News / Economy

Boeing's JAL Loss May Bring Work Back to US

(File Photo) Japan Airlines Co Ltd has ordered 31 Airbus A350s to replace 31 Boeing 777s that it will retire this decade.
(File Photo) Japan Airlines Co Ltd has ordered 31 Airbus A350s to replace 31 Boeing 777s that it will retire this decade.
Reuters
Boeing Co's loss of a major Japanese airplane order to rival Airbus this week may produce a surprise U.S. benefit - bringing aerospace work home to U.S. companies.
 
Over the past 50 years, Boeing has increasingly outsourced large airplane pieces such as wings and fuselage sections. Its partnerships with Japanese companies carried the understanding that Japanese airlines would keep buying Boeing planes. The virtuous circle gave work to Japan's heavy industrial companies and helped Boeing keep Airbus largely out of the Japanese market.
 
But on Monday, Japan Airlines Co Ltd appeared to shatter the alliance by ordering 31 Airbus A350s to replace 31 Boeing 777s that it will retire this decade.
 
The $9.5 billion JAL deal is considered by some industry experts as likely to prompt Boeing to award less supply work to Japan in the future. Boeing would send that work to other countries, including the United States.
 
Japanese airlines were big buyers of Boeing's 787 Dreamliner, which helped justify the large investments Japanese companies made to set up production of major components, said Ron Epstein, an analyst at Bank of America Merrill Lynch.
 
The 777X, the next generation of Boeing's popular widebody jet, is supposed to have its design and building launch this year and enter service by 2020.
 
The 787 Dreamliner is the company's latest state-of-the-art widebody aircraft. It has been in service for two years but has encountered numerous technical problems.
 
Since Japan airlines are so far not big buyers of the 777X, “why would industrial policy follow the same plan?” Epstein asked.
 
Many people assumed Japan's “heavies” would be involved in the 777X, he added. “Maybe they're not going to be as big players on this.”
 
Boeing said it is considering all options on where to build the 777X, but declined to discuss whether the JAL decision would affect its thinking.
 
“We have built a strong relationship with Japan Airlines over the last 50 years and we look to continue our partnership going forward,” the company said in a statement on Monday.
 
Officials at Mitsubishi Heavy Industries, Kawasaki Heavy Industries and Fuji Heavy Industries  also declined to comment on their potential work on the 777X until after the new plane is formally launched.
 
The launch is widely expected at the Dubai airshow in November, where industry sources say Emirates Airline  plans to order 150 widebody planes, most likely the 777X.
 
However, at Mitsubishi, which is responsible for the 787 wing and would be most affected if Boeing brought wing assembly to the United States, a spokesman suggested the contract is up for grabs.
 
“It's a decision that Boeing will make,” he said. “If we are asked to build the wing we will do our best, if not we will still work our hardest.”
 
Limited options
 
Boeing has limited options for where it could build the 777X plane and its components since only a handful of companies have the scale and certification to take on such a project reliably.
 
Among those considered as possible: Spirit Aerosystems in Wichita, Kansas, a former Boeing facility that already makes wing parts and fuselages for Boeing; Triumph Group, headquartered in Berwyn, Pennsylvania, which makes wing, fuselage and structural pieces for planes, as well as composite structures, though not those used for airframes, according to the company website.
 
Boeing also could bring the work in-house, either at its massive factory in Everett, Washington, or at the assembly plant in Charleston, South Carolina, where it builds some 787s. Boeing is buying land to expand that factory.
 
Spirit said it is interested, and noted it is a significant supplier to the 777, making wing, fuselage and underwing components. Triumph did not respond to requests for comment.
 
Korea and China also have been mentioned as possible sites for production of at least part of the 777X.
 
A person close to Boeing with knowledge of the matter said a global cost-cutting initiative by the company would likely force suppliers in Japan to look for low-cost manufacturers in China and India, pointing to a rise in the Chinese portion of supply chain and a reduction for Japan.
 
Boeing's “Partnering for Success” cost-cutting program, launched in 2012, requires 15 percent cuts over three to four years from all suppliers including the Japanese “heavies,” this person said.
 
Tax incentives
 
Meanwhile, Boeing's former home state of Washington is making a big push to win the 777X, after 787 work went to Japan and elsewhere.
 
Washington State Governor Jay Inslee, whose state touts itself as home of the world's largest cluster of aerospace companies, last week proposed extending lucrative state tax breaks for Boeing until 2040 if the company builds the 777X and its wings in Washington. Boeing already builds the 777 in Washington, so the logic of putting future production there is strong, state officials say.
 
In addition, the extended breaks would apply to all Boeing production in Washington, giving the state an edge against competitors such as South Carolina and Kansas, where Boeing's production is much more limited, said Alex Pietsch, director of the Washington state governor's office of aerospace.
 
Part of the state's pitch: The 777X's composite wing will be large and difficult to transport, so it makes sense to fabricate it near the site of final assembly, Pietsch said.
 
State studies show that current 777 production supplies $20 billion of some $76 billion in annual economic activity from the state aerospace industry.
 
A state task force is working on a proposal that could be put forth as early as November, if a special legislative session is called in Washington, he said.
 
If so, that may just coincide with Boeing's long-awaited launch of the 777X in Dubai.
 
“I'd love to have them come out in Dubai and say they're going to build the 777X in Washington,” Pietsch said.

You May Like

Multimedia Obama Defends Immigration Action

Obama says with his executive action on immigration, enforcement resources will be focused on 'felons, not families; criminals, not children' More

US-Led Airstrikes in Syria Kill Over 900: Monitoring Group

British-based Syrian Observatory for Human Rights says the toll includes more than 50 civilians, five of them women and eight of them children More

Report: Obama Broadens US Combat Role in Afghanistan

The New York Times says resident Barack Obama has signed a classified order extending the role of US troops in Afghanistan for another year More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
New Skateboard Defies Gravityi
X
November 21, 2014 5:07 AM
A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.
Video

Video Tensions Build on Korean Peninsula Amid Military Drills

It has been another tense week on the Korean peninsula as Pyongyang threatened to again test nuclear weapons while the U.S. and South Korean forces held joint military exercises in a show of force. VOA’s Brian Padden reports from the Kunsan Air Base in South Korea.
Video

Video Mama Sarah Obama Honored at UN Women’s Entrepreneurship Day

President Barack Obama's step-grandmother is in the United States to raise money to build a $12 million school and hospital center in Kogelo, Kenya, the birthplace of the president's father, Barack Obama, Sr. She was honored for her decades of work to aid poor Kenyans at a Women's Entrepreneurship Day at the United Nations.
Video

Video Gay Evangelicals Argue That Bible Does Not Condemn Homosexuality

More than 30 U.S. states now recognize same-sex marriages, and an increasing number of mainline American churches are blessing them. But evangelical church members- which account for around 30 percent of the U.S. adult population - believe the Bible unequivocally condemns homosexuality. VOA's Jerome Socolovsky reports that gay, lesbian, bisexual and transgender evangelicals are coming out. Backed by a prominent evangelical scholar, they argue that the traditional reading of the bible is wrong.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Mexico Protests Escalate Over Disappearances

Protests in Mexico over 43 students missing since September continue to escalate, reflecting growing anger among Mexicans about a political system they view as corrupt, and increasingly tainted by the drug trade. Mounting outrage over the disappearances is now focused on the government of President Enrique Pena Nieto, accused of not doing enough to end insecurity in the country. More from VOA's Victoria Macchi.
Video

Video US Senate Votes Down Controversial Oil Pipeline - For Now

The U.S. Senate has rejected construction of a controversial pipeline to transport Canadian oil to American refineries. The $5 billion project still could be approved next year, but it faces a possible veto by President Barack Obama. As VOA’s Michael Bowman reports, the pipeline has exposed deep divisions in Congress about America’s energy future.
Video

Video Can Minsk Cease-fire Agreement Hold?

Growing tensions between government troops and separatists in eastern Ukraine further threaten a cease-fire agreement reached two months ago in the Belarusian capital of Minsk. Critics of U.S. policy in Ukraine say it is time the Obama administration gives up on that much-violated cease-fire and moves toward a new deal with Russia. VOA's Scott Stearns has more.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.
Video

Video Ferguson Church Grapples with Race Relations

Many white residents of Ferguson, Missouri, say they chose to live there because of the American Midwest community's diversity. So, they were shocked when a white police officer killed an unarmed black teenager in August – and shaken by the resulting protests and violence. Some local churches are leading conversations on how to go forward. VOA’s Ayesha Tanzeem reports.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8050
JPY
USD
117.90
GBP
USD
0.6376
CAD
USD
1.1259
INR
USD
61.655

Rates may not be current.