Brunell: Resurgent Boeing must not remain in a holding pattern
Tuesday, December 4, 2012
Every year about this time, we compare the commercial airplane sales of Boeing and its European arch rival, Airbus.
In the past decade, the results haven't worked in Boeing's favor. Airbus has posted higher sales numbers as Boeing struggled to get its new 787 into production. However this year, Boeing, which assembles the bulk of its commercial aircraft in the Puget Sound area, is the clear winner.
Boeing reported 962 orders placed so far in 2012, more than double the 437 of Airbus.
For both companies, single-aisle plane sales are pivotal to their success. Boeing's new 737 MAX is 13 percent more fuel efficient than any other single-aisle airplane and accounted for 860 orders this year.
Fuel efficiency is a major selling point for a cash-strapped industry buffeted by high fuel costs. The added good news for Boeing is 787 production is ramping up to more than a dozen planes each month from its Everett and South Carolina assembly lines. The 787 uses 20 percent less fuel than its closest twin-aisle Airbus counterpart.
While things look bright for Boeing, Airbus is not about to throw in the towel. In a move to strengthen its U.S. base, Airbus announced it will invest $600 million over the next five years to build its A320 assembly plant near Mobile, Ala. It will be its first factory in the United States, and Alabama, like South Carolina, is a right-to-work state.
Airbus plans to assemble 40 to 50 A320 jets there per year in 2017. The Mobile facility will assemble aircraft from prefabricated sections built at Airbus factories in Germany and France.
Alabama officials said the state would provide Airbus with more than $100 million in tax breaks and other incentives to support the project. To counter what other states do to attract manufacturers, Washington provides a sales tax exemption to manufacturers -- and keeping those incentives in place is more important than ever.The A320 plant is expected to create roughly 1,000 new jobs, a figure that includes direct Airbus employees as well as jobs with suppliers. Airbus and parent company European Aeronautic Defence and Space Company currently employ around 1,000 people in the United States, including 200 engineers at an existing technical center in Mobile.
The plan to expand in the United States follows the opening of Airbus' first non-European assembly line in Tianjin, China, in 2008. That plant now produces 36 A320 planes a year for the Chinese market.
Why are Boeing and Airbus focusing on China? Boeing's forecast includes 11,450 new passenger jets for Asia in a confirmation of the region's transport-intensive growth despite the expansion of high-speed rail networks in China.
Approximately 23,240 airplanes worldwide (68 percent of new deliveries) will be single-aisle airplanes, reflecting growth in emerging markets, such as China, and the continued expansion of low-cost carriers throughout the world.
Because the core of the aviation market has now moved from the U.S. and North America to the Asian-Pacific marketplace, other aircraft manufacturers are gearing up to compete. They are especially interested in the single-aisle commercial market including Commercial Aircraft Corporation of China.
Remember that other states and countries want those 85,000 Boeing jobs currently housed in Washington. And while Boeing is performing well today, we must also remember that its competitors are nipping at Boeing's heels.
The stakes are high. Market analysts for Airbus in France predict that during the next 20 years, commercial airlines throughout the world will buy about 27,800 new aircraft worth $3.5 trillion, more than doubling the global airliner fleet.
So, while the news from Boeing is a welcome Christmas present for our state and our economy, we cannot afford to be complacent.
Don Brunell is president of the Association of Washington Business, Washington state's chamber of commerce.