GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Boeing Moves Out of the Northwest

November 27, 2013 | About:

Boeing Airlines (BA) has had a long association with the Pacific Northwest. However, these ties have frayed in the recent years. This can be credited to the fact that the aerospace giant has moved its headquarters out of Washington to Chicago. This apart the company has also developed a new production line in South Carolina. With this move made by Boeing, the relationship between the company and the Machinists’ Union has become too sour to be amended.

Boeing, however, has asked about 15 locations across the U.S. to submit bids in order to start the work for building its forthcoming 777X jet. The formal requests for proposals were reportedly sent out to more than a dozen sites. Boeing has made it very clear that it has no plans to reunite with the Machinists’ Union to settle down the dispute regarding the rejection of its contract offer last week which proved to be the reason why the search for new sites began in the first place.

Washington State has been named as one of those 15 sites under consideration for the project. Other such proposed sites include Long Beach, California and Salt Lake City. The other locations that might be included on Boeing’s list are Huntsville, Alabama, San Antonio, Texas and North Charleston in South Carolina.

The states of Kansas and Missouri have also expressed an interest to be in contention. Both the states are known to have aerospace expertise and Boeing facilities. Though aviation analyst Richard Aboulafia has said that it is unlikely that Boeing would opt for a greenfield suit, a completely new location having no experience in airplane manufacturing. If we remember, Boeing had done this in the case of 787 Dreamliner Program by choosing to go for South Carolina to build big fuselage sections. The result was not good. It led to delays and quality problems in the jet program’s early years that the chief executives of both Qatar and Emirates Airways have told the company not to do the same for 777X program.

In Aboulafia’s view, the best site by far to set up the production facility is Washington State. This is because the state has both the required workforce and the infrastructure for building the current 777. A company source has revealed that these sites were selected on the basis of certain qualifications that the company is looking for. These include:

  • Proper infrastructural facilities.
  • A huge workforce, g iven the kind of industry that aviation is.
The fiscal decision will be made in mid-December. Boeing would consider proposals for final assembly of the airplane and for the fabrication and the assembly of these giant flying machines.

Boeing 777X airplane was launched last week with orders and commitments for a record-breaking 259 jets. The plane’s structure consists of a metal fuselage that is very similar to the 777-300ER model. The plane will have a capacity of 400 passengers. Added to that, the plane will be powered by fuel efficient engines and will have a huge wingspace of almost 233 feet.

The wings are made up of carbon filtered plastic composite. They’ll be fabricated in a state-of-art manufacturing facility with a separate clean room for laying down of the fiber and will house a giant high pressure oven to bake the material till it gets hard enough to withstand huge forces.

On Nov. 13, the 31,000 members of International Association of Machinists (IAM) rejected a project by Boeing in Washington State that would have employed around 700 people from the state alone. The proposed contract would have done away with the old employer pension scheme and had introduced a new wage structure that would drastically slow down the wage growth for new recruits. Under this system employees would take about 16 to 20 years to reach top of the pay scale rather than six years which it takes now. Boeing however has made it clear that it would not initiate any further talks with IAM to amend things.

For the record, Dubai-based Emirates airlines has placed an order for 150 of Boeing’s new 777 mini-jumbos in a deal worth around $76 billion. Similarly, Etihad Airways, Qatar Airways and Lufthansa have together placed orders for some 109 new 777s. This has brought the total projected sales to a whopping $95 billion.

BA stock has been doing well in the market. With the way things seem to fall in place for the company it is certain where I’d put my money in. An investment in the company’s stock right now can yield good results in the future.


Rating: 3.8/5 (4 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK