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

    Top US General: Turkish Media Report ‘Absurd'

    General Dunford rejects ‘irresponsible' claims of coup involvement by former four-star Army General Campbell, who led NATO forces in Afghanistan before retiring earlier this year

    Video Saving Ethiopian Children Thought to Be Cursed

    'Omo Child' looks at efforts of one African man to stop killings of ‘mingi’ children

    Protests Over Western Troops Threaten Libyan 'Unity' Government

    Fears mount that Islamist foes of ‘unity' government plan to declare a revolutionaries' council in Tripoli

    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.
    London’s Financial Crown at Risk as Rivals Eye Brexit Opportunitiesi
    X
    VOA News
    July 25, 2016 5:09 PM
    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video Recycling Lifeline for Lebanon’s Last Glassblowers

    In a small Lebanese coastal town, one family is preserving a craft that stretches back millennia. The art of glass blowing was developed by Phoenicians in the region, and the Khalifehs say they are the only ones keeping the skill alive in Lebanon. But despite teaming up with an eco-entrepreneur and receiving an unexpected boost from the country’s recent trash crisis the future remains uncertain. John Owens reports from Sarafand.
    Video

    Video Migrants Continue to Risk Lives Crossing US Border from Mexico

    In his speech Thursday before the Republican National Convention, the party’s presidential candidate, Donald Trump, reiterated his proposal to build a wall along the U.S.-Mexico border if elected. Polls show a large percentage of Americans support better control of the nation's southwestern border, but as VOA’s Greg Flakus reports from the border town of Nogales in the Mexican state of Sonora, the situation faced by people trying to cross the border is already daunting.
    Video

    Video In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movement

    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video Calm the Waters: US Doubles Down Diplomatic Efforts in ASEAN Meetings

    The United States is redoubling diplomatic efforts and looking to upcoming regional meetings to calm the waters after an international tribunal invalidated the legal basis of Beijing's extensive claims in the South China Sea. VOA State Department correspondent Nike Ching has the story.
    Video

    Video Four Brother Goats Arrive in Brooklyn on a Mission

    While it's unusual to see farm animals in cities, it's become familiar for residents of Brooklyn, New York, to see a little herd of goats. Unlike gas-powered mowing equipment, goats remove invasive weeds quietly and without adding more pollution to the air. As Faiza Elmasry tells us, this is a pilot program and if it proves to be successful, the goat gardener program will be extended to other areas of New York. Faith Lapidus narrates.
    Video

    Video Scientists in Poland Race to Save Honeybees

    Honeybees are in danger worldwide. Causes of what's known as colony collapse disorder range from pesticides and loss of habitat to infections. But scientists in Poland say they are on track to finding a cure for one of the diseases. VOA’s George Putic reports.
    Video

    Video Wall Already Runs Along Parts of US-Mexico Border

    The Republican Party’s presidential nominee, Donald Trump, gained the support of many voters by saying he would build a wall to keep undocumented immigrants and drugs from coming across the border from Mexico. Critics have called his idea impractical and offensive to Mexico, while supporters say such a bold approach is needed to control the border. VOA’s Greg Flakus has more from the border town of Nogales, Arizona.
    Video

    Video New HIV Tests Emphasize Rapid Results

    As the global fight against AIDS intensifies, activists have placed increasing importance on getting people to know their HIV status. Some companies are developing new HIV testing methods designed to be quick, easy and accurate. Thuso Khumalo looks at the latest methods, presented at the International AIDS conference in Durban, South Africa.
    Video

    Video African Youth with HIV Urge More Support

    HIV, the virus that causes AIDS, is the top killer of teens in sub-Saharan Africa. But many youths say their experience with the virus is unique and needs to be addressed differently than the adult epidemic. VOA South African Correspondent Anita Powell reports.
    Video

    Video Pop-Up Art Comes to Your Living Room, Backyard and Elsewhere

    Around the world, independent artists and musicians wrestle with a common problem: where to exhibit or perform? Traditional spaces such as museums and galleries are reserved for bigger names, and renting a space is not feasible for many. Enter ArtsUp, which connects artists with venue owners. Whether it’s a living room, restaurant, office or even a boat, pop-up events are bringing music and art to unexpected places. Tina Trinh has more.
    Video

    Video Scotland’s Booming Whisky Industry Fears Brexit Hangover

    After Britain’s vote to leave the European Union, Scotland’s government wants to break away from the United Kingdom – fearing the nation’s exports are at risk. Among the biggest of these is whisky. Henry Ridgwell reports on a time of turmoil for those involved in the ancient art of distilling Scotland’s most famous product.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.9093
    JPY
    USD
    104.27
    GBP
    USD
    0.7612
    CAD
    USD
    1.3233
    INR
    USD
    67.329

    Rates may not be current.