Will Consolidating 787 Dreamliner Production In South Carolina Help Boeing Survive COVID-19?

Norwegian Air Sweden Boeing 787-9 Dreamliner aircraft as seen on final approach landing on … [+] Polderbaan runway and taxiing at Amsterdam Schiphol International Airport AMS EHAM in The Netherlands during a rainy day in haze. The wide body commercial airplane has the registration SE-RXM, 2x RR Rolls Royce jet engines and the name Asger Jorn. Norwegian Air Sweden AB is a Swedish low-cost airline and a fully integrated subsidiary of Norwegian Air Shuttle, using its corporate identity. February 28, 2020 (Photo by Nicolas Economou/NurPhoto via Getty Images)

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Boeing today confirmed that it will be consolidate production of the 787 Dreamliner in South Carolina in 2021. The controversial move away from Washington State will close a chapter at the company, which was founded by William T. Boeing in Seattle in July of 1916.

The company portrays the move as a business decision that will help it “preserve liquidity” by focusing production at a single site. Boeing says the shift to full production of the 787 in North Charleston, S.C., will “improve operational efficiency as the company adapts to market downturn and positions for recovery and long-term growth.”

Boeing bills itself as the world’s largest aerospace company and leading provider of commercial airplanes. But with the impact of the coronavirus on world air travel (not to mention the unrelated Boeing 737MAX disasters) the commercial airplane business hasn’t been so hot lately. When Boeing reported its most recent quarterly results in July, it was revealed that Boeing has 843 canceled or uncertain orders in 2020, compared to 59 new orders.

While many of the jets cancelled or dropped from the order book have been star-crossed 737MAX models, the coronavirus has had a particularly impact severe impact on long-range widebodies such as the 787 Dreamliner. About 1500 Dreamliners have been ordered, with over 980 delivered since the aircraft went into service in 2011.

The fuel-efficient Dreamliner has been a popular choice of airlines and passengers alike. The 787-9 model can fly up to 290 people in two classes of service up to 7600 miles. Just two years ago, a Norwegian Airlines 787 set a subsonic airliner speed record of 5 hours, 13 minutes flying from New York to London. The 787 reached speeds of up to 776 miles per hour on the 3,470-mile journey, aided by a 200-mph tailwind.

But 2018 was a millennium ago in the COVID-19 era. Passengers aren’t exactly lined up to fly all over the world. Potential globe-trotters face travel bans and quarantines, as well as their own fears of flying during a pandemic, putting a damper on sales of world-spanning aircraft like the 787. The fact that most world airlines are now broke, with $84 billion of losses expected for 2020, doesn’t help Dreamliner sales either.

During the worst of the pandemic, in May, as many as 16,000 airliners were parked. As of August 2020, that figure had dropped to below 8,000. But widebodies and jumbo jets were particularly hard hit. Several airlines said farewell to aging Boeing 747s, while the even larger A380, only efficient when operated near its 500-passenger capacity, was idled as well. Qantas said it will keep its A380 fleet in storage in California’s Mojave desert until at least 2023.

SCHOENEFELD, GERMANY – JUNE 01: Passenger planes of airline Lufthansa that have been temporarily … [+] pulled out of service stand parked at Berlin-Brandenburg Airport during the coronavirus crisis on June 01, 2020 in Schoenefeld, Germany. Countries across Europe are easing lockdown measures and many are seeking to promote a return of international travel and tourism. At the same time airlines are still facing a calamitous era, with some already receiving government bailouts and many announcing layoffs. (Photo by Sean Gallup/Getty Images)

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Boeing still has a backlog of orders for the much more efficent Dreamliner, but instead of building ten Dreamliners each month, the plan is to build six per month in 2021. So the move to consolidate production at one site may make some financial sense. The company said that an enterprise review of Boeing’s facility footprint, organizational structure, investment mix and supply chain health and stability “confirmed the feasibility and efficiency gains created by consolidation.”

Unmentioned in Boeing’s announcement was that while workers in the Seattle area are members of the International Association of Machinists, workers in South Carolina, a right-to-work state, are not unionized.

As a Boeing document ‘on our union position’ put it, “The IAM is the same union that wanted to prevent South Carolina from even building 787s.”

Boeing executives tried to soften the blow for the Seattle area. Stan Deal, president and chief executive officer of Boeing Commercial Airplanes, said in a statement, “Our team in Puget Sound will continue to focus on efficiently building our 737, 747, 767 and 777 airplane families, and both sites will drive Boeing initiatives to further enhance safety, quality, and operational excellence.”  

However, the company previously announced that 747 production would end in 2022. The 767 is primarily sold in freighter and military configurations. The 777/777X, a wide body long range jet even larger than the 787, has been called “too big for a post-Corona market.” Simple Flying reports that the 777/777X combined production rate will be reduced to just 3 per month in 2021.

That leaves the Seattle area to build Boeing’s volume leader, the 737. However, although the order backlog for 737 MAX models is about 3,500, the aircraft maker has lost more than 800 orders for the troubled MAX this year. There are approximately 500 737 MAX aircraft already built that remain grounded. Production has slowed to a trickle as the FAA has still not “ungrounded” the aircraft 18 months after the planes were taken out of service in March of 2019.

RENTON, WA – AUGUST 13: Boeing 737 MAX airplanes are seen parked on Boeing property near Boeing … [+] Field on August 13, 2019 in Seattle, Washington. (Photo by David Ryder/Getty Images)

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In Boeing’s hundred-year hometown, recriminations have already begun. The Stranger, Seattle’s alternative newspaper and web site, published a story entitled “Get Ready for Mainstream Seattle to Blame Progressives for Boeing’s Departure.”

Dan Price, CEO of Seattle-based Gravity Payments, tweeted, “Boeing got a $8.7 billion subsidy from Washington state taxpayers, the biggest corporate subsidy in US history. Since then it cut 17,000 jobs in Washington. Now it’s moving up to 30,000 WA employees to South Carolina because SC has fewer worker protections.”

Former Boeing engineer Stan Sorscher told a local radio station that the company played different locations off against each other. “They don’t have to take your job today. They threaten you all the time,” Sorscher said. “That’s the message of this — we took the crown jewel, the airplane of the future, out of your hands and you will have legacy programs. Nothing more threatening than that.”

To Sorscher, consolidating manufacture of the 787 in South Carolina (where manufacturing problems led to delivery delays earlier this year) shows a bean-counter mentality meant to calm worried investors.

The move bears with it the promise of potential dislocation. But for Boeing to survive the COVID-19 era, “preserving liquidity” by cutting costs until sales can turn around may be a painful but necessary remedy.

Planes are seen under construction at a Boeing assembly plant in North Charleston, South Carolina on … [+] March 25, 2018. The sparkling new Boeing 787s bound for China Southern Airlines and Air China are waiting to be delivered but the prospect of a trade war could make for a less rosy future. / AFP PHOTO / Luc OLINGA (Photo credit should read LUC OLINGA/AFP via Getty Images)

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