Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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SPEEA negotiators recommend member rejection of Boeing contract offer
So much for being encouraged. SPEEA’s press release:
| Boeing rejects SPEEA offer, escalating conflict |
SEATTLE – In a move that escalates its mounting problems, The Boeing Company today (Jan. 17) rejected union offers to extend existing contracts and instead gave its “last best and final” offers to the Society of Professional Engineering Employees in Aerospace (SPEEA), IFPTE Local 2001.
Boeing’s actions reiterate the company’s growing disrespect for the engineers and technical workers who are essential to working issues and restoring confidence in the 787. While the company agreed to extend parts of the existing contracts, the offers put retirement benefits for all 23,000 engineers and technical workers, including retiree medical, at risk. In addition, Boeing’s corporate negotiator said the company will end the pension for future employees.
Although the offers contain improvements, both the Professional and Technical Negotiation Teams unanimously recommend rejection.
“We are profoundly disappointed the company is taking advantage of our good-will offers to push through unwarranted cuts, put existing retiree benefits at risk and eliminate the pension for future employees,” said Ryan Rule, Professional Negotiation Team member.
SPEEA members will vote on the company’s offers in the coming weeks. Ballots are likely to include a request to grant the Professional and Technical Negotiation Teams authority to call a strike.
Boeing rejected SPEEA’s offer after stating publicly that the company does not need SPEEA members for the FAA investigation or working the 787 issues. Last week, Mike Delaney, vice president of engineering for Boeing Commercial Airplanes, said managers and engineers from other areas of the company could do the work. Aerospace industry analysts scoffed at this assertion because the 787 engineering work is performed by SPEEA engineers and technical workers.
The company’s offers continue annual salary raise pools of 5 percent and maintain existing medical benefits. Boeing did agree to extend same-sex survivor pension benefits.
SPEEA members rejected Boeing’s initial offer by 96 percent on Oct. 1, 2012. Today’s actions come after nearly a year of negotiations. In recent weeks, SPEEA members have been preparing in earnest for a major strike that could idle Boeing factories and send engineering and technical experts to the picket line.
SPEEA represented engineers and technical workers are essential to solving the mounting issues with the 787, including assisting the Federal Aviation Administration’s (FAA) investigation and restoring confidence in the 787.
“Boeing corporate created the 787 problems by ignoring the warnings of the Boeing technical community,” said Joel Funfar, Technical Negotiation Team member. “Now, they propose to double down on their failed outsourcing strategy by outsourcing the engineering work required to solve the problems caused by previous rounds of outsourcing.”
Negotiations, taking place at the SeaTac Hilton Hotel with the assistance of the Federal Mediation and Conciliation Service (FMCS), are ended.
This negotiation process was tainted by numerous actions that are in violation of the National Labor Relations Act. Boeing has regularly tried to prevent members from discussing their working conditions with others and with SPEEA. The company engaged in unlawful surveillance of protected activity, confiscated pictures of members engaged in protected activity and has refused to provide information relevant to the negotiations.
SPEEA and Boeing started meeting in April to negotiate new contracts for 15,550 engineers and 7,400 technical workers. In October, engineers rejected Boeing’s initial offer by 95.5 percent. Technical workers rejected the company’s offer by 97 percent. Existing contracts expired Nov. 25. Since negotiations resumed Jan. 9 after a month-long FMCS-imposed recess, union members have increased preparations for a possible strike. A 40-day strike in 2000 by SPEEA stopped deliveries and caused major factory and service bottlenecks at Boeing plants around the country.
Boeing presents best and final offer in SPEEA contract talks
It’s in: Boeing’s Best and Final.
Boeing concedes on medical, it says, but still wants pension relief for new employees. Says it will roll forward the current contract. The press release sounds like it pretty much accepts the SPEEA proposal, except for future employees’ pension costs.
The devil is in the details; we’ll see what SPEEA thinks after its review, but from the press release this looks encouraging.
Here is Boeing’s message to employees:
Today, Boeing gave SPEEA its best-and-final contract offer, agreeing to the union’s approach to extend the terms of the previous contract for current employees. With the exception of proposals explicitly agreed upon by both parties, the provisions of the current agreement will roll forward as they apply to current employees. This four year contract would allow all of us to focus our time and energy on the immediate challenges facing the company.
Under this offer, both Profs and Techs would see salary pools of 5 percent annually for the duration of the contract. The average Prof would see $84,071 in additional pay and performance-based incentive payments (EIP) over the life of the agreement. The average Tech would see $64,515 in additional pay and incentive payments.
Health care plans would remain in place with no increase in employee contributions.
For new hires only, we offer an enhanced retirement savings plan that would replace the traditional pension. Pensions for current SPEEA-represented employees are unchanged except for an increase in the pension basic benefit. Moving new hires to an enhanced retirement savings plan will provide future employees with a market-leading retirement plan — while allowing Boeing to better manage retirement plan expenses, reduce financial risk and invest in areas critical to the success of our business.
Over the past nine months, our team has negotiated in good faith to provide a market-leading offer to our employees.
We encourage you to visit the negotiations website where you’ll find updated fact sheets with all the details of this offer, as well as an updated Pay & Benefits Estimator that shows what it means to you.
Airbus annual press conference: Passed 12,000 orders since inception, more than 9,000 single-aisle
We’re at the Airbus Annual Press Conference for the 2012 results, the first of several stops on our Europe trip. Participants are:
Fabrice Breigier, CEO (FB)
Gunter Butschek, COO (GB)
John Leahy, COO-Customers (JL)
Tom Williams, EVP Programs (TW)
Domingo Urena-Raso, Head of Airbus Military (DUR)
FB:
- We have passed 12,000 orders, including 9,000 single-aisle. 17 new customers in 2012, of 89 served last year.
- 739 A320 family orders in 2012. 58 A330s, 27 A350, 9 A380.
- North America now 10% of backlog, Europe 14%, Middle East 9%, Asia-Pacific 35%, Africa 2%, Latin America 8%, lessors 20%.
- 305 A320 CEOs orders in 2012. 687 since neo launch.
- A320 sharklets above expectations at 4% vs 3.5% advertised.
- A330 can do 95% of all 787 missions. Sold 800 since 787 launch.
- A380 wing issue now behind us. New wing progressively incorporated in 2014. 97 aircraft in operation.
- A350 program remains very challenging, focused on next big challenge is first flight.
- Airbus Military: 32 orders (28 C295, 4 CN235).
- A330 MRTT delivered to Australia, Saudi Arabia, UK; selected by India, France. Won every major procurement outside US since USAF selection.
- First A400M delivery 2Q2013, will deliver four this year. 13 A400s in production.
- Focus on speed, agility, flexibility, innovation. Our future depends on capacity to be innovative.
It’s official: Boeing regains lead as No. 1 aircraft producer, sales king, but victory overshadowed by 787 crisis
On a day when Boeing would normally be celebrating its return as the world’s number one aircraft producer and retaking the order crown, the 787 crisis over shadow’s the Airbus 2012 Results review in which the European OEM concedes the lead for the first time in a decade.
Airbus today (European time) announced it delivered a record 588 aircraft to 89 customers in a single year, and took in 914 gross orders (833 net), achieving a 41% market share on the order contest. Boeing delivered slightly more than 600 aircraft last year and received just over 1,200 orders, driven by the 737 MAX.
Going into 2012, Airbus COO-Customers John Leahy conceded the turn-about. But he noted then that for 2011-2012 Airbus would likely retain the lead, and today he revealed that it did, reporting a two-year market share of 53%.
The A320neo retains a lop-sided market share of 62% at the end of 2012. Boeing edges Airbus in A320ceo v 737NG backlog with 51.5%. Other categories:
Putting perspective on the 787
Update: The Wall Street Journal has a long article (subscription required) discussing the problem and the possibility the FAA could release the 787s for service if it approves interim steps designed by Boeing. It also has this illustration:
Original Post:
The grounding of the Boeing 787 by the US Federal Aviation Administration wasn’t entirely unexpected, based on discussions we had in the last 48 hours with people in the US and in Europe.
Although the FAA did not pull the Airworthiness Certificate of the airplane, the grounding had virtually the same effect.
Airlines throughout the world followed suit and some of the regulatory agencies followed the FAA lead.
We’ve been inundated with media calls asking about the ramifications. Here’s a synopsis of the questions and our responses.
Thoughts about the FAA-Boeing 787 program review
Here is the Airworthiness Directive.
As the Boeing 787 problems evolve from annoying, in-service teething issues into a fire, a full program review by the Federal Aviation Administration, a second battery issue and now a grounding, the program review raises almost as many questions as it hopes to solve.
The FAA has never been adequately staffed, nor staffed with enough experts, to conduct program development and certifications without relying on the manufacturers and supply chains to provide analysis and expertise.
Since the creation of the FAA, this system has worked pretty well. Although some may argue that the FAA and the industry are too cozy—and sometimes there certainly appears to be justification in this criticism—it’s in nobody’s interest to screw up. The airplane makers and their stakeholders have to make safe airplanes. The FAA—the regulators—have to assure that the airplanes are safe. The airlines, who carry the passengers, clearly need safe airplanes.
FAA grounds 787; first since DC-10
The US Federal Aviation Administration grounded all US-registered Boeing 787. There are only six–all operated by United Airlines–but equivalent regulators typically follow the lead, though they don’t have to.
This is the first ground of a US-made commercial airliner since the McDonnell Douglas DC-10 was grounded in 1979, following a crash at Chicago O’Hare International Airport.
The move was becoming more and more widely talked about in aviation circles. We’re on a multi-stop trip in Europe and more and more people we’ve visiting had been talking about the prospect of grounding.
Buckingham Research issued a note about a company that is in the process of producing a new lithium-ion battery design of later technology:
From the Buckingham note
We think BA does have alternatives if it decides to replace the current Li-Ion batteries.
- We recently spoke with EaglePicher, a competitor to GS Yuasa (787 battery maker).
- EaglePicher has a Li-Ion battery technology currently being certified for a business jet.
- EaglePicher notes it could have a 787 Li-Ion battery designed and certified in 12-15 months.
- EaglePicher’s Li-Ion battery conforms to current (and far stricter) FAA standards for Li-Ion batteries.
- Consequently, we think BA has design alternatives if it decides to replace the current battery.
Odds and Ends: KC-46A vulnerable to cuts; SPEEA talks resume today
While the aviation world is absorbed with the Boeing 787 drama, there actually is more going on.
KC-46A Defense Cuts: We were the first to report this when the White House issued its Sequestration hit list, but with Congress once again failing to do its job, Sequestration is over the horizon . Defense News has this update.
SPEEA Talks Resume: Boeing made its second contract offer Monday. SPEEA reviewed it yesterday. Talks resume today. We’re very pessimistic, but SPEEA presented the following today:
With the desire to focus all attention on solving the emergent issues with The Boeing Company’s 787, the union representing engineers and technical workers today (Jan. 16) proposed incorporating areas of agreement from ongoing negotiations into existing contracts and extending the agreements for another four years.
This “best and final” offer by the Society of Professional Engineering Employees in Aerospace (SPEEA), IFPTE Local 2001, was presented as negotiations resumed at 1 p.m. with the assistance of the Federal Mediation and Conciliation Service (FMCS) at the SeaTac Hilton.
SPEEA’s unprecedented offer would free Boeing and 23,000 engineers and technical workers from protracted and increasingly contentious negotiations that appear headed for a strike. It also allows the company and its technical workforce to focus on reaffirming confidence and proving the 787 is the reliable and safe product employees know it to be. Completing negotiations also helps Boeing stay focused on supporting customers, engineering the 767 tanker, 737 MAX, increasing 737 and 777 production rates and the other products needed for our national defense.
“These negotiations have been going on for more than a year,” said Tom McCarty, SPEEA president and Professional Team member. “At this point, we should move forward with the items upon which we can agree, and leave the status quo in place for the remaining items.”
In addition to the proposed contract extension, SPEEA requested that Boeing continue to meet under the auspices of FMCS mediation to tackle the difficult issues that have proven so divisive in these negotiations.
“Our hope is that we can work collaboratively to find solutions in a data-rich environment outside of the constraints of the collective bargaining process” said Ryan Rule, Professional Team member.
In making the proposal, SPEEA agreed to accept Boeing’s funding mechanism for the Ed Wells Partnership training program. The status quo proposal continues to offset company medical costs through annual deductible increases based on salary growth. To put to rest the pension issue, a major point of contention, SPEEA proposes to accept the same pension proposal that Boeing negotiated with the International Association of Machinists (IAM District 751). Finally, the contract extension offer is made with the understanding Boeing recognizes same-sex survivor pension benefits pursuant to Washington state law.
“With our contracts put to rest, we can all roll up our sleeves and work the issues facing the 787 and Boeing,” said Sandy Hastings, Technical Team member. “SPEEA members know this is a great airplane, and we are eager to prove this to our customers, the flying public and the FAA (Federal Aviation Administration).”
Latest 787 problem increases level of concern
The emergency landing of an All Nippon Airways Boeing 787 due to a possible battery fault and report of smell of smoke increases the level of concern surrounding the program.
But we continue to advise caution in drawing conclusions.
ANA, followed by Japan Air Lines, grounded their combined 24 787s for inspection and evaluation. Given that the reports indicate a battery was involved, and following the airport fire in Boston 10 days ago on a JAL 787 involving batteries, the action is prudent.
But the news reports we’ve seen are too ambiguous as to the details of the latest incident.
We are confident that all operators are conducting inspections and Boeing’s customer service team has all hands on deck to support their customers and to try and figure out the facts.
But if there are many more (or perhaps any more) such incidents, we would not be surprised if more than spot, voluntary groundings occur.
Odds and Ends: Split winglets for 737NG Retro; A380 wing fix
Split winglets for 737 Retro: Boeing bypassed Aviation Partners Boeing for its split winglet on the 737 MAX, but APB just launched its own order with United Airlines to retrofit the 737NG.
A380 Wing Fix: While Boeing is getting beat up for every glitch in the 787 A380, let’s remember the Airbus A380 went through its own set of glitches. One of them, cracks in wing rib braces, while not a safety issue was nonetheless high profile. The fix is about to be certified by EASA.