IAM 751 issues analysis of Boeing contract offer

IAM 751 issued an analysis of Boeing’s most recent contract offer and of the contract that was rejected in a November 13 vote.

751’s president, Tom Wroblewski, accompanied the analysis with a message to members. This is below the jump (there isn’t a unique link to it).

We’ve asked Boeing for its analysis. If it supplies one, we’ll post it.

Meanwhile, at a time when tensions are high, a little warped sarcasm might lighten the mood a bit. Here it is from a columnist for the St. Louis Post-Dispatch.

Read more

IAM 751’s president issues message to members: here’s why you can’t vote

Update, 11 am PST: Boeing’s Doug Alder just sent us this statement:

The union leadership rejected Boeing’s best and final counterproposal. Boeing did not withdraw its counterproposal, nor was there any need to do so, because the counterproposal was rejected.

Original Post:

Reprinted here without comment:

Dear Brothers and Sisters:

Several hundred of our 30,000 members at Boeing e-mailed me overnight to ask why you can’t vote on the company’s most-recent contract offer. The answer is simple:

There is no offer to vote.

Boeing’s offer was only on the table Thursday so long as I agreed to recommend the offer and urge you to vote yes on it. But I could not recommend you accept this offer. When I said we couldn’t do that, Boeing withdrew the offer immediately.

So there is no offer to vote.

As union leaders, we couldn’t go onto the shop floor to ask you to accept this proposal. Despite what Boeing is saying, the offer was almost identical to the one you rejected by a 2-to-1 margin on Nov. 13.

In the four-page document they passed to us Thursday afternoon, we could only identify four changes from the Nov. 13 offer, and they weren’t significant:

Boeing sweetened the pot with an additional $5,000 lump-sum bonus – payable in 2020. It is not a $15,000 bonus now, it is still a $10,000 bonus now.

Boeing increased annual maximum dental coverage – by $500 per person in 2020, and by another $500 per person in 2024.

Boeing promised to extend the Letter of Understanding that guarantees we will keep doing 737 MAX work until 2024 – but passed no contract language on it, leaving us uncertain of how solid that guarantee was.

Boeing agreed to back down from its plan to keep new hires in progression for up to 22 years, and to go back to the current system that gets new hires to the maximum rate in six years.Their proposal also called for a “joint evaluation” of the progression system.

Every other item was EXACTLY THE SAME as the offer you rejected Nov. 13.

I think you’ll agree these were very minor changes, and not nearly enough to offset the things Boeing was trying to take away from you, and for the Machinists who will join us in the future:

Freezing your pensions, eliminating them for new Machinists and replacing them with a “savings plan” so vague we couldn’t tell you anything about how it would work.

Raising everyone’s health care contributions by as much as $4,000 a year over 2011 levels by the end of the contract.

Limiting future wage increases to 1 percent every other year, and locking in current starting pay rates until 2024, when thousands of Boeing jobs would be below minimum wage.

Given that you had voted so overwhelmingly against an almost identical proposal on Nov. 13, I didn’t see any point in bringing it to you for a vote, and our Business Reps agreed with me.

So, until Boeing changes its conditions, we don’t have an offer to vote on.

I’m sorry that there has been confusion over this issue, especially by the reported comments of the retired leader from our International headquarters, who seems to be suggesting there’s still an offer hiding out there somewhere, just waiting for you to vote on. I understand that many of you are frustrated, and I don’t blame you.

I simply ask that you work together with me as we continue to make the case that Boeing’s best chance for success – by far – is to build the 777X here in Washington state, utilizing the skills, experience and dedication of the finest aerospace workers in the world: the Machinists of District 751.

In solidarity

Tom Wroblewski

Airbus to cut new airplane R&D, focus more on derivatives

Airbus is going to cut back its new airplane research and development spending and redirect efforts more toward derivative airplanes, EADS CEO Tom Enders told aerospace analysts at the EADS Global Investors Forum.

Buried in a Bloomberg News report of the GIF is this:

Enders also wants to curb cash-hungry development efforts in favor of milking existing products for higher returns. At Airbus, he backed the re-engining of the A320 narrow-body over building a new plane. No new jets are planned at Airbus beyond the A350, which is due to commence deliveries late next year.

“Why should we spend large amounts of money when we can make significant incremental improvements?” he said. “This principle can be applied outside of just civil aircraft.”

Airbus, like Boeing, suffered under the strain of new aircraft programs, notably the A380 and A400M. As yet, the A350 doesn’t seem to have been a black hole, with normal development costs.

Richard Aboulafia of The Teal Group was critical of Boeing for years for starving R&D for new aircraft and over-relying on derivatives while Airbus invested in new aircraft programs. He had this to say about Enders’ news:

This is only possible as a percent of sales.  Airbus is at a twin aisle product line disadvantage relative to Boeing, so this isn’t the time for them to rest on their laurels.  Some kind of response to the 777-9X is essential, even if it arrives a few years after the Boeing jet.  Whether it’s an A350-1100 or a clean sheet, it requires a significant investment right after A350XWB-800/900/1000 spending winds down.  Thus, in absolute numbers, the company would be advised to keep spending high for the next ten years.  But on the positive side, since Airbus’s revenue will grow with A350 (and incrementally with the A320 neo), the company’s percent of revenue spent on IRAD will decline.
Enders’ comments reflect the changing nature of Airbus’s shareholder relations more than anything else.  They’ll need to focus more on profitability rather than new product development over the next ten years; they may wind up looking more like Boeing.

IAM, Boeing talks fail; 777X site selection evaluation continues; Update: Members to vote on deal

Update, 11:30pm PST: KIRO TV (CBS Seattle) quotes Boeing spokesman Doug Alder as saying the Boeing offer has not been withdrawn, contradicting the IAM 751’s understanding.

Update, 9:10 PM PST: The Seattle Times reports the IAM 751 membership will get to vote on Boeing’s counter-contract offer after all.

Original Post:

Talks between Boeing and the IAM 751 machinists union failed to reach an agreement when Boeing presented a counter-proposal to the union’s offer that did’t budge on the pension issue, according to The Seattle Times.

KING5 TV (NBC Seattle) has this story.

Boeing’s statement is here.

IAM 751’s statement is below the jump (there isn’t a unique link to it).

The Boeing and IAM 751 statements paint a very different picture of the offers.

Our take:

Although both sides now have said talks have ended, we fully expect political pressure on both sides to resume talks before Boeing makes a final decision on the 777X assembly site.

Boeing said it will make a decision early next year; our sources suggest this timeline is the end of January.

This leave a small window for a third try, but we’re not optimistic.

We believe that barring an agreement, Boeing Chicago will elect to put the 777X assembly site and wing production somewhere other than Washington.

We believe that those within the IAM membership who believe Boeing is bluffing are mistaken. One need look no further than the events leading to putting 787 Line 2 in Charleston. Members believed Boeing was bluffing then, and it wasn’t.

As we have written many times, while Boeing Commercial Airplanes is understood to want to assembly the 777X in Everett, headquarters in Chicago has a very different view–and in the end, it’s only that view that counts.

One item in the Boeing statement stands out like Braille to us as well:

In addition, a separate agreement committing final assembly of the 737 MAX at the Renton, Wash. site would have been extended through 2024.

For those who think it impossible Boeing wouldn’t start another 737 assembly line elsewhere, we understand from two sources close to Boeing that a study is underway about opening a 737 assembly line in Charleston. Some 737 MAX work has already been assigned there, and Boeing continues to buy land there.

We firmly believe that the industrial logic–and all other logic–demands that the 777X (and the 737 MAX) assembly be in Puget Sound. But Boeing CEO Jim McNerney is clearly intent on moving work away from the unions (and from Washington State) absent dramatic changes in contracts and the cost of doing business.

Boeing offered terms and conditions in the IAM contract that were sure to be rejected.

The PR war of who is responsible will continue for some time to come. But just as we firmly believe the 777X should be built in Washington, we also firmly believe it won’t be without some last minute agreement.

Washington politicians need to step up their effort to look Beyond Boeing for the future of the state’s aerospace industry.

Read more

Odds and Ends: EMB, BBD split AA order; WTO on Airbus subsidies; IAM, Boeing bargaining; KC-46A

EMB, BBD split American order: Embraer took the lion’s share of the long-awaited order from American Airlines for regional jets. EMB won 60 firm orders and 90 options for the E-175 and Bombardier won 30+40 CRJ-900s. Flight Global points out that none seem to be going to American Eagle.

The order is welcome by both OEMs, which had gaps in their respective production lines.

WTO on Airbus subsidies: Bloomberg News reports that the World Trade Organization won’t rule until the end of next year on a US complaint that Airbus failed to comply with WTO findings that it received illegal subsidies. (No link available).

Bloomberg writes, The EU says it had secured repayment of some $2.3 billion in launch-aid loans and terminated the launch-aid loan agreements in question, while also addressing subsidies given in the form of capital contributions, infrastructure support and regional aid.(Emphasis added.)

     The U.S. counters that the largest launch-aid subsidies—for the A380, Airbus’s super jumbo jet—remain in place and that the actions the EU claims to have taken with respect to earlier subsidies “appear to do nothing to withdraw them, or to remove their adverse effects.”

As we’ve written, Boeing is now requesting essentially the same thing in its Request for Proposals for the 777X site selection.

IAM, Boeing bargaining: It’s a relief to see Boeing and the International Association of Machinists District 751 bargaining for a new contract amendment for the 777X site selection, but no deal is imminent. The Seattle Times reports things could move quickly, however.

First KC-46A airframe, wings joined: Aviation Week has this story about the progress of Boeing’s KC-46A tanker program.

Assessing the Air Canada 737 order: factors that likely played a role

How did Boeing win the Air Canada mainline 150-200 seat jet order when only a couple of weeks ago Flight Global reported the Airbus won the deal?

We, too, heard that Airbus seemed to be the favorite, but the information was soft. We’re not rapping Flight Global—undoubtedly it was confident in its sourcing, but this just shows that a situation can change dramatically and quickly.

We’ve been following the competition for months, behind the scenes, and here are factors we understood that were involved.

Read more

Air Canada snubs Airbus, orders 737s; keeps some of Embraer portion open

Air Canada snubbed Airbus with its mainline jet fleet renewal and ordered up to 109 Boeing 737 MAXes. The initial order is for the 8 and 8 MAX, with the ability to swap for the 7 MAX. The deal includes the provision for Boeing to purchase up to 20 Embraer E-190s, which would be replaced by the 7 MAX, apparently.

But Air Canada is keeping open the prospect of replacing the other 25 E-190s with a new jet or to keep operating them. Bombardier hopes to win this segment of the order.

This is a big win for Boeing and one of the rare times Boeing has displaced Airbus in the MAX v NEO competition of an incumbent Airbus operator.

The Air Canada press release is below the jump.

Read more

Odds and Ends: From EADS’ Investors’ Day; Illinois and 777X; Air Canada; LOT gets $33m from Boeing

From EADS’ Investors Day 1: Airbus parent EADS is having two days worth of briefings for aerospace analysts. Here’s initial news coverage from Day 1:

Reuters: EADS strategy stresses Airbus

Reuters: EADS IDs new dividend policy, A350 target

Illinois and 777X: Add the Prairie State to those submitting bids to Boeing for the 777X assembly site. Illinois was previously not included in any list that we saw.

Air Canada: The airline’s Board of Directors meets today to ratify staff recommendations to replace the Airbus A319/320/321 fleet. Airbus and Boeing are competing with their A320neo and 737 MAX families. This competition is said to be only for the 150-200 seat sector. A separate decision for the 100-149 seat sector is expected to come next year. Bombardier hopes to win that part of the deal.

Update, 10:30 PST: The Wall Street Journal says Air Canada and Boeing are negotiating a deal for 50 737 MAXes.

Update, 11:15am PST:

LOT gets $33m from Boeing: Reuters reports that LOT Polish Airlines will receive $33m from Boeing for the 787 problems. Payments will be in cash, the news agency says.

Odds and Ends: Airbus’ 5th quarter; 777X RFP responses

Airbus’ 5th quarter: John Leahy, COO-Customers of Airbus, is so well known for announcing a whole bunch of orders at the company’s annual review press conference (January 13 this time) that Boeing dubbed it the “5th quarter,” and the quip has stuck. Aeroturbopower has a wrap up of how many orders could be announced at the 5th quarter.

Boeing, IAM Meet: Dominic Gates of The Seattle Times reports that Boeing and the IAM met for the first time since the 2-1 vote rejection November 13 of the contract offer in connection with the 777X site selection.

777X responses to RFP: The following news articles try to detail some of the responses by states to Boeing’s 777X site selection RFP:

Alabama

California and another California

Missouri: The county votes to add $1.8bn in tax breaks to the State’s $1.7bn.

Washington: The State adds Spokane to the list of alternative sites, according to Glenn Farley at KING5 (NBC, Seattle). (No link available.)

New York Times: Losing 777X would start a death spiral for WA State.

On Tuesday, the day the RFPs were due to Boeing, the Washington Congressional delegation released a letter to Boeing CEO Jim McNerney urging that the 777X be assembled in the state. The letter is below the jump.

This follows an Open Letter to Boeing on December 6 from Snohomish County officials (Everett is in this county), published in The Everett Herald.

Read more

Key events Dec. 10-12: Boeing, EADS, Air Canada

There are some key events to follow today through Thursday:

December 10: The Requests for Proposals for the site selection of the 777X are due into Boeing today. Media will be trying to find details, but Boeing certainly won’t be talking. Nor do we expect states to be doing much talking, either.

Boeing says there will be a decision early next year; we are hearing the end of January, but this information is very soft.

December 11: EADS, parent of Airbus, begins two days of its Global Investors Day briefings.

Air Canada’s Board of Directors is to meet to decide on replacing its large, aging fleet of Airbus A320/321s. Airbus and Boeing are bidding. Flight Global earlier reported staff had selected the Airbus, but Air Canada denied a decision had been made. But, as with all denials, this could be carefully crafted: the Board hadn’t approved a deal, so no “decision” had been made.

We understand, but are not 100% certain, that the fleet renewal for the 100-149 seat sector remains open. This means Bombardier and its CSeries could still win a deal–or Air Canada may decide to retain its Embraer E-190 fleet.

December 12: EADS’ investors day continues, with guidance and information about the next 12 months and beyond for Airbus.

Doug Harned of Bernstein Research issued a note Monday listing a series of questions for EADS’ officials; we couldn’t sum it up better:

  1. What is the A350 development and production outlook?
  2. How large are A350 losses likely to be in 2015? [NB: EADS/Airbus writes off development costs in the year incurred, unlike Boeing which uses program accounting to spread costs. Editor.]
  3. Will Airbus hit its goal of 10% margins, ex-A350, in 2015?
  4. Can Airbus grow and sustain the A380 production?
  5. When will Airbus take up rates on the A320neo?
  6. What is the outlook for A330 deliveries?