By the Leeham News Team
May 5, 2022, © Leeham News: Boeing is moving the corporate headquarters from Chicago to Arlington (VA) (a Washington (DC) suburb), the Wall Street Journal reported. The signs were there for all to see if you were looking.
Boeing closed its headquarters in Chicago as the COVID pandemic expanded. The Illinois/Chicago tax breaks expired. Key corporate communications people relocated already from Seattle to Washington, including Bernard Choi—whose duties expanded from oversight of Boeing Commercial Airplanes communications to the corporate level. There is an under-utilized Boeing building in Arlington.
Already under financial pressure because of the 737 MAX grounding in March 2019, the pandemic made things much, much worse. With no orders flowing into Boeing Commercial and few deliveries after the pandemic grew across the globe, Boeing’s cash flow took a huge hit. Then 787 deliveries were suspended in October 2020 and have yet to resume.
The Department of Defense began awarding a lot of contracts to Boeing. LNA doesn’t follow Defense closely, but optically, it seemed like one contract after another was flowing Boeing’s way. Relief was granted this week by the Air Force and funding fixes to the remote vision system on the KC-46A tanker, a Category 1 (the highest level of concern) item on Boeing’s troubled tanker program. The Air Force secretary made it clear a few weeks ago he prefers to award Boeing a sole-source, directed contract for up to 160 more refueling tankers rather than open it to competition with Lockheed Martin-Airbus.
These moves seem designed to fund Boeing to keep it afloat while Boeing Commercial still sorts itself out from its disastrous era, which will take several more years before BCA returns to pre-MAX crisis levels. And more DOD contracts are expected soon.
Being down the block, so-to-speak, from the Pentagon, and across the river from the Hill (Congress) makes all the sense from a corporate perspective. As for impacts on BCA: Boeing hasn’t been a Seattle-based company since 2001, so this move should have no impact.
But what the greater Puget Sound area does need to watch is what happens to the next Boeing airplane (NBA), whatever design it takes. There is a lot of free space in Everett now that the first 787 assembly line is history. The 747 assembly line closes for good this year. These bays, next to each other, offer lots of space for a final assembly line for the NBA. But there is no guarantee that the airplane will be built here. The Everett plant is heavily unionized, Washington State is an expensive place to do business and Puget Sound is the priciest in the State. Union contracts are up in late 2024. One assumes Boeing will leverage the NBA for more concessions from labor. It’s a recipe for locating the NBA in another state.
Boeing is headed for a permanent single-aisle market share of 43% against Airbus in the heart-of-the-market A320neo vs 737 MAX sector.
Both OEMs face challenges with the supply chain ramp-up. Boeing has the added headaches of slow certification of the 737-7 and 737-10. Airbus is going to run behind for certification of the A321XLR.
When the A220-300, which competes with the 737-7, is added into the mix, Airbus gains another point in the single-aisle market sector.
Certification of the MAX 10 by year-end, a Congressional mandate for certain types of authorization including the MAX 10, is in doubt. Boeing reportedly is seeking Congressional action to extend the deadline for the MAX 10. Boeing wants to deliver the MAX 10 to customers next year. If the airplane gets caught in a certification loop, there’s no telling when it could be delivered; 2024 is as good a guess as any.
And speaking of certification loops, this appears to be what’s happening to the MAX 7. Certification of this airplane was expected months ago. Delays, for reasons neither Boeing nor the FAA has identified, have been so long that Southwest Airlines swapped 40 orders to the MAX 8.
HOTR is told that the FAA is essentially reviewing “everything” that was done previously and through the flight testing while the global MAX fleet was grounded. There is no hint when certification might be forthcoming.
Airbus announced Wednesday that certification of the 4,700nm range A321XLR will slip from 2023 to 2024. This confirms what had been circulating in aviation circles for months.
The new, integrated fuel tank, which replaces up to four auxiliary fuel tanks, is designed in such a way that Europe’s regulator, EASA, has concerns about fire in the event of a crash. The FAA expressed similar concerns. Airbus’ redesign will add the empty weight of the airplane, which reduces range. Airbus is working to regain the lost range. The redesign adds to the certification timeline.