Leeham News and Analysis
There's more to real news than a news release.
SPEEA, Boeing talks go downhill
Talks didn’t exactly break off between Boeing and its engineers’ union, but by all appearances, it seems pretty close to doing so.
The two sides are to meet next week, but SPEEA put out this press release today:
The Boeing Company today presented a partially modified offer to our Prof and Tech Negotiation teams, but was unwilling to provide our team with a complete document. The pieces provided indicate smaller wage and Ed Wells training program cuts than previously proposed. Verbally, the company indicated that they still intend medical cost increases, elimination of the pension for future hires and reduction of growth in retirement benefits for the existing 23,000 engineers and technical workers.
In a departure from long standing practice, Boeing refused to provide the offer electronically today, but indicated they will do so next week. Working through federal mediators, the company said it needed four days to assemble all the pieces of its offer into a complete document.
While refusing to provide the complete offer to SPEEA, Boeing rejected our request that the parties work privately through the mediators rather than negotiating publicly. The company indicated that they intend to try and bypass the negotiating team by “selling” the offer directly to members. Boeing has already launched an aggressive public relations campaign claiming that Boeing corporate’s proposed cuts are actually “improvements.” Members are encouraged to watch the special 18-minute “Trust Me” video posted on the SPEEA website at www.speea.org.
“It was profoundly disappointing that Boeing corporate yet again gave us mere pieces of an offer and refused to provide it electronically” said Ryan Rule, Professional Team member. “As members may recall, we found numerous take-a ways in the last company offer which they hadn’t bothered to flag as changes. This incoherence in corporate contract configuration control is baffling.”
“It’s difficult to understand how Boeing corporate can legitimately claim that they need four days to print out their offer or put that same offer on a flash drive for our negotiating teams,” said Sandy Hastings, Technical Team member. “What are they trying to hide?”
While the major cuts and take a-ways are readily apparent, based on the number of items Boeing hid without mentioning in its first offers, our teams and SPEEA staff know they need to be able to review the company offer line-by-line in order to provide a comprehensive assessment to the membership. The company’s inexplicable delay in providing their full offer prevents a comprehensive analysis.
Support for the SPEEA negotiations continues to grow.
Addressing the SPEEA Council Thursday, IFPTE President Greg Junemann said to remember that Boeing tried to push SPEEA members to accept cuts and take-a ways in 2000.
“Your negotiating teams’ focus is negotiating a contract that respects your contributions without going out on strike,” Junemann said. “But, the folks in Chicago need to hear this loud and clear: If they provoke a strike by SPEEA again, all of IFPTE, and a whole lot of the labor movement, is ready to show them again that engineers and technical workers deserve respect and their fair share of this company’s remarkable success.”
Negotiations are scheduled to resume at 1 p.m., Wednesday, January 16.
Prof and Tech Negotiation Team members encourage members to talk to co-workers, send comments to management and maintain workplace visibility with desk tents and activities. New video messages and a contract offer section are on the website.
Boeing issued this press release (caught up, for some reason, in our spam filter at first):
Today, Boeing presented a revised contract offer to SPEEA featuring increased salary pools for both engineers and technical employees.
Profs would see salary pools of 5 percent during the first two years of the contract and 4 percent in the last two years. Techs would see salary pools of 4 percent annually for the duration of the contract, with an additional lump sum payment equaling 1 percent of their salary in years one and two.
Under this revised offer, profs would average $85,600 in additional pay and performance-based incentive payments (EIP) over the life of the agreement. Techs would average $61,200 in additional pay and incentive payments.
Our proposals on health care (Washington, Oregon, California and Utah) and retirement remain unchanged from our pre-Thanksgiving offer.
Throughout these negotiations, our goal has remained the same — a market-leading contract that rewards employees while keeping the company and workforce competitive for future work. We’ve worked to resolve our differences with the SPEEA negotiations team, withdrawing many proposals that were important to the company. Since our initial offer back in September, we’ve shown considerable movement by increasing our salary proposal twice and revising our medical proposal to lower paycheck contributions.
We encourage you to visit the negotiations website where you’ll find new fact sheets with all the details of the new offer, as well as an updated Pay & Benefits Estimator that shows what the offer means to you.
Boeing and SPEEA’s negotiations teams have agreed to continue discussions next Wednesday.
Boeing also held a teleconference. We missed the live but will dial into the replay when we can. We’ll also link any news stories we see for the Boeing side of the story.
SPEEA had expected to go for a strike vote next week, but without a formal offer, one can’t be held. Thus, any potential strike–which had a target date of Feb. 1–gets pushed to the right.
FAA launches 787 system review
The Federal Aviation Administration today launched a review of the Boeing 787’s electrical system.
We start our coverage with a running synopsis of the press conference at 9:30am ET. Presenting are
Michael Huerta, director of the FAA (MH);
Ray LaHood, US Transportation Secretary (RLH); and
Ray Conner, President and CEO of Boeing Commercial Airplanes (RC).
RLH:
- #1 priority is protecting the safety of the traveling public.
- We go the extra mile when it comes to safety.
- Today we are conducting a comprehensive review of the design and production of the 787, covering critical systems of the aircraft, including design, production and assembly.
- Will look for the root causes of the recent issues be sure it doesn’t happen again.
- FAA spent 200,000 hrs in advance of certifying aircraft.
Federal 787 review adds new dimension to Boeing-SPEEA talks
The formal Federal Aviation Administration review adds a new dimension to the stalled contract talks between Boeing and its engineers’ union, SPEEA.
Talks Thursday didn’t go well, with SPEEA issuing a short press release laste yesterday afternoon:
SPEEA negotiations with The Boeing Company continued Thursday with little progress on key issues.
Our teams reminded Boeing that with record profits, a completely funded pension, 4,200 airplanes on backorder and $20 billion of cash on hand, it doesn’t make sense to cut wage growth, cut pension growth, eliminate the pension for future hires and raise medical costs for everyone.
Signifying the importance of our efforts to secure a respectful contract with Boeing, IFPTE President Greg Junemann, visited the teams at the hotel and then attended today’s SPEEA Council meeting to reiterate the support of our international union.
Negotiations are scheduled to resume at 9 a.m., Friday.
Boeing’s press release was even more terse:
For the second day in a row, negotiations teams from Boeing and SPEEA held contract talks with the assistance of federal mediators.
The mediators adjourned the meeting late this afternoon. Talks will continue Friday morning.
Boeing will have to rely on its engineers to sort through the review of the electrical system, which has now had four or five glitches, including the well-publicized fire in Boston on a Japan Air Lines 787.
With contract talks going nowhere fast, the prospects of a total breakdown in talks appears more and more likely, perhaps as soon as today. If this happens, look for a strike voted early next week. A walk-out could occur in early February.
If a strike happens, work by SPEEA engines on any 787 system review will stop or at the very least slow to a crawl. Boeing will have to rely on out-sourced engineers, if this is feasible. Engineers at the subcontractors responsible for the systems obviously would continue work, but at best the system review will be complicated by a SPEEA strike.
Clearly, the latest 787 problems add headaches to the contract talks that aren’t needed.
FAA, Boeing 787 review press conference 9:30am ET
MORE to come….
787 electrical system review to be ordered: Seattle Times
Late Thursday night, The Seattle Times reported that the FAA will on Friday order a full electrical system review of the Boeing 787. The story is here.
Jon Ostrower has this short report.
Here is a long report in the Wall Street Journal (subscription required).
More bad headlines
The New York Times has this story about more nettlesome problems with the 787. Although the issues related in this story–cracks in the windshield and an engine oil leak–are minor, the headlines add to the growing bad publicity surrounding the 787. These issues also cause service interruptions for the airplane, inconveniencing passengers and the operators.
The famed Airbus “5th Quarter”–huge LionAir buy reported
We talked about this a month of more ago: the prospect LionAir would order 100 Airbus A320 family aircraft. Today (or was it yesterday, in Asia?) comes this report that LionAir signed an order in December for as many as 220 A320neos (with PW GTF engines, we understand).
Through November Airbus recorded a net of 585 orders, compared with Boeing’s year-end total of 1,200. Reuters believes Airbus will end 2012 with around 900 orders.
LionAir has been exclusively a Boeing customer.
Update, Jan. 10: Avolon (a lessor) announced today it signed an order for 20 additional A320s in December.
SPEEA-Boeing talks resume today; grim outlook
Flashback to 2000 strike: KPLU takes a look.
The war of words resumed yesterday in advance of contract talks that restart today at 1pm PT in Seattle between Boeing and its engineers’ union, SPEEA.
Even before parties reconvened, SPEEA yesterday issued a press statement outlining demonstrations to take place today:
Wednesday’s ‘Day of Action’ events are expected to draw from dozens at small sites to hundreds and thousands of SPEEA members walking inside and outside Boeing facilities in Renton and Everett. Boeing has drawn three Unfair Labor Practice Charges (ULPs) for videotaping and photographing union members at the events, confiscating cameras and the photographs they held. All of the marches have been peaceful. The ULPs are awaiting action before the National Labor Relations Board.
Both sides want an agreement without a strike, but SPEEA has been vocal for weeks, predicting talks will break down almost immediately because—in its view—the two sides are too far apart.
Boeing has a different view. The company notes that SPEEA at one point offered to extend its current contract, which Boeing rejected in part because health care and pension costs would remain unchanged. But the company points out that the current contract includes a 5% annual raise while Boeing’s current offer is 4.5%–just one-half of one percent apart. SPEEA has asked for 6% in the current negotiations.
Where the real differences appear to be are over those pesky health care and pension costs. SPEEA asserts that Boeing is asking for too much in the way of co-pays and other medical costs and that by changing the retirement plan from a defined benefit program to a define contribution to a 401(k), any raises offered by Boeing are negated and in effect result in losing money.
Boeing takes issue with this, saying that over the life of its contract offer, SPEEA engineers will receive $17,000 in raises and spend $5,000 in added medical costs.
As for the retirement plan, Boeing says the proposal for switching to a defined contribution to a 401(k) will be for new-hires only. Non-union employees throughout the company are on a 401(k) plan.
We view the current situation as grim. We think Boeing Chicago is misunderstanding the mood of SPEEA members, just as it did in the contract vote in October and as it did with IAM 751 in 2008.
But as we’ve written before, as one who pays 100% of our medical and retirement costs, we have little sympathy for Boeing wanting SPEEA members to pony up a greater share of health care costs. We also believe that defined benefit plans have unrealistic federal ROI assumptions that place an undue burden on companies. Update: we certainly muddled this statement. We’ve previously written that we have little sympathy for SPEEA not wanting to pony up more of its own health care costs, and this is our position.
At the same time, we recognize that SPEEA–along with the IAM–saved Boeing’s bacon during the debacles of the 787 and 747-8 development, and it’s also clear that neither program is running smoothly just yet.
We also believe that profit sharing, such as that proposed by Boeing, is a good employee incentive. But we also believe that Boeing Chicago tends to trend toward being too anti-union for its own good.
We don’t think there will be a quick resolution as talks resume today. SPEEA is planning job actions and it is making plans to shut down deliveries as soon as a strike occurs. The 42-day SPEEA strike in 2000 saw 50 fewer deliveries at a time when production rates were far less than today.
We hope cooler heads prevail, but we’re not counting on it.
Embraer selects PW GTF for E-Jet RE; concept clarity comes at last
It’s official: Embraer selected the PW GTF to re-engine the E-175, E-190 and E-195.
In doing so, it looks like the E-170 will be allowed to wither on the vine.
This is a huge win for PW and setbacks for Rolls-Royce, which sorely wanted to win the E-Jet RE for its Advance 2 RR development; and for GE, the incumbent supplier of the CF34 and which was developing the Next Generation variant for the E-Jet.
It’s yet another validation for the GTF. Versions of this engine will power the Mitsubishi MRJ, the Bombardier CSeries, the Irkut MS-21, the Airbus A320neo family and now the E-Jet RE.
It’s a huge comeback for PW, which made a major strategic error in not competing to power the Boeing 737 300/400/500. Boeing continues to use the GE/CFM LEAP engine as its sole-source supply for the 737 MAX, though Boeing seriously evaluated the GTF as well.
Below is EMB’s press release:
Embraer Selects Pratt & Whitney’s PurePower Engines for Second Generation of E-Jets
São José dos Campos, January 8, 2013 – Embraer SA (NYSE: ERJ; BM&FBOVESPA: EMBR3) announced today that Pratt & Whitney´s PurePower® Geared TurbofanTM engines have been selected for its future, second generation of E-Jets, with entry into service planned for 2018. The decision is an important milestone in the program, which is expected to be officially launched later this year.
The new engines – the PW1700G and PW1900G – range in thrust from 15,000 to 22,000 pounds. In combination with new aerodynamically advanced wings, state-of-the-art full fly-by-wire flight controls and other systems evolutions, they will result in double digit improvements in fuel burn, maintenance costs, emissions and external noise.
“We are very happy to expand our partnership with Pratt & Whitney, keeping the E-Jets family as the best solution for our customers, today and in the future”, said Frederico Fleury Curado, President & CEO of Embraer. “The PurePower GTF engines are a great fit to the next generation of our E-Jets and we look forward to another long lasting and successful program with Pratt & Whitney”.
“We are proud that Embraer has recognized the unmatched value of the PurePower engine, and we are committed to supporting a successful launch of the new E-Jet aircraft family,” said Pratt & Whitney President David Hess. “To date, Pratt & Whitney has completed more than 4,200 hours and 12,400 cycles of full engine testing for the PurePower engine family, demonstrating the benefits and reliability of the engine architecture.” Pratt & Whitney is a division of United Technologies Corp. (NYSE: UTX).
The second generation of E-Jets will be a significant step in Embraer´s commitment to continuously invest in this line of commercial jets, complementing a series of ongoing improvements currently being implemented in the existing family, with great benefits to its customers. Embraer´s objective is to offer the best product and maintain its leadership in the 70 to 120 seat market.
Perspective on 787 Boston incident
Update: Wall Street Journal reporting United Airlines found mis-wired battery following inspections in wake of JAL 787 fire.
Update, 1215 PM PT: Boeing issued this statement regarding the fire incident:
“Regarding yesterday’s event onboard a Japan Airlines (JAL) 787 at Boston Logan Airport, we are working closely with the National Transportation Safety Board (NTSB), our customer and other government agencies. JAL has reported that smoke detected while a 787 was on the ground after passengers disembarked and during cleaning was traced to the battery used to start the auxiliary power unit (APU).
“As is standard practice within the industry, it would be premature to discuss additional details at this stage as the investigation is ongoing. However, nothing that we’ve seen in this case indicates a relationship to any previous 787 power system events, which involved power panel faults elsewhere in the aft electrical equipment bay. Information about the prior events has been shared with the NTSB and they are aware of the details.
“Boeing is cooperating with the NTSB in the investigation of this incident. Before providing more detail, we will give our technical teams the time they need to do a thorough job and ensure we are dealing with facts not speculation.”
Original Post:
We’ve been inundated with calls from media asking what we think about the small fire and battery explosion on the JAL Boeing 787 parked at Boston. A couple of questions were common:
- What does this mean for the 787?
- Would you fly it?
- Is there a problem with the airplane?
- Are problems like this common with new airplanes?
Before addressing these specific issues, we want to say: use caution in drawing any conclusions. There is much more we don’t know than what we do know.
We don’t know: