Leeham News and Analysis
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Leeham News and Analysis
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- Bjorn’s Corner: Air Transport’s route to 2050. Part 27. June 20, 2025
- Pontifications: A Personal Note June 19, 2025
- Airbus books 142 firm orders as Boeing retracts from the Paris Air Show June 19, 2025
- AIN Media Group Agrees to Acquire Leeham News & Analysis June 17, 2025
IAM International to force vote over 751 objections on Boeing contract offer (via Seattle Times)
Update, 3:30pm PST:
IAM 751 leaders have come out opposed to ratifying the contract. This, and a response to Ray Conner’s earlier email, is below the jump, reprinted here. (There is no unique link.)
Original Post:
The Seattle Times broke the news this morning that the IAM International will force a vote on the second Boeing contract offer over the objections (and probably by now, the figurative dead bodies) of IAM District 751 union leaders.
The contract proposal is here.
Some members of the 751 union have been seeking a vote since the 751 leadership, headed by Tom Wroblewski, rejected a counter-offer from Boeing that Wroblewski said he could not support.
Wroblewski said the offer was contingent upon his endorsement of the offer and, unable to do so, he claimed Boeing withdrew the offer. Boeing said it did not, and would not comment about whether the offer was actually “contingent” on Wroblewski’s endorsement. But in a letter issued to employees by Ray Conner, CEO of Boeing Commercial Airplanes, it contained a phrase that under any fair interpretation certainly leads one to conclude Wroblewski was correct.
Conner wrote:
We were sincere in asking for the union leadership’s commitment to support our improved final proposal as a tentative agreement that would be taken to a vote by IAM members with a recommendation for approval.
We’ve been of two minds on the vote issue.
- If indeed the offer was contingent upon Wroblewski’s endorsement, and in good conscience he could not, then he was correct in not sending the issue to members for a vote. If Boeing were to release this contingency, then it should go to a vote. This should easily have solved the problem.
- We certainly respect Wroblewski for sticking to his principals. At the same time, we also believe in democracy (with a small “d”) and believe the members should have their say.
What we are crystal clear about, however, is the continued meddling by International in this entire affair. It was International that [m]ucked this up from the beginning, starting with leading the negotiations, forcing the first agreement on 751 leadership, figuratively placing them under house arrest to silence them, [m]ucking up the communication with the membership and mishandling the media through the voting process.
Now International is inserting itself again, and no prophylactic is going to contain this mess.
This should be something sorted out between 751 and Boeing.
International’s motivations seem more intent on preserving its dues-paying jobs at any cost than on doing what’s best for 751 members and for Boeing.
In February 2010 we suggested 751 ought to divorce from International because even then we didn’t believe International had the best interests of the local at heart. We’re more convinced than ever this is the case.
It is so clear that Boeing has International running scared. Regardless of the outcome of a new vote, International will rue these day some day.
Odds and Ends: Recovering WWII flying boat; Constellation restorations; Eastern Air DC-7B; Where will 787-10 be assembled?
As the holidays approach, we’re going to lighten up a bit and provide some links to feature stories. There continues to be news, of course, and a couple of items are in this post. But enjoy the break.
Recovering WWII Flying Boat: A World War II Sunderland Flying Boat has been recovered from the waters and is set for restoration. Here is the story.
Lockheed Constellation: The Airline History Museum in Kansas City is raising money to return to flying status a previously restored Lockheed Constellation. Officials want to recreate the history-making trans-continental flight of Howard Hughes and Jack Frye in April. Lufthansa Airlines continues work on restoring a 1649 model, which would be the only such Connie to be returned to airworthy condition. Here is a website detailing this effort as far as we could determine. Here is a website that talks about surviving Connies with some data about the LH program. It’s out of date, having predicted a first flight this year.
Eastern Airlines DC-7B: N836D still sits at the Charlotte (NC) airport, having returned here shortly after takeoff when an engine shut down. US Airways 1549 pilots Sully Sullenberger and Jeff Skiles were on board. The airplane is owned by the Historical Flight Foundation in Miami. In May 2011 we flew on the plane from Miami to St. Maarten and back. The Foundation needs $50,000 to return the plane to Miami and $10,000/mo to keep it insured and operational for flight-seeing trips.
Back to some news:
787-10 assembly site: Overshadowed in all the hubbub surrounding the Boeing 777X is where the 787-10 will be built. Boeing launched the program at the Paris Air Show and plans a 2018 EIS. Boeing plans to increase production rates of the 787 from 10 to 12 and ultimately to 14 by the end of the decade (our information is, not without coincidence, 2018). Plans are to have Boeing’s Everett plant and the Charleston plant each producing seven per month.
The Everett plant can accommodate the 787-10, but only on a slant basis, not nose-to-tail, we’re told. Charleston will be able to do nose-to-tail.
The Charleston Post and Courier reports that a decision on the 787-10 assembly site will be made in the first quarter.
The Post and Courier Tweeted that Greensboro (NC) is off Boeing’s list now. Update: North Carolina is off the list entirely, the newspaper reports.
Boeing 777X RFP considerations
We obtained a copy of Boeing’s Request for Proposal documents. Much of the information contained therein has already been reported. You may link to these news articles here.
As with previous inquiries, Boeing spokesman Doug Alder declined to authenticate the RFP documents or to comment on the contents.
Boeing plans to announce its site selection decision soon into the new year.
We look at some key production and entry-into-service (EIS) issues today.
Site Selection
Boeing outlined three scenarios for site selection:
Scenario 1:
Wing Fabrication & Assembly, Body Assembly, Final Assembly & Delivery
Start of facility construction no later than November 2014
Production start July 2016
Scenario 2A:
Wing Fabrication & Assembly
Start of facility construction no later than November 2014
Production start July 2016
Scenario 2B:
Body Assembly, Final Assembly & Delivery
Start of facility construction no later than June 2015
Production start January 2018
EIS
EIS is promised for 2020. Boeing hasn’t been specific about when within 2020 this is planned, but Market Intelligence initially had EIS pegged for December 2019, based on previous Boeing representations to potential customers. For our purposes, we’ll assume EIS in mid-2020.
Design Timeline
Wind tunnel testing began December 5 in Farnborough, England.
Based on the proposed EIS of 2020 and the historical design-to-EIS timelines, we estimate roll-out of the first test airplane and flight tests will be in 2018.
|
Boeing 777X Timeline |
||
|
2013 |
Offer, first orders |
Wind Tunnel Testing begins |
|
2014 |
Site selection; facility construction begins Nov or…(see 2015) |
‘Top Level’ Design |
|
2015 |
Facility construction begins June |
Firm configuration |
|
2016 |
Production begins in July; or…(see 2018) |
|
|
2017 |
|
|
|
2018 |
Production begins in January |
Roll out, flight tests begin |
|
2019 |
|
|
|
2020 |
|
777-9X EIS |
|
2021 |
|
|
|
2022 |
|
777-8X EIS |
|
Sources: Boeing 777X RFP; Leeham Co. Estimates |
||
Production
According to the RFP, production is to begin in July 2016 or January 2018, depending on the site selection scenario chosen. The RFP raises an interesting question:
- If production begins in July 2016, this represents a four year timeline to the 2020 EIS.
- If production begins in January 2018, this represents a 2 ½ year timeline to EIS.
“Production” is undefined in the RFP but typically this means components, not just final assembly. Given a 2020 EIS, it seems that Scenarios 1 and 2A are more likely than Scenario 2B. But it all depends on how “production” is ultimately defined by Boeing.
According to the RFP, the facilities need to have a production capacity of 10.4 aircraft a month. The 777 Classic is currently being produced at a rate of 8.3/mo, although Boeing is known to have studied a rate of at least 9/mo.
Market Launch
Boeing officially launched the program at the Dubai Air Show with 225 orders from Emirates Airlines, Etihad Airlines and Qatar Airways. Lufthansa Airlines placed the first order prior to the show. Program orders now stand at 295. Forty-three of these were for the ultra-long range 777-8X, which can fly 9,400nm. We previously discussed the market potential for the ULR, which historically has been highly limited.
The 777-9 is, of course, in a class by itself at 406 seats. It’s larger than the current 777-300ER (365 seats), the Airbus A350-1000 (350-369 seats) and smaller than the Boeing 747-8 (advertised 467 seats) and Airbus A380 (525 seats). The question is whether Airbus will respond to the 777-9 or leave Boeing to this market segment.
We believe Airbus should proceed with a stretch of the -1000, commonly dubbed the -1100, that would be a straight-forward stretch using the same engines and wing. This would reduce the range of the -1000 by an estimate 1,200-1,500nm but the resulting 6,500-7,000nm range would cover 90% of the routes operated by airlines. This is the approach Boeing took with the 787-10. Furthermore, the Middle Eastern airlines have spoken with their orders for the 777X.
Is there enough market left for two airplanes in the 400 seat sector? Airbus, according to our Market Intelligence, doesn’t appear to think so. Current thinking appears to be that Boeing can have this narrow niche and Airbus will continue to pursue the narrow niche of the Very Large Aircraft (into which the 777-9 technically and barely falls) with the A380. Airbus believes the future of the 747-8I is dim and we agree. Thus, the large twin and VLA market appears to be shaping up like this:
|
Seats |
Airbus |
Boeing |
|
300-350 |
A350-900 |
787-10 |
|
350-370 |
A350-1000 |
777-8 |
|
370-410 |
None |
777-9 |
|
410-Up |
A380 |
747-8I* |
|
* Likely discontinued ~2020 |
|
|
|
Leeham Co. Chart |
|
|
Airbus has had trouble throughout its existence with its wide-body strategy. The A300, its first airplane and the first twin-engine, twin-aisle airplane, was a mediocre design and performer. The A330/340 line was originally a medium range pair that didn’t truly find favor until the A330 range was increased in recent years to more than 5,000-6,000nm. The A340 sold fewer than 400 and was easily eclipsed by the 777, particularly the 777-300ER.
Boeing and the “cash cow”
As The World Waits (or those of us in the USA, anyway) for Boeing to decide where it will assemble the 777X, it might be worth returning to a 2010 study by the Institute for Wisconsin’s Future about how Boeing looks to states as cash cows for subsidizing its airplanes.
(Wisconsin is a bidder for the 777X).
This is a 24 page report by IWF. It reads remarkably similar to Boeing’s current Request for Proposals. Boeing Cash Cow Report
Make of it what you will.
Odds and Ends: AirAsiaX orders A333; WA and Airbus; Boeing names COO
AirAsiaX orders A330-300s: As forecast earlier this week, the budget carrier ordered 25 Airbus A330-300s. According to reports, AirAsiaX may not be done. Group CEO Tony Fernandes wants Airbus to develop an A330neo. Stay tuned.
Washington State and Airbus: The Associated Press wrote a story about the courtship of Washington State of Airbus, making a link between the Boeing 777X site selection Schizophrenia and the Airbus effort. Some headline writers made an even more direct cause-and-effect link. This vastly overstates what’s been going on. Gov. Christine Gregoire began reaching out to Airbus in 2010, but the effort was stalled by the then-contentious and bitter competition between Boeing and Airbus over the USAF KC-X tanker competition. Gregoire, who was just named chairman of the advisory committee to the US Export-Import Bank, naturally backed the Boeing bid but was wisely measured in her rhetoric when it came to the EADS KC-330 offering. The Washington Congressional delegation, however, was often vitriolic and as a result, Gregoire’s efforts largely stalled.
Once that competition was over in 2011, Gregoire resumed her efforts in the last year of her governorship, meeting with EADS and Airbus officials at the 2012 Farnborough Air Show. The WA Dept. of Commerce had continued efforts throughout. This past summer, Commerce and the Pacific Northwest Aerospace Alliance hosted an Airbus suppliers meeting in the Seattle area, attended by about 120 suppliers (about 30-40 had been expected).
So while the AP story is factually correct overall, any linkage to 777X and the Airbus courtship is overstated. This has been a long-term effort by Airbus, PNAA and it is a concept we called for in October 2009 in a speech before the Governor’s Aerospace Summit just days before Boeing announced it was locating 787 line 2 in Charleston (SC). The Airbus effort, if anything, has more of a link to that event than to the 777X.
Boeing names Muilenberg COO: Dennis Muilenberg, CEO of Boeing’s defense business, has been named COO of The Boeing Co. He is succeeded by Christopher Chadwick. Ray Conner, CEO of Boeing Commercial Airplanes, was named Vice Chairman of the Board and continues in his current position. The press release is here.
McNerney reaches retirement age next year but given the timing, we think he’ll stick around a bit longer to give Muilenberg more time in the #2 corporate position. Since Muilenberg is younger than Conner, we think Muilenberg is the more likely choice for successor.
Another Day, Another 777X story: The obsession continues. Seattle Times columnist Danny Westneat has this commentary worth reading. The Everett Herald has a good wrap up of where things stand in Washington State right now. The Seattle Times looks at Long Beach (CA) in depth and its potential for the 777X.
Odds and Ends: AirAsiaX plans A330 order; AA’s livery; vote for TWA heritage livery
AirAsiaX plans A330 order: AirAsiaX, the long-haul low cost carrier, plans a large order for the Airbus A330 this week, according to Bloomberg.
A380’s future: Bloomberg News talks about the future of the Airbus A380 with CEO Fabrice Bregier. Among his comments: no stretch anticipated until 2030.
American Airlines livery: Doug Parker, the new CEO of American Airlines, says employees will get to vote whether to keep the new American livery or restore the double AA/eagle livery to the tail. American will also add a TWA “heritage” livery airplane. US Airways has several heritage paint jobs in its fleet.
So…which TWA era would you like to see? Vote in the poll following the photos.
Boeing Board OKs $10bn stock buyback, 50% hike in dividends in move sure to anger IAM members (Updated)
Update, 10 pm PST: IAM 751 gave us its reaction; it’s at the bottom of this post.
Original Post:
At a time where feelings are running raw with IAM 751 members, the Boeing Board of Directors authorized a new, $10bn stock buyback. This follows a $7bn stock buyback program from 2007 that was suspended from 2009 and January this year, when it was resumed. The suspension was due to the 787 and 747-8 program cost overruns, compensation and related costs.
The Board also approved a 50% hike in dividends to shareholders.
“The buyback and dividend announcement today reflects our normal cash deployment strategy – one that ensures investment in our core businesses (R&D, facilities) and workforce, returns value to shareholders, manages our pension obligations and maintains our strong balance sheet and credit rating,” Boeing spokesman Charles Bickers wrote to us in an email.
“The announced returns get us back to the levels that we have previously targeted. Boeing’s shareholders –including thousands of employees– have been very patient as the company came through the last few years. There were no share repurchases between 2009 and 2013 and there was only one dividend increase between 2009 and 2012, meaning that the average annual rate of dividend increase in that period was a little over 1 percent.”
But the actions come at a sensitive time, on the heels of a 2-1 contract rejection vote by 751 members of major contract concessions demanded by Boeing in return for committing to build the 777X and its wings in Washington State. Terminating the defined pension plans in favor of a 401(k) plan was a key element in members voting against the contract.
Drastically altering the wage page scale, extending by 10 years the time it would take to get to the top of the scale, called zoom, was another “ask” by Boeing. A third point of contention was the proposal to require employees to pay 33% more in their health care premiums.
A revised Boeing contract offer gave on zoom and the premiums but held firm on the pension. The offer was also said by the 751 leadership, to be contingent upon the leadership sending the offer to a vote with a “Yes” recommendation, which they refused to do. Talks broke off, and the leadership continues to face an open revolt among some members demanding a vote. A bevy of Washington politicians have also urged the leadership to allow a vote.
“This announcement does not alter the fact that Boeing offered marketing leading compensation and benefits associated with the contract extension. As I said above, the announcement is consistent with our prudent and balanced cash deployment strategy, which includes investment in our core business (R&D, facilities), our workforce, managing our pension obligations, returning cash to shareholders and maintaining a strong balance sheet and credit rating,” Bickers wrote.
IAM 751 as yet has not commented.
Update: IAM 751 gave us this statement:
“Boeing is looking forward to a period of long-term financial stability made possible primarily by the men and women of District 751,” said union President Tom Wroblewski.
“While other production sites have failed to hit their targets, we have delivered record numbers of airplanes at record profit margins this year, helping drive the stock price to record highs,” he said. “Given this, I feel it’s wrong for the company to try to take away pension benefits that provide our members with their own future financial stability.”
IAM won’t release its offer details; IAM v Itself v Boeing
IAM’s offer to Boeing: While IAM 751 released its analysis of the Boeing contract offer of last week, it refuses to release its own offer to Boeing. We asked for it and received a terse, “That’s not available.” Thus, we are left with 751’s analysis that Boeing’s offer is unreasonable and basically unchanged from the one voted upon November 13 (and rejected by a 2-1 margin). But we don’t know how reasonable or not the 751 counter-proposal was, which was rejected by Boeing.
751’s refusal to disclose its counter to Boeing also leaves its own membership in the dark.
Meanwhile, a Chicago Tribune columnist isn’t too enthused about the Boeing “asks.” Chicago, of course, is where Boeing’s corporate headquarters are and Illinois is one of the state’s bidding for the 777X project. As we wrote on December 9, the audacity of Boeing’s asks are mind-boggling. Others are waking up to this fact.
Another analysis notes how little leverage the IAM has right now because this contract negotiation comes well before the current contract expires in 2016, and as a result 751 can’t strike.
But mark our words: if Boeing puts the 777X elsewhere after trying to strong-arm the union (in their view), there will be a retaliatory strike in 2016 regardless of the offers. This happened in 2008 as payback for the 2002 and 2005 contracts and outsourcing that came from them.
The IAM 751 members are going to strike themselves right out of a job. But we have seen the IAM shut down a company rather than give concessions, and call that a victory. (Eastern Airlines, 1991.)
IAM v Itself v Boeing: It’s no surprise that the IAM v itself v Boeing continues to dominate the aerospace news, at least in the US.
The Seattle Times has two stories in its Sunday paper worthy of note:
IAM is between a rock and a hard place (IAM v Boeing)
Two key players in the drama (International v Local)
Separately:
- Reuters has this analysis on Boeing win over Airbus at Air Canada.
In focus: the 777 Classic
This week we take a look at the Boeing 777 Classic primary and secondary markets as a follow-on to our report last week in advance of the A340 Summit hosted by Airbus, Rolls-Royce and CFM International with additional presentations by Lufthansa Airlines and HiFly. We have a follow-up of this meeting on Leeham News and Comment.
The 777 Classic presents a very different picture compared with the A340. As a reminder, here is the current status of the A340 program, which is now out of production:
|
Status |
A340-200 |
A340-300 |
A340-500 |
A340-600 |
|
In Service |
19 |
175 |
20 |
90 |
|
Stored |
6 |
27 |
14 |
7 |
Source: Ascend Leeham Co Chart
On the other hand, Boeing has delivered 1,156 777 Classics and has a current backlog of 318. There are 259 orders and commitments for the 777X, officially launched last month at the Dubai Air Show, for a total of 1,415.
The Ascend data base, which tallies Letters of Intent, Options and Option LOIs, (and calculates orders and commitments somewhat differently than Boeing), has 2,059 units listed.
|
|
777-200 (All) |
777-300 (All) |
777 Classic TBD |
777-8 |
777-9 |
777X TBD |
|
In Service |
637 |
504 |
|
|
|
|
|
Orders |
43 |
272 |
|
8 |
45 |
|
|
Options |
35 |
68 |
1 |
|
|
62 |
|
Option LOIs |
20 |
5 |
15 |
|
|
|
|
LOIs |
42 |
75 |
6 |
35 |
179 |
|
|
Stored |
6 |
1 |
|
|
|
|
|
Total |
783 |
925 |
22 |
43 |
224 |
62 |
|
Source: Ascend |
|
|
|
|
Leeham Co. Chart |
|
The 777 program has been more successful than Boeing’s wildest dreams, and the 777X is off to a promising start.
While Airbus faces challenges with the A340 family on the secondary market, Boeing doesn’t have any similar issues today. There are just seven Classics stored, according to Ascend: six 200s and one 300, compared with 54 A340s of all sub-types, or 15% of the total fleet compared with 0.6% for the 777 Classics.
Most of the Classics remain with the original operators. Only a few -200ERs and five -200LRs have traded, the latter a special case because the original operator, Air India, was in financial distress and elected to dispose of the airplanes at a distressed price to raise cash.
What is the secondary market potential for the Classics? Market Intelligence suggest very little-to-no market for the 86 777-200 “standards,” the light-weight, 545,000 lb, 5,240nm initial version of the Classic family. The heavier weight 777-200ER at 656,000 lbs and 7,725nm range is a secondary passenger market and a freighter conversion candidate. Boeing has been studying a P2F conversion for the 200ER, but this potentially is a costly option, according to the Market.
The -200ER was optimized for passenger service and includes composite floor beams that will have to be replaced with steel beams, according to a 2012 Boeing briefing. Major structures and component work will be required. Then, Boeing assumed early -200ERs would be priced in the high $20m range, and the conversion would cost in the low $30m, for an out-the-door price of the low $60m.
Kostya Zolotusky, managing director for Capital Market Leasing at Boeing Capital Corp., tells us that nothing has changed in P2F timing. Feedstock values, however, are too high and a weak cargo market means there are plenty of Boeing 747-400s and MD-11s surplus today. Boeing does not expect the freighter market being strong at least for a couple years.
He believes there is a potential market for the 777-200 standard for package carriers outside the mature USA market. A 777-200ER P2F would be a different airplane vs the new-build 777-200LRF: an 80 tonne airplane vs 100T.
Zolotusky notes that the 777 “has one of the lowest movements out of the original operators out of all the wide-bodies. There is nothing that is parked or in distress.” All 777s are within 90 percentile of original operator, he tells us and compared the Airbus A330s in 80s and the A340s in 70s.
One of the issues with the A340s are the Power By Hour arrangements with Rolls-Royce for the A340-500/600 engines. “We are talking to engine makers to be sure we don’t have A340 situation that limits the liquidity with PBH situation,” Zolotusky tells us.
While this is a follow-on to the A340 report of last week, Zolotusky urged that we “decouple the conversation from A340. The A340 became economically unviable.”