for the 767-200/300: a twin-aisle, twin jet seating 220-260 passengers and a range of 4,500nm-5,000nm. This is a low-volume production airplane, tailor-made for the 747 space. A decision to launch this airplane is likely next year.
Boeing being Boeing, this new airplane will be competed to other states. Washington cannot count on it being built here.
Boeing is making a major push to make its services division a profit center, at least more so than it already is.
The 747 bay at Everett could become an MRO facility, should Boeing choose to take its services division to this level.
After Washington legislators gave “Boeing” an $8.7bn tax break in exchange for the 777X assembly and wing production sites in Everett, running to 2040, what’s left to give? (the tax breaks weren’t just to Boeing, but rather the entire aerospace sector, but Boeing as the recipient was how even the governor positioned it.)
The time to think about what to do is now. Waiting until Boeing launches the NMA, probably in 2017, with a national competition for the assembly site, will be too late.