Boeing to Reduce Investment in Its Air Traffic Unit

Boeing Co. said Thursday that it was scaling back investment in its air traffic management business, undoing some of the corporate strategy laid out under former Chief Executive Phil Condit.

The company’s air traffic management unit will be folded into Boeing’s research operation. The unit was launched in 2000, a time of record air travel and unprecedented delays, with the ultimate goal of developing a satellite-based navigation and communication system for guiding aircraft more efficiently and precisely. But the 9/11 jet attacks triggered the worst-ever airline industry downturn and investment has since focused heavily on security, not air traffic modernization initiatives.

In fact, the Bush administration is proposing cuts of nearly $500 million in the Federal Aviation Administration’s budget for next fiscal year, mostly from air traffic improvement projects.

“There just isn’t the demand there to warrant a separate business unit,” said Boeing spokesman John Dern of the company’s air traffic initiative.

Talk of change began weeks ago when John Hayhurst, president of Boeing air traffic, announced his retirement. Hayhurst’s deputy, Kevin Brown, was named Thursday to succeed him and to fold the unit into Phantom Works, Boeing’s research and development arm.

“Boeing will continue to pursue advances in air traffic management that will enhance efficiency, capacity and security,” said Harry Stonecipher, Boeing’s president and chief executive. “However, in an effort to be more efficient, we are scaling down our investment and making an organizational change to meet current demand.”

Stonecipher replaced Condit last year after Condit resigned in the aftermath of military contracting scandals. Condit had elevated air traffic, Internet and financing ventures into separate business units, and all have been retooled.

An industry source said Boeing had been getting little in return for the money it spent on air traffic development and concepts. A company spokesman declined to say how much the company had invested in the program.

One of the unit’s successes was an FAA research contract in 2002 worth an estimated $46 million. That deal is coming to an end, but it could be extended, the government said.

Boeing hopes the rebound in U.S. air travel and signs of building congestion might spur new interest in its strategies for improving air traffic management.

The company plans to keep the air traffic unit’s 150 employees, who are based in suburban Virginia and the Seattle area, but some could move to other positions.

Boeing shares fell 43 cents to $42.63 on the New York Stock Exchange.