On the Line
Whenever Boeing Co. books an order for its 717, a mechanic or an engineer is given the honor of ringing a 2-foot-tall bell atop a balcony at California’s last commercial aircraft factory.
The bell hasn’t pealed much lately. The silence in Long Beach is a reminder of the trouble Boeing has had selling the 106-passenger jet.
And if the company doesn’t land some big customers soon, the bell may stop ringing for good.
About 1,800 people work on the 717 in Long Beach, down from about 7,500 in the mid-1990s. Right now, Boeing has 35 orders for the twin-engine jetliner -- enough to keep the production line operating for three more years.
Chief Executive Harry Stonecipher suggested in July that there was a limit to how long Boeing would keep the 717 assembly line open: “When people stop buying an airplane, we stop building it. We have a number of campaigns going on, and the result of those will determine the life of that program.”
Some analysts believe Boeing that will make a decision early next year on the Long Beach plant’s future.
“That line has been in jeopardy for years,” said Richard Phillips, senior vice president of the aerospace group for investment bank Houlihan Lokey Howard & Zukin.
Boeing is making a renewed sales push for the 717.
“I really feel that we are on the verge of igniting this thing,” said Patrick C. McKenna, Boeing’s new general manager for the 717 program.
“There is a lot of activity in the market. I think you’ll hear something from us in the way of sales in the next month or two,” he said.
Boeing’s commercial aircraft business has been struggling for years as it has lost market share to Europe’s Airbus. In 2003, Airbus for the first time delivered more commercial jetliners than Boeing.
Now, to regain momentum, Boeing is taking orders for its super-fuel-efficient 7E7, a mid-size jet that is under development. It will be assembled in Everett, Wash.
Meanwhile, the company has become increasingly reliant on military contracts. But Chicago-based Boeing also faces a growing Pentagon scandal. A former top Air Force procurement official was sentenced Oct. 1 to nine months in prison after making a surprise admission that she favored Boeing on several major Air Force contracts because the company gave her family jobs.
As for the 717, it has long been a money loser for Boeing, which has struggled to sell a handful of planes a year, making the Long Beach plant a perennial target for closure.
The company’s list price for the jetliner is about $35 million, but analysts believe it is heavily discounted, selling for as little as $25 million a plane. Last week, Turkmenistan Airways said it had bought two 717s for a total of $58 million.
“We’re waiting out the storm,” said assembly line mechanic Bill Schultz, who is also president of the main union for the plant, United Auto Workers Local 148. “It’s a good plane, and we’re confident we’ll get some orders.”
Schultz, who began working in the factory in 1979, recalls when the place was bustling with activity, making MD-80 jetliners for McDonnell Douglas. Boeing bought McDonnell Douglas in 1997 and inherited the 717, which went into production that year.
The sprawling Long Beach plant, which opened in 1941, is part of Southern California’s once-exalted aerospace manufacturing history. A large lighted “DC Jets” sign still sits atop the five-story factory, recalling the days when the Douglas Aircraft-owned facility boasted 160,000 workers. At its peak during World War II, the Long Beach plant churned out one C-47 military cargo plane every two hours. By war’s end, the facility had produced 15,000 aircraft.
Later, it rolled out DC-8s and MD-11s for the world’s airlines. In its heyday, the plant was so large that workers needed to use bicycles to get around.
With the recent cutbacks, the factory now seems too large for the smallest of Boeing jets.
Schultz’s job is to install the tail assembly. Most of his co-workers have at least 18 years of experience, as younger workers were laid off during several cutbacks in the last four years.
The point man in the plant’s future appears to be McKenna, who prefers plaid wool shirts and blue jeans that make him look more like a lumberjack than an aerospace executive. He insists that Boeing is marketing the aircraft more aggressively than ever before.
“We’re engaged in a number of campaigns that will result in orders of a pretty fair quantity,” he said. In August, McKenna, an 18-year Boeing veteran, replaced James Phillips, who had run the 717 program since its inception.
McKenna declined to identify potential customers. But industry officials say several airlines have been looking at the 717 as a replacement for their aging DC-9s and MD-80s. German low-fare airline Germanwings said last week that it would lease and operate two 717s this winter to see if it wanted to acquire a fleet of them. Its leading rival, Hapag-Lloyd Express, also is considering buying 717s. And Aloha Airlines is said to be looking at acquiring the 717 for inter-island service in Hawaii.
Another possible buyer is Russian regional carrier Siberia Airlines, which wants an interim fleet of regional jets until it takes delivery later this decade of new jets being developed by Russian aircraft maker Sukhoi.
Most airlines considering the 717 would use it for short-haul service. The single-aisle jet has a range of about 1,800 miles.
The commercial aircraft industry worldwide has been suffering since the Sept. 11, 2001, terrorist attacks.
As air travel and aircraft orders slowed, Boeing slashed the 717 production rate in Long Beach from about three planes a month to one.
Boeing has suggested that it needs to deliver about 200 of the 717 aircraft to break even. So far it has delivered 134 airplanes, mostly to smaller regional carriers such as AirTran Airways or Midwest Airlines.
Two years ago, the company quietly considered shuttering the 717 line but found that the cost of closing the Long Beach plant, including paying termination fees to suppliers, was too great.
Richard Aboulafia, aviation analyst for research firm Teal Group Inc., said that even with a more aggressive marketing push, the 717 still faced hurdles.
One problem is that the McDonnell Douglas-designed 717 doesn’t have the same cockpit electronics as other mid-size Boeing aircraft, such as the 737. Most airlines prefer having similar cockpit configuration across their fleet to save the additional expense of maintaining different airplanes and retraining pilots.
The 717 “is like finding a dinosaur in your backyard,” Aboulafia said. “The fundamental problem is still there: It’s a wonderfully designed, orphaned aircraft.”
Despite lagging 717 sales, airlines that fly them rave about the aircraft’s performance.
“The Boeing 717 is the cornerstone of our operation,” said Joseph Leonard, chairman and chief executive of AirTran Holdings Inc., the parent company of AirTran. The regional carrier, which operates mostly on the East Coast, was the 717’s launch customer and now operates a fleet of nearly 80 of them.
Robert Fornaro, AirTran’s chief operating officer, praised the 717’s reliability, saying it has one of the airline industry’s highest dispatch rates, the amount of time it is available to fly instead of being down for maintenance. He estimates that the aircraft is 24% more fuel efficient than the aircraft it replaced.
“The Boeing 717 is a proven market-development aircraft that has helped us achieve cost savings,” he said.
Midwest Airlines, another major 717 customer, said that although jet fuel prices rose by 33% in the second quarter of this year, its fuel cost per seat mile dropped by 20% because of the 717’s efficiency. The Milwaukee-based airline operates 15 of the jetliners and has 10 on order.
Airlines also say passengers like the jet’s seating arrangements, with three seats on one side of the aisle and two seats on the other.
So far, results of Boeing’s new sales campaign for the 717 have been mixed. Last month it lost a competition to sell 12 airplanes to Philippine carrier Cebu Pacific, which selected Airbus’ A319.
And Boeing faces a possible new competitor: Canadian aircraft maker Bombardier Inc. is considering making a 100-seat jet.
McKenna concedes that Boeing long viewed the 717 as an unwanted stepsister. For many Boeing executives in Seattle, where its commercial aircraft business is headquartered, the 717 was mainly viewed as a way to fend off archrival Airbus.
But now, McKenna said, his superiors have never been more supportive in marketing the 717. The company recently brought in sales managers, accountants and marketing executives from Seattle for a week in Long Beach to learn about the 717’s features. About 200 people participated in the program.
“That, I think, helped to get people comfortable and emotionally tied to the 717 program, and then we started to see some activity,” McKenna said. “It’s an important couple of months for us to go out and make sure we get a couple of these across the goal line.”
