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, Modi Resolve Nuclear Deal Issues

Leaders find resolution on issues of liability of suppliers to India in event of nuclear accident, US demands to track whereabouts of material supplied to country More

WHO's Late Efforts in Tackling Ebola Highlight Need for Reform

Health experts debate measures to reform agency’s response to global public health emergencies in special one-day session on deadly outbreak More

One Tumultuous Year in Power for CAR's President

As sectarian violence raged across Central African Republic, interim President Catherine Samba-Panza has Herculean task: to end civil war and put country back on right track 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.
Worldwide Photo Workshops Empower Youthi
X
Julie Taboh
January 23, 2015 11:08 PM
Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video Worldwide Photo Workshops Empower Youth

Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video US, Japan Offer Lessons as Eurozone Launches Huge Stimulus

The Euro currency has fallen sharply after the European Central Bank announced a bigger-than-expected $67 billion-a-month quantitative easing program Thursday - commonly seen as a form of printing new money. Henry Ridgwell reports for VOA from London on whether the move might rescue the eurozone economy -- and what lessons have been learned from similar programs around the world.
Video

Video Nigerian Elections Pose Concern of Potential Conflict in 'Middle Belt'

Nigeria’s north-central state of Kaduna has long been the site of fighting between Muslims and Christians as well as between people of different ethnic groups. As the February elections approach, community and religious leaders are making plans they hope will keep the streets calm after results are announced. Chris Stein reports from the state capital, Kaduna.
Video

Video As Viewership Drops, Obama Puts His Message on YouTube

Ratings reports show President Obama’s State of the Union address this week drew the lowest number of viewers for this annual speech in 15 years. White House officials anticipated this, and the president has decided to take a non-traditional approach to getting his message out. VOA White House correspondent Luis Ramirez reports.
Video

Video S. Korean Businesses Want to End Trade Restrictions With North

Business leaders in South Korea are calling for President Park Geun-hye to ease trade restrictions with North Korea that were put in place in 2010 after the sinking of a South Korean warship.Pro-business groups argue that expanding trade and investment is not only good for business, it is also good for long-term regional peace and security. VOA’s Brian Padden reports.
Video

Video US Marching Bands Grow Into a Show of Their Own

The 2014 Super Bowl halftime show was the most-watched in history - attracting an estimated 115 million viewers. That event featured pop star Bruno Mars. But the halftime show tradition started with marching bands, which still dominate the entertainment at U.S. high school and college American football games. But as Enming Liu reports in this story narrated by Adrianna Zhang, marching bands have grown into a show of their own.
Video

Video Secular, Religious Kurds Face Off in Southeast Turkey

Turkey’s predominantly Kurdish southeast has been rocked by violence between religious and secular Kurds. Dorian Jones reports on the reasons behind the stand-off from the region's main city of Diyarbakir, which suffered the bloodiest fighting.
Video

Video Kenya: Misuse of Antibiotics Leading to Resistance by Immune System

In Kenya, the rise of drug resistant bacteria could reverse the gains made by medical science over diseases that were once treatable. Kenyans could be at risk of fatalities as a result if the power in antibiotics is not preserved. Lenny Ruvaga has more on the story from Nairobi.
Video

Video Solar-Powered Plane Getting Ready to Circumnavigate Globe

Pilots of the solar plane that already set records flying without a drop of fuel are close to making their first attempt to fly the craft around the globe. They plan to do it in 25 flying days over a five month period. VOA’s George Putic reports.
Video

Video How Experts Decide Ethiopia Has the Best Coffee

Ethiopia’s coffee has been ranked as the best in the world by an international group of coffee connoisseurs. Not surprisingly, coffee is a top export for the country. But at home it is a source of pride. Marthe van der Wolf in Addis Ababa decided to find out what makes the bean and brew so special and how experts make their determinations.
Video

Video Yazidi Refugees at Center of Political Fight Between Turkey, Kurds

The treatment of thousands of Yazidis refugees who fled to Turkey to escape attacks by Islamic State militants has become the center of a dispute between the Turkish government and the country's pro-Kurdish movement. VOA's Dorian Jones reports.
Video

Video World’s Richest 1% Forecast to Own More Than Half of Global Wealth

The combined wealth of the world's richest 1 percent will overtake that of the remaining 99 percent at some point in 2016, according to the anti-poverty charity Oxfam. Campaigners are demanding that policymakers take action to address the widening gap between the ‘haves’ and the ‘have nots’, as Henry Ridgwell reports for VOA from London.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid

World Currencies

EUR
USD
0.8930
JPY
USD
117.98
GBP
USD
0.6673
CAD
USD
1.2445
INR
USD
61.498

Rates may not be current.