Long Beach’s 717 Project Is in Doubt as Sales Stall

Despite rosy projections from Boeing and strong hints of future orders, pessimism is growing about the future of the company’s 717 jet, a project considered key to the survival of commercial plane production in Long Beach.

To the dismay of Boeing and local employees, the new 100-seat jetliner has not landed an order in nearly six months.

And this week, the 717 was snubbed by a major customer, International Lease Finance Corp. of Century City, which pledged to buy up to 30 A318 planes from rival Airbus Industrie.

“The engineers here are very depressed about the 717,” said Bill Klein, chairman of the Long Beach unit of the Southern California Professional Engineering Assn., a labor union representing about 3,500 Boeing engineers.

The fate of the 717 is crucial to Long Beach, because the twin-jet is the only commercial program planned for the sprawling Boeing campus after early 2000. That makes it the best hope for offsetting some of the thousands of layoffs planned for the facility in the next year.

Boeing’s plan to add a local assembly line for special versions of the 737--announced with great fanfare a few months ago--is on hold and may never materialize.

“It’s time to worry, but it’s not time to pull the plug” on the 717, said Brett Lambert, vice president of DFI International, a Washington-based aerospace consulting firm. “I don’t think it’s as negative as people probably see it on the factory floor.”

On Thursday, an executive from Aserca Airlines and affiliated airline Air Aruba expressed interest in the 717 as a replacement for nearly a dozen of their aging DC-9 jets.

“The orders have not been placed,” said John Thom, a spokesman for Boeing’s Long Beach division. “But they have begun negotiations with Boeing on the 717.”

The 717, then called the MD-95, was nearing production at McDonnell Douglas when Boeing purchased the company in 1997. About 1,500 employees work on the Long Beach program, a number that could grow to about 2,500 workers.

International Lease’s move to Airbus was particularly disappointing because the first 717s are already in test flights, while Airbus has not yet even committed to building the A318.

Even with immediate action, initial deliveries of the Airbus plane would be at least two years behind the 717, which will begin deliveries next year.

That advantage should translate into solid orders, given market demand estimates for up to 2,600 of the small, short-route jets in the next 20 years.

It is seen as a good replacement for the 800-plus aging DC-9s still in fleets worldwide. Its design--which allows for quick, efficient turnaround between flights--is considered another selling point.

But so far, sales of the 717 have stalled at 55.

The first order came in late 1995, when AirTran Airways--formerly ValuJet--ordered 50 jets, with an option to buy 50 more. In May, Bavaria International Aircraft Leasing ordered five 717s.

“I don’t know where Boeing got its market estimates, but a teenager with a calculator could have figured out that there wasn’t a place for this plane,” said Richard Aboulafia, director of aviation at Teal Group, a consulting firm in Fairfax, Va.

Part of the problem is the slumping Asian and other economies, which have dulled airlines’ enthusiasm for plane purchases, analysts say.

Another difficulty stems from the planned phaseout of the related MD-80 and MD-90 jet programs, which leaves the 717 an “orphan” airplane--one dissimilar enough from other fleet planes that training and maintenance are not cost-effective, analysts said.

“We would certainly like to see more orders at this time, but it’s a pretty tough market right now and we remain real optimistic about this plane,” Thom said.

Even if the jet continues to flounder in the market, however, analysts believe Boeing will push forward with the 717’s certification and deliveries.

“If the program is canceled prior to certification,” said John Walsh, an industry consultant based in Annapolis, Md., “they would have to give substantial amounts of money back to its risk-sharing suppliers, as well as to the customers.”