Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing’s 737 North Line and the Everett factory: in transition now June 9, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 25. June 6, 2025
- New RISE powerplant benefits from decades of GE research and development June 5, 2025
- Engine makers emphasizing durability, reliability June 4, 2025
- Boeing CEO: Lessons learned are key to certification of 737-7/10 and 777X June 2, 2025
Politics rears head over Boeing state incentives
It took no time at all for politics to rear its head in Washington State over Gov. Jay Inslee’s proposal for an incentive package for Boeing in exchange for siting the 777X in Everett.
Republicans, who oppose any tax hike for any reason under any circumstances, wasted no time in raising questions over the transportation tax proposal, or even if there was a need for the incentives to clinch the deal.
The IAM 751 local, which has its own problems with its membership over the proposed give-backs in the contract extension, lost no time in marshaling a team to lobby the legislators.
The Tacoma News Tribune asks why a special session is needed at all.
The IAM members vote next Wednesday, Nov. 13, on the contract. It’s unknown yet how the Legislature dynamics will play out.
Delta’s growth in Seattle cause ansgt among Alaska Air fans, but ALK the likely winner
Delta Air Lines is boosting its domestic service to Seattle, causing a lot of angst among Alaska Airlines fans, the hometown airline here.
Alaska (stock symbol ALK), which has about 50% of the market at Sea-Tac Airport, is a Delta code-sharing partner. Delta is overlaying a number of AS routes to Seattle, causing a bevy of news articles and wonderment about just what AS (the OAG code) had done to piss off Delta, and more to the point, if AS’s very existence will be threatened by Delta’s aggressive moves.
Delta also canceled a ground services contract with Alaska, another sign, some think, of the growing “war” between the two airlines.
Delta’s growing domestic presence in Seattle has to be taken into context with its international ambitions here. Delta is making Seattle an international hub. Once with just a few flights, all inherited from its merger with Northwest Airlines, Delta is adding trips, including re-introducing Seattle-London Heathrow, a flight NWA flew for a short period then dropped in the face of long-established service by British Airways.
Delta Air Lines International Service from Seattle
Sources: Delta Air Lines, Great Circle Mapper
Seattle has historically been a difficult international market. Routes are often very seasonal. Air France offered its own flights here from Paris for a short time before agreeing with Delta to take it over. United Airlines had London service but couldn’t sustain it. American Airlines once had Tokyo service that connected to its Miami hub for onward flights to South America, but also dropped it.
New 777X facilities to be 1.5m sf, one third the size of Boeing’s Everett plant: IAM
With the release by IAM 751 of the summary of the contract terms to be voted on next week by the membership as one step required for Boeing to select Everett as the assembly site for the 777X, the cover letter reveals Boeing will build “buildings” totaling 1.5m sf–to “house 777X final assembly and wing production.”
The total square footage equals one-third the size of the 4.5m sf of the entire Everett Boeing plant.
A Boeing spokesman declined to comment on the IAM 751 facilities statement, saying the company isn’t commenting on the “specifics” of the contract. We learned separately that a wetland assessment has been underway at Paine Field at the prospective site; Snohomish County (where Paine Field is located) undertook the study.
Assessing the 777X events for Washington State, IAM, Boeing
Update, Nov. 6, 10:00am PST: A summary by IAM 751 of the contract details is here.
Original Post:
Here’s our take on the news that the IAM and Boeing reached a tentative agreement leading to the selection of Washington State as the assembly site for the 777X, contingent on contract ratification and the Legislature approving an incentive package:
- IAM 751 is both a winner and a loser. Members lose the defined pension plan benefits and pays more for health care benefits. But they keep jobs assembling the 777X, and the siting of the composite wing production here reinforces the expertise of composite development in the Seattle area. These wins outweigh the loss of the benefits.
- Washington State is a winner. This is self evident. The fact that a transportation package is a must–one has been stalled for a long time–not only benefits Boeing but it benefits the state as a whole. Let’s hope the “no new taxes under any circumstances” Republican Party finally wakes up and votes for this thing. These extremists could kill the entire deal.
- Boeing is a winner. It gets labor peace from the IAM through 2024. It gets an experienced, high quality workforce instead of gambling Boeing Charleston–which remains problematic–would be up to the task in five years, when assembly begins. It gets cost reductions on the pension plans and health care benefits.
- Customers are winners. See number 3 re: Everett vs Charleston.
- SPEEA is probably a winner. With the wing and airframe coming to Puget Sound, SPEEA engineers here will certainly get its share of the work, despite the recent announcement that Boeing was putting engineering everywhere but here.
- Boeing Charleston and South Carolina, the presumptive alternative site, are losers. No explanation required.
A big question mark:
As we previously wrote, extending the 787 tax breaks to the 777X through 2040 (with a value of $8bn, more or less) is problematic. These were ruled illegal by the World Trade Organization in the US (Boeing) vs Europe (Airbus) trade dispute claims and counter-claims. The finding is under appeal, but what happens if the finding is upheld? Then what?
Lots to do:
The IAM membership has to approve the tentative contract; a vote is planned next week. Members will have to get past the benefit reductions, offset to some degree by a generous signing bonus and additional benefits for early retirees.
The Legislature has a lot of moving parts to look at in the next week. The challenges are daunting.
Recommendation:
IAM: Although perhaps painful and anathema, ratify the contract.
Legislature: Approve the package, including the new transportation taxes.
IAM, Boeing have tentative deal; Washington State steps up for 777X
The International Association of Machinists and Boeing have a tentative agreement that means the Boeing 777X will be built in Everett. The new contract is eight years, to 2024.
The IAM membership is to vote on the contract next week.
Gov. Jay Inslee has called a special session beginning tomorrow to approve a bi-partisan incentive package. Inslee said that if the IAM membership and the Legislature approve the packages, the 777X will be built here.
The state package includes:
- A package of statewide transportation improvements, which Inslee calls an essential piece of the aerospace future as well as the state generally;
- Expand investments in education;
- Expansion of policies for industry;
- Extend the 787 tax incentives to 2040 and to include the 777X. This has a “ballpark” value of $8bn through 2040.
All this has to be approved in a week.
Inslee noted that this deal “reverses the outflow of work from this state.”
Inslee’s statement is below the jump.
Implications of IAM-Boeing talks on 777X (Updated 11am PST Nov. 5)
Update, Nov. 5, 11am PST: The Seattle Times has this update of the secret talks (well, not secret any more) between the IAM and Boeing over the site location for the 777X. Boeing wants health care and pension costs cut. These were key issues in the SPEEA contract negotiations (in the end, pensions were shifted from defined benefit to 401(k) for new employees but health care cuts were saved for another day).
When the health care and pension plans came under Boeing attack in the SPEEA negotiations, behind the scenes the IAM was said to be already planning to gear up to hold the line when the current contract expires in 2016.
The Seattle Times report also includes some reaction to the leaked terms.
Original Post:
The news that the International Association of Machinists has been engaged in secret talks to win Boeing’s site selection for the 777X for Everett (WA) carries implications beyond the obvious jobs, economic benefits and Washington vs South Carolina rivalry.
Reuters broke the story. The Seattle Times has more detail.
As readers of this column know, we’ve suggested that the Washington Legislature consider making the State a right-to-work state. Understandably, this suggestion hasn’t gone down well with IAM 751, the local here in Puget Sound, with SPEEA, the engineers’ union, or with Gov. Jay Inslee, a Democrat with close ties to the unions.
We have urged this consideration because Boeing has been moving SPEEA jobs out of state and has leveraged South Carolina (a right-to-work state) against Washington.
If the IAM and Boeing reach an agreement to extend the current contract from 2016 to the mid-2020s (we believe 10 years to 2026 seems to make sense), assuring Boeing steady production, many of the issues facing Boeing that enable it to leverage RTW over unionized Washington become moot.
RTW has been a sword wielded by Boeing over the IAM and Washington. It has been a sword of Damocles. The IAM, typically a highly militant union, took an enlightened approach two years ago when it extended a contract in place by four years in exchange for Boeing selecting the Renton (WA) plant for the final assembly line for the 737 MAX. This prospective 777X deal would carry this innovative approach further.
Secondly, we have heard–anecdotally to be sure–that customers are concerned over the prospect of Boeing Charleston being selected because of the history of quality control challenges from this 787 assembly site, preferring the proven history of Everett’s quality control.
Next up, SPEEA is now faced with coming to a peace agreement. After a highly contentious contract negotiation last year, culminating in an odd set of ratification votes early this year, Boeing has systematically moved SPEEA jobs out of state. As the weaker of the two unions, SPEEA needs to use the example of the IAM to tone down the rhetoric. We know conversations are underway. We don’t know what direction they are taking, however. But if SPEEA can follow IAM’s example, aerospace in Washington State will be able to look at the future with more confidence.
The trick will be for Washington politicians to avoid becoming complacent, as it has time and time and time again.
Airbus’ A350-800 dilemma
Last week we discussed Airbus’ A350-1000 dilemma. The -1000 will be a fine airplane, but we concluded the company needs to go forward with a larger capacity “A350-1100” to match the size of the Boeing 777-9X, but take the Boeing 787-10 approach and be content with sacrificing range in lieu of designing a new wing and engines.
Airbus’ A350 dilemma doesn’t end there. What’s it to do with the A350-800? One fleet planner told us a year or more ago that the “-800 is an expensive A330-300” with the same operating costs as the larger capacity A350-900.
Airbus has been encouraging customers to move up to the larger A350-900, with Hawaiian Airlines and US Airways the key hold outs. Conventional wisdom says US Airways will swap its order once the merger with American Airlines goes through (which is looking more and more likely, given settlement talks with the Department of Justice). American has a large order for the Boeing 787-9, making the -800 unnecessary in a combined carrier fleet plan.
There are now around 80 -800s in Airbus’ backlog, and even officials at Airbus have been ambiguous about green-lighting production of the -800, which is supposed to enter service in 2016 (after the -900 but before the -1000). We have written several posts in which we concluded the -800 would be re-sequenced to 2018, after the 2017 EIS of the -1000.
We believe there is a very good chance the A350-800 will be dropped in favor of proceeding with an A350-1100.
So what’s Airbus to do in the 250-300 seat space now occupied by the -800 and the aging A330 family?