Boeing and IAM 751 reach settlement on Charleston and Renton

Today is a day for big news out of Washington State. Boeing and IAM 751 which represents Boeing line workers in Washington State have come to an agreement after about 6 weeks of secret negotiations according to the Seattle Times. This agreement will supercede the current contract which expires 10 months from now.

The main provisions of the deal will require Boeing to locate 737 MAX production at Renton (this is logical given current 737 production is there). Boeing used the 737 MAX line as a bargaining chip to win settlement of another Boeing problem...the NLRB suit against Boeing which located the second 787 line in Charleston, SC. The details of this settlement of the NLRB suit are not yet known but I am assuming that it means that the NLRB will not pursue the suit against Boeing and Boeing will not have to shut down the Charleston plant.

Other main points in the 4 year deal is 2% annual raise plus COLA, a ratification bonus of $5000/employee as well as a 2% - 4% pay bonus. All this is pending IAM 751 membership approval. A vote is to take next week.

Dominic Gates said that there will not be an y immediate announcement of the NLRB suit due to it needing to be signed off by the NLRB and Obama. Given the current political environment and how the Republican party has raised its voice over this issue it is a no brainer for Obama and the NLRB.

This is a win on many fronts. It a win for Boeing because it ensures labor peace for four more years and the NLRB is off its back. Presumably the 787s will still be assembled in both Everett and Charleston but the details are unknown at this time.

It's a win for the union as it ensure that 737 production will stay in Renton and that members are getting the pay they expect as well as other benefits. It's a win for the NLRB and the Obama administration, even though they had nothing to due with the negotiations (as far as I know) as the NLRB suit became a huge issue for them in a year before the presidential elections are to take place. It will be interesting to know the details of the settlement of the NLRB suit though. It's a win for both the cities of Charleston and Renton as it will mean that there will be no layoffs at those plants due to non-economic factors.

Here's Boeing's press release on the agreement:

Boeing Announces Intent to Locate 737 MAX Production in Puget Sound

- New airplane to be built in Renton, Wash., pending ratification of labor
agreement

SEATTLE, Nov. 30, 2011 /PRNewswire/ -- Boeing (NYSE: BA) today announced that it intends to build the new 737 MAX in Renton, Wash., pending approval of an early contract extension with the International Association of Machinists & Aerospace Workers (IAM), the union representing hourly employees in Washington, Oregon and Kansas.

As part of an effort to improve their relationship, Boeing and the IAM have been discussing the potential for an early contract extension for several weeks. The current contract is set to expire in September 2012.

Independent of that effort, Boeing has been conducting a review of potential sites for 737 MAX production since the company announced in August that it will build a new-engine variant of the market-leading 737.

Boeing has assessed the business case for locating production of the 737 MAX in Renton in light of the economics of a proposed new labor agreement, and the company is prepared to locate 737 MAX production in Renton provided the economics contained in that proposal are achieved.

Upon ratification of such an agreement by hourly employees, Boeing says it will make the necessary investment to produce Next-Generation 737s and 737 MAXs in its existing Renton facility.

"The 737 MAX builds upon the legacy of the world's best single-aisle airplane and continues to generate overwhelming response from our customers," said Jim Albaugh, president and chief executive officer, Boeing Commercial Airplanes. "If our employees ratify a new agreement, building the 737 MAX in Renton will secure a long and prosperous future there, as well as at other sites in the Puget Sound area and in Portland, Ore., where 737 parts are built."

To date, Boeing has received more than 700 commitments from our customers for the 737 MAX. The new airplane is expected to enter service in 2017.

Another important take away is that this agreement may start the healing process in the relationship between the IAM and Boeing. Time will only tell on that account.

Another 787 for ANA getting ready for delivery

Matt Cawby posted a photo of the 4th 787 to be delivered to ANA outside at the Everett Field fuel dock. This aircraft L/N 41 is registered as JA807A and is expected to be delivered around mid to late December. The aircraft is shown with it Trent 1000 engines and the protective covering removed from the windows of the aircraft. As I blogged a couple of days ago, this aircraft along with L/N 31 will be the only 787s delivered in December.

Boeing will have delivered only 4 787s in 2011 with expectations that they would have delivered 6 - 8 787s. Again most of the very early build aircraft are still outside on the Everett flightline and not inside where the change incorporation rework is being done.

In other news ZA004 has been taking to the air of late and I can only surmise that this is related to getting final FAA type certification for the Trent 1000 package "B" improvements. Boeing will need this certification before delivering any 787s withe these improvements and I suspect that L/N 31 and L/N 41 are equipped with the package "B" Trents.

Did AMR order more 777-300ERs?

Today AMR detailed the breakdown of their huge A320 order (they're converting the order of 130 current generation A320s into a mix of current gen A319 and A321).
AMR's Press Release
However what is interesting comes at the end of press release. In the last paragraph, AMR states that they have orders for 15 777s that are to be delivered between 2012 and 2016. Looking at Boeing's O&D web site shows that AMR has orders for 7 777-300ER as well and 6 777-200ERs (left over from the order placed in the 1990s). I don't think that these 6 777-200ERs will ever be delivered to AMR.

Interestingly enough Boeing booked an unidentified order last week for 8 777s the version is unknown until Boeing releases it's orders for the month in early December. However there is some confusion if this 777 order is for American Airlines or Singapore Airplanes which had announced an order for 8 777-300ERs. Boeing did book another order for 8 777-300ERs also in September, 2011 so it is possible one of these orders is for Singapore Airlines and the other is for American.

Boeing to deliver only 2 787s in December

According to sources, Boeing will deliver only two more 787s the rest of this year. The two aircraft are both destined for ANA and are late build 787s. L/N 31 is already out on the Everett flightline has had some ground test done but has yet to run its engines for the first time. Boeing plans to fly this airplane on its B-1 check flight sometime next week and deliver around the 2nd week of December.

The next airplane will be L/N 41 which is currently located in the Everett Modification Center. This is another late build airplane which should fly around early December and be delivered around the 3rd week of December. So far Boeing is not planning any deliveries of the GEnx-1B powered 787 next month. In their last earning release, Boeing said that they expect the number of 787 and 747s to be delivered in 2011 to be between 15 and 20 units with 747s accounting for 2/3 of that. If using the low range of that forecast then Boeing was giving delivery guidance at 5 787s and 10 747s for this year. Their well on their way to 10 747s and perhaps more but they will fall short on 787s deliveries for 2011 that they had given guidance on.

Unfortunately, the view of the Everett ramp seems to confirm this situation. ANA said in late September that they were expecting to take delivery of 5 more 787 by year end and have a total fleet of 7 by Dec. 31st. Currently there is only one airplane with Trent 1000 engines hanging from the wings (L/N 31) with two 787s with GE engines on the ramp. The GEnx-1B certification program is not complete yet so it is doubtful that those planes won't be delivered until sometime in the New Year. Boeing was expecting to deliver 6 by the end of 2011 but it's looking increasingly like it won't even make that number.

So what is the problem? Two things: 1) Too many jobs that need to be fixed, particularly on the early build 787s (L/N 7 to L/N 19). 2) Lack of adequate resources to finish the job in a timely manner. Boeing may have a plan to deal with the jobs that yet to be done on all these airplanes but it is time consuming and there is a need to try and get the airplanes that have the fewest re-work requirements into the hands of customers. It's no wonder that 3 of the 4 airplanes that would have been delivered are late build 787s. It looks like Boeing will be spending a lot of time getting those 12 other 787s ready for customers and the only way to do that is to assign more resources (i.e. workers) to tackle these airplanes and get them out.

On a bit of positive news, some of the suppliers are starting to ramp up production of their work share in order to support Boeing's ramp up of 787 production. Mitsubishi Heavy has added a 2nd autoclave to support increased 787 wing box output. Currently Boeing is at 2.5 airplanes per month and hopes to be at 3.5 by sometime next spring. Also on a brighter note, the backlog of 747 on the Everett ramp also seems to be diminishing as Boeing has delivered 5 of them thus far and has two more in flight tests. It does look like they can deliver 12 to 13 of the 747-8Fs by the end of this year. At least the 747 deliveries frees up more ramp space for the 787s coming out of final assembly.

787 production continues; Boeing draw first blood in Dubai

With Dubai 2011 underway, Boeing has drawn first blood with a huge order from Emirates.

But first some 787 tidbits.

Boeing sent two of it's 787 test planes on international marketing trips. ZA001 is flying to various 787 customer destinations to show the aircraft around the world. First stop is New Zealand where Air New Zealand is to induct the first 787-9 into it's fleet in a little over 2 years from now. It will go on to Australia from there where Jetstar and QANTAS will take delivery starting in 2013. ZA003 is now flying with a full passenger interior with the test workstations and other flight test equipment removed. It also is sporting a new paint job which is a hybrid of the Dreamliner livery that Boeing painted on ZA001.

Meanwhile, back in Boeing has pushed another 787 out the door and has reallocated several 787 to other airlines. L/N 50 and L/N 51 are currently on the final assembly floor and each has been reallocated to United and ANA respectively . They were to have gone to Ethiopian and LAN but were changed for unknown reasons. With the start of assembly on L/N 51 Boeing is on it's way of 2.5 787s per month with the target of 3.5 to occur sometime in early 2012.

One of the early build 787s appears to have completed the change incorporation and re-work. That airplane is L/N 23 (ZA177) which is destined for Japan Airlines. The aircraft took a check test flight on Nov. 11th and was ferried back to Everett on the 13th. It still does not have a customer interior but that work will be done in Everett along with testing of the interior and then Boeing and customer test flights prior to delivery. Given that work, Boeing can deliver this plane to JAL by the end of December or early January, 2012 depending on the remaining certification activities that need to be completed on the GEnx-1B powered 787. I am still maintaining my short term view that Boeing should be able to deliver 6 more 787 in December (no November deliveries). Most if not all these deliveries will be later production airplanes for ANA with a later production GEnx airplane added in.

Speaking of which, ZA006 continues F&R and ETOPS testing. Last word from Boeing was that GEnx-1B testing was 95% complete so I do anticipate that Boeing can complete all certification testing by the end of this month will the aim of having first delivery by the end of December to either JAL or Air India.





Dubai 2011


The Dubai Air Show got of to a bang with a huge order by Emirates for 50 777-300ERs. The bang not only came in the size of the order $18bn at list prices, or the fact that this is Boeing's largest commercial aircraft order by value or that it will make Emirates the largest user of the 777. The big bang came in the message this order sent to Airbus. It has been no secret that the market really hasn't accepted the A350-1000 as a viable competitor to the 777-300ER. The market response after launching the A350 coupled with the feeble attempt by Airbus and Rolls Royce to improve the aircraft earlier this year and the 2 year delay (with possibly more delays to come) has angered customers for the airplane, namely Qatar and Emirates. Thus this order at the start of the airshow was meant as a message to Airbus about the status of the A350-1000. Additionally, the A350-1000 is barely a better airplane than the Boeing offering but with the proposed 777-8X/9X (on which Emirates has been working closely with Boeing) thus this latest order would allow Emirates to easily introduce the next iteration of the 777 as this latest order is delivered towards the end of the decade. I wouldn't be surprised if Emirates has a conversion feature in the contract that allows them to convert to the newer model after Boeing launches the airplane with delivery aimed for 2020.


Airbus did get into the order column with an order for 50 A320NEOs from ALAFCO. This same lessor announced today that they sold 6 or their 787 orders to Oman Air. So this order with Oman is really a non-order order. Boeing is still adding more MoUs for the 737 MAX. The count is 700 airplanes spread across 9 customers with only American Airlines the only named customer of those 9. I don't expect any of these MoUs to be firmed before the end of the year but most if not all should be firmed by the end of 1st quarter 2012 in addition to any new customers that would have signed on by then.


Dubai 2011 Totals


Airbus


ALAFCO - 50 x A320NEO (+30 options)

Boeing

Emirates - 50 x 777-300ER (+20 options)

Updated 787 Final Assembly Start Dates

I just got some new production start dates for the next few 787s (up to L/N 53). L/N 50 was the latest 787 to start final assembly (started on Oct. 27th). Here are the following final assembly start dates:

L/N 51 - Nov. 10 (14 days)
L/N 52 - Nov. 22 (12 days)
L/N 53 - Dec. 6 (14 days but take back on day for the Thanksgiving Holiday, 13 days)

In order to be producing at a 2.5 aircraft rate, Boeing needs to start final assembly on a new 787 every 12 days (excluding holidays and assuming a 30 day month). It looks like they're trying to get there but I was expecting L/N 51 to start final asembly a couple of days sooner.