Countdown to IAM-Boeing vote January 3; poll results; union urged to accept; no tax breaks from WA if Boeing splits work

Two third of Readers in our on-line polling this week urged IAM 751 members to accept the Boeing contract offer that contains major concessions, notably on pensions, in exchange for Boeing selecting Washington State to assemble the 777X and produce its wing here.

The unscientific polling is broad-based and not restricted to union members, and should not be considered indicative of the outcome of the vote today. Results are to be announced tonight around 9pm PST.

The polling results below are as of January 2. Voting is still open so totals may differ in the original post vs what is reported below, but voting subsided to the point where results should remain constant.

Should IAM 751 Members Accept or Reject the Boeing 777X contract?

Answer Votes Percent
Accept 366 67%  
Reject 183 33%  

Key political leaders in the Puget Sound area met Monday with Ray Conner, CEO of Boeing Commercial Airplanes, before meeting with the press and urging the members of IAM 751 to approve the contract.

The Puget Sound Business Journal has a detailed story, including the dire consequences if the contract is rejected.

The Associated Press has a similar story.

IAM 751 sent a letter December 23 to its members recommending a No vote and detailing why.

According to the civic leaders meeting with Conner, the BCA CEO said if the 751 members don’t accept the contract, the wing production will be sent elsewhere. According to the news reports, Conner was more ambiguous about the fuselage work and final assembly.

The Requests for Proposals Boeing issued after 751 members rejected the first contract offer on November 13 allowed for splitting the FAL and the wing production among sites. But we confirmed with Washington’s Director of Aerospace that if Boeing does this, none of the $8.7bn in tax breaks the state offered Boeing will be extended; it’s an all-0r-nothing offer.

Missouri is the only other state to go public with its tax break offer: $1.7bn from the state and $1.4bn from St. Louis County.

Texas, California, South Carolina, Alabama, Utah and Georgia are among the 22 states that offered up 54 sites to Boeing in the RFP process. North Carolina and Pennsylvania are the only ones to publicly reveal they were eliminated in Boeing’s early analysis of the RFPs.

The contract offers set off internal strife at the IAM. District 751 leaders are feuding with the IAM International leaders, who negotiated the contracts with Boeing and who have largely run roughshod over 751. Local leaders oppose ratification of the contract and the International urges acceptance. International forced the January 3 vote over the objections of the District.

But our polling also shows the District 751 leadership is in trouble. A large percentage of our Readers blame 751 leaders for the current mess and more want to see the District leaders replaced than the International heads.

A large number of Readers also believe District 751 should be decertified as Boeing’s union representation and a large number believe 751 should divorce from its affiliation with IAM International.

We understand that neither decertification nor “divorce” can occur until 2016 under the current contract, or until 2024 if the contract is Accepted and extended. One of our Readers believes that if this contract is rejected, it is possible for changes to be made this year. We don’t know the answer.

These poll results are below the jump.

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Odds and Ends: Looking ahead in 2014; Boeing letter to Machinists; TWA retro choice; Screw it, let’s do it on Virgin [plane]

Looking ahead in 2014: We wrote this outlook for 2014 for CNN International Travel.  More seats, more fees, quieter year.

IAM 751 members vote Friday on the ‘777X contract.‘ Here is a letter dated December 27 from Boeing to the Machinists making the case to vote for the contract.

It is the TWA Twin Globe livery that is the clear choice by our Readers for American Airlines to select for a retro livery.

Source: Photobucket.com. Convair 880

TWA’s last livery was a distant second. (We didn’t particularly like this design.) The design should probably go on an MD-80, the derivative of the DC-9 on which the Twin Globes livery appeared.

Source: Ed Coats Collection. Douglas DC-9-15.

Which TWA livery should join American Airlines’ fleet as the “heritage” airplane?

Answer Votes Percent
Boeing 707 Twin Globes Livery 944 53%  
Final Blue/Red/Gold Livery shown on Boeing 757 427 24%  
Red Stripe, Solid Tail Livery shown on Boeing 747 165 9%  
1950s Livery seen on Lockheed Constellation 158 9%  
Boeing 707 Delivery Livery (no Twin Globes) 56 3%  
Reverse Red livery shown on McDonnell Douglas MD-80 23 1%  

In other news and irreverence:

  • Today is the last day to vote in our polls concerning the IAM-Boeing ‘777X Contract.’ We’ll post the results before the machinists begin voting on Friday.
  • Aspire Aviation has a long profile on the 777X here.

Qatar swaps A319neo to A320neo; just 29-39 orders remain

Qatar Airways has swapped its order for the A319neo in favor of the A320neo, leaving just 29-39 orders remaining for the smallest version of the neo family.

Qatar became the first customer for the A319neo when it placed a surprise order at the 2009 Paris Air Show. Bombardier had negotiated a contract for 20 CSeries to be signed at the show, and with market expectations high, was embarrassed when Qatar’s CEO, Akbar Al-Baker, did one of his famous U-Turns and didn’t proceed. (Al-Baker would embarrass Boeing and Airbus at later air shows by withdrawing an announced deal for the 777-300ER and no-showing at an Airbus press conference.) We were reliably told that the French government intervened with the Qatari government to block the important CSeries order at the Paris Air Show in favor of an order for the A319neo and A320neo.

Avianca Colombia retains an order for nine and Frontier Airlines has 20, according to the Ascend data base. Flight Global reports Avianca has 19 on order, however, and this is the figure shown in an Avianca presentation, probably reflecting options yet to be exercised. Avianca is scheduled to get three in 2017, two in 2018 and the rest in 2019, according to Ascend. Frontier is scheduled to begin taking delivery in December 2018 through 2020.

This means the A319neo, which was supposed to enter service in 2016, six months after the October 2015 EIS for the A320neo, now slips behind the A321neo EIS.

The new EIS schedule means the A319neo still is planned to enter service two years before Boeing’s 737-7 MAX but two years after Bombardier’s CS300. Embraer’s E-195 E2, which seats 133 in single class to the A319neo’s 156 in single class, is scheduled to enter service in 2019.

The Frontier order is iffy, we believe. The CEO, David Siegel, told us a couple of years ago economics of the A319 aren’t very good in today’s fuel environment and favored the larger A320. Frontier was then owned by Republic Airways Holdings and was sold this year to Indigo, an investment group (not related to India’s Indigo Airlines). Indigo was principal owner of Spirit Airlines, an ultra-low cost carrier in the US. Siegel has been transforming Frontier from a low cost carrier to a ULCC. The new ownership is certain to accelerate this transition.

We expect the new ownership will also favor the A320neo and A321neo, and that eventually the order for the A319neo will be up-sized. We believe Avianca will inevitably follow.

This means Airbus will probably drop the A319neo eventually. The A319ceo may be retained through 2019 at steeply discounted prices, but more likely the A320ceo with deep discounts will be Airbus’ continuing competitive response to Bombardier’s CS300 and, to a lesser extent, Embraer’s E-195 E2.

Boeing has sold the 737-7 only to Southwest Airlines and WestJet. Southwest is said to need the 737-7 for its Midway Airport operations. Air Canada has the option to convert some of its 737 MAX orders to the -7.

2013 Year in Review: 787 grounding was the top story

We’re back from what we had planned as a holiday hiatus. This was interrupted by the IAM-Boeing 777X contract issue, of which we felt compelled to initiate some special posts.

This leads off our 2013 Year in Review.

IAM-Boeing 777X Contract

Although it was not voted by Readers as the most important story of 2013, nor did it even make the Top Three, its importance can’t be understated. The relationship between the IAM 751 District, which represents Boeing “touch labor” workers in Puget Sound (and in limited numbers, in Oregon and elsewhere), is to put the best face on it, dysfunctional. Relations hit a lot point in 2008, with a 57 day strike, and 2009, when Boeing elected to put 787 line 2 in Charleston. We thought, as did many others, that 751 and Boeing entered a new era in 2011 when an agreement was reached extending the 2012 contract to 2016 in exchange for locating the 737 MAX construction in Renton. As it turns out, this guarantee had less promise to it than was thought; Boeing is using this assembly as a stick (or a carrot) in the current 777X contract proposal.

If the 777X is not assembled in Washington, this will likely mark the beginning of a serious migration of Boeing from Washington. What’s been happening up to down, with 787 Line 2 and a series of jobs relocations, is peanuts compared with what will happen as airplane programs wind down and Boeing has clean-sheet designs in the next decade.

Failure of 751 and Boeing to come to some accord (not necessarily one based on the January 3 contract vote) has grave implications for IAM jobs and aerospace in Washington.

Top Story of the Year

Readers voted and we agree that the top commercial aviation story of the year was the three month ground of the 787. Except for the Concorde, a special and highly limited case, there hadn’t been a grounding of a commercial jet since 1979 with the McDonnell Douglas DC-10. With only 50 787s in service at the time of the grounding, global disruption was limited but the number of 787s scheduled for delivery during this time magnified the global implications. Japan Air Lines and its rival All Nippon Airways, with more 787s in service than any other carrier, were disproportionately affected. The grounding may have helped influence JAL to break the Boeing monopoly and buy Airbus with the A350-900 order.

ANA is still considering a major order and having lost JAL to Airbus, Boeing can be counted on being motivated to cut virtually any deal on any terms and conditions to avoid losing ANA.

A350 and 777X

A mere handful of votes separated the first flight and flight testing of the A350XWB with the launch of the 777X. The A350XWB barely topped the 777X as the second most important story of 2013.

Flight testing by all accounts is going well. Airbus officials are so far sticking with an entry-into-service for next year, but when is a moving target. Officials initially said mid-year, then September then November or December. Based on customer comments, we moved EIS to 1Q2015 in our estimates months ago, perhaps January.

In mid-December, the new American Airlines did what we had expected: it dropped the US Airways order for the A350-800, swapping it into the A350-900. The days of the -800 are numbered, and we think this subtype will follow the 787-3 into oblivion as early as 2014.

Boeing finally launched the 777X in November at the Dubai Air Show. The launch was really anti-climatic: Lufthansa Airlines had already become the first customers in advance of the air show, but Dubai provided the well-expected, high-profile order of 150 from Emirates Airlines and more orders from Qatar Airways and Etihad Airlines. On December 20, Cathay Pacific Airways ordered 21 777-9s, giving Boeing some 280 orders and commitments for the airplane. How many of the commitments will actually be firmed up by the end of 2013 is something we’ll all know in early January.

CSeries First Flight and Flight Testing

Bombardier came in at a distant fourth in the Reader tally with the first flight of the CSeries. This is BBD’s attempt to leap into the Big Leagues, challenging Airbus and Boeing directly at the small end of the mainline jet market. First flight was delayed three times and the flight test program has been slow off the mark. Flight Test Vehicle 2 is behind schedule entering the program and, we believe, so is FTV 3.

Bombardier long said that EIS would be 12 months after first flight. Following the September 16 launch of FTV 1, BBD stuck with this plan publicly. This meant EIS would be September 2014.

Not a chance.

We already had moved EIS to 1Q2015 by the time BBD CEO Pierre Beaudoin told the Toronto Globe and Mail in November that EIS was still a “good year” away.

We now have EIS in 2Q or 3Q2015 in our estimates. BBD’s year-end earnings call is February 11. We expect an EIS update from the company at that time.

Other Stories

All other nominees for 2013’s Top Stories were also-rans to Bombardier. Here are the results at December 29.

Vote for the Top Aviation Stories of 2013

Answer Votes Percent
Airbus A350 XWB has first flight and enters testing 168 20%  
Airbus A380 gets big order boost from Emirates 16 2%  
American Airlines and US Airways merge 39 5%  
Boeing 777X is launched 164 20%  
Boeing 777X Site Selection competition 43 5%  
Boeing 787 is grounded 258 31%  
Boeing 787-10 is launched 11 1%  
Bombardier CSeries has first flight and enters testing 74 9%  
Embraer launches E-Jet E2 3 0%  
IAM 751 rejects 777X Contract Nov. 13 33 4%  
IAM International Forces Vote on Second 777X contract offer 24 3%   

The deeper, longer term implications of IAM’s Boeing contract vote January 3

There are deeper, longer term implications for the January 3 vote by IAM 751 members on the revised contract proposal from Boeing than have been discussed in the public domain.

  • Contract extension to 2024 brings “labor peace,” but also significantly weakens the union in the future.
  • The replacement for the Boeing 757 lurks in the background.
  • So does the replacement for the 737 MAX.

The near-term implications have been discussed ad nausea: for employees, vote for a contract that includes concessions, notably on pensions, or risk losing the assembly site for the 777X. For the states, Washington could be a winner, or a big loser. The state that’s awarded the assembly site would be a big winner. Suppliers will supply Boeing regardless of where the 777X is assembled.

Another near-term implication we’ve talked about: the fall-out on the IAM, both at the International level and the District 751 level. No matter how the vote turns out, there is a civil war within 751 members who are royally upset with their leadership and others who believe in it. The civil war between 751 and IAM International HQ will continue well beyond the vote, with the prospect that International could simply depose all the 751 leaders and place 751 under a trustee “for the good of the union.”

But there are much longer term implications of the vote.

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A330neo prospect gains traction

Note: The following was distributed to our e-mail list December 23. Last week, American Airlines (as predicted) swapped the A350-800s for A350-900s.

The possibility of Airbus launching an A330 new engine option appears to be gaining ground.

Our Market Intelligence tells us that Airbus is considering a decision soon, probably next year, with a target entry-into-service date of 2018.

A decision to proceed with an A330neo would come after one to drop the A350-800, according to our information. Airbus has systematically switched -800 customers to the larger, and more profitable A350-900 and A350-1000. There are now just 79 A350-800s in backlog.

Customer

Qty

Comments

Aeroflot

8

 

Aircraft Purchase Fleet

12

For Alitalia

Asiana

8

 

AWAS

2

Probably will swap to A359

Hawaiian Airlines

6

Waiting on US Airways

ILFC

6

Probably will swap to A359

Kingfisher

5

Good as gone

Libyan

4

 

US Airways

18

Expected to disappear now that AA merger completed, replaced with A359/A351

Yemenia

10

 

Source: Airbus, Nov. 2013

79

 Leeham Co Chart

We identify 37, or 47%, that probably are already at risk of cancellation in favor of the larger A350-900 or A350-1000. These 37 are highlighted in red and pink. Another 10, those for Yemenia, are probably already iffy, according to Market Intelligence. The total of 47 represents 59% of the backlog. We have no information on the remaining customers’ intentions.

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Vote in poll on IAM Boeing 777X contract

The  IAM 751 members vote Friday whether to Accept or Reject a contract proposal from Boeing that will extend the term to 2024 and contain several contract concessions in return for assembling the 777X in Everett (WA) and producing the wing here. The issues are, to say the least, controversial.

Here’s a chance to express an opinion whether the contract should be Accepted. We can’t control who votes–in other words, members and non-members can vote in our poll. But absent any polling of the members, this is the only mechanism to gauge opinion in advance of the vote. We’ll release results next Friday morning.

The contract terms and conditions, how the contract was negotiated and sent to members and the split between 751 leaders, IAM International and within the 751 membership are controversial.

Some IAM 751 members are unhappy with 751 leadership and the International.

IAM International president Buffenbarger rallied against pension cuts at Boeing’s IAM 837 District

IAM International President Tom Buffenbarger advocates that IAM 751 approve a contract from Boeing that freezes current pensions and adopts a 401(k) style pension for future hires. Yet Buffenbarger advocated to IAM 837 (the union District at Boeing’s St. Louis plant) reject a contract that did just this.

Here is Buffenbarger in an IAM-produced video.

http://www.youtube.com/watch?v=YGUMyxeLv2M

Vote for the Top Commercial Aviation stories of 2013

This is self-explanatory. We’ll publish the results December 31.

Feel free to nominate other stories in Reader Comments.

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.

  1. 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.
  2. 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.

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