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

    Former US Envoys Urge Obama to Delay Troop Cuts in Afghanistan

    Keeping troop levels up during conflict with both Taliban and Islamic State is necessary to support Kabul government, they say

    First Lady to Visit Africa to Promote Girls' Education

    Michele Obama will be joined by daughters and actresses Meryl Streep and Freida Pinto

    Video NYSE Analyst: Brexit Will Continue to Place Pressure on Markets

    Despite orderly pricing and execution strategy at the New York Stock Exchange, analyst explains added pressure on world financial markets is likely

    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.
    Brexit Vote Plunges Global Markets Into Uncharted Territoryi
    X
    June 24, 2016 9:38 PM
    British voters plunged global markets into unknown territory after they voted Thursday to leave the European Union. The results of the Brexit vote, the term coined to describe the referendum, caught many off guard. Analysts say the resulting volatility could last for weeks, perhaps longer. Mil Arcega reports.
    Video

    Video Brexit Vote Plunges Global Markets Into Uncharted Territory

    British voters plunged global markets into unknown territory after they voted Thursday to leave the European Union. The results of the Brexit vote, the term coined to describe the referendum, caught many off guard. Analysts say the resulting volatility could last for weeks, perhaps longer. Mil Arcega reports.
    Video

    Video Orlando Shooting Changes Debate on Gun Control

    It’s been nearly two weeks since the largest mass shooting ever in the United States. Despite public calls for tighter gun control laws, Congress is at an impasse. Democratic lawmakers resorted to a 1960s civil rights tactic to portray their frustration. VOA’s Carolyn Presutti explains how the Orlando, Florida shooting is changing the debate.
    Video

    Video Tunisian Fishing Town Searches for Jobs, Local Development Solutions

    As the European Union tries to come to grips with its migrant crisis, some newcomers are leaving voluntarily. But those returning to their home countries face an uncertain future.  Five years after Tunisia's revolution, the tiny North African country is struggling with unrest, soaring unemployment and plummeting growth. From the southern Tunisian fishing town of Zarzis, Lisa Bryant takes a look for VOA at a search for local solutions.
    Video

    Video 'American Troops' in Russia Despite Tensions

    Historic battle re-enactment is a niche hobby with a fair number of adherents in Russia where past military victories are played-up by the Kremlin as a show of national strength. But, one group of World War II re-enactors in Moscow has the rare distinction of choosing to play western ally troops. VOA's Daniel Schearf explains.
    Video

    Video Experts: Very Few Killed in US Gun Violence Are Victims of Mass Shootings

    The deadly shooting at a Florida nightclub has reignited the debate in the U.S. over gun control. Although Congress doesn't provide government health agencies funds to study gun violence, public health experts say private research has helped them learn some things about the issue. VOA's Carol Pearson reports.
    Video

    Video Trump Unleashes Broadside Against Clinton to Try to Ease GOP Doubts

    Recent public opinion polls show Republican Donald Trump slipping behind Democrat Hillary Clinton in the presidential election matchup for November. Trump trails her both in fundraising and campaign organization, but he's intensifying his attacks on the former secretary of state. VOA National Correspondent Jim Malone reports.
    Video

    Video Muslim American Mayor Calls for Tolerance

    Syrian-born Mohamed Khairullah describes himself as "an American mayor who happens to be Muslim." As the three-term mayor of Prospect Park, New Jersey, he believes his town of 6,000 is an example of how ethnicity and religious beliefs should not determine a community's leadership. Ramon Taylor has this report from Prospect Park.
    Video

    Video Internal Rifts Over Syria Policy Could Be Headache for Next US President

    With the Obama administration showing little outward enthusiasm for adopting a more robust Syria policy, there is a strong likelihood that the internal discontent expressed by State Department employees will roll over to the next administration. VOA State Department correspondent Pam Dockins reports.
    Video

    Video Senegal to Park Colorful ‘Cars Rapide’ Permanently

    Brightly painted cars rapide are a hallmark of Dakar, offering residents a cheap way to get around the capital city since 1976. But the privately owned minibuses are scheduled to be parked for good in late 2018, as Ricci Shryock reports for VOA.
    Video

    Video Florida Gets $1 Million in Emergency Government Funding for Orlando

    The U.S. government has granted $1 million in emergency funding to the state of Florida to cover the costs linked to the June 12 massacre in Orlando. U.S. Attorney General Loretta Lynch announced the grant Tuesday in Orlando, where she met with survivors of the shooting attack that killed 49 people. Zlatica Hoke reports.
    Video

    Video How to Print Impossible Shapes with Metal

    3-D printing with metals is rapidly becoming more advanced. As printers become more affordable, the industry is partnering with universities to refine processes for manufacturing previously impossible things. A new 3-D printing lab aims to bring the new technology closer to everyday use. VOA's George Putic reports.
    Video

    Video Big Somali Community in Minnesota Observes Muslim Religious Feast

    Ramadan is widely observed in the north central US state of Minnesota, which a large Muslim community calls home. VOA Somali service reporter Mohmud Masadde files this report from Minneapolis, the state's biggest city.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.9036
    JPY
    USD
    102.32
    GBP
    USD
    0.7297
    CAD
    USD
    1.3005
    INR
    USD
    68.004

    Rates may not be current.