Boeing bucks commercial-jet tailspin
Inside the vast expanse of Building 4-82 on the shore of Lake Washington is a rare sight in American industry today - an active commercial airplane production line. Here, in varous stages of assembly, are twelve 737 jetliners. Next door, in Building 4-81, are five of Boeing Company's new short-to-medium-range twin-jet 757s.
Some 40 miles to the north, at Everett, Wash., the scene repeats itself as Boeing's other new entry into the international airplane market, the 767 wide-body twin jet, is in production. That plane is already completing its test flights and first deliveries will begin in August, to United Airlines.
The flurry of activity here is unusual, because orders from the commercial airline industry have gone into a tailspin. Airlines, especially in this country , are suffering from a decline in passenger volume, skyrocketing fuel and operating costs, and ruthless price cutting. Many carriers are delaying replacing older, inefficient planes as long as possible.
Adding to Boeing's difficulty in selling new planes is something of a glut of used and even new aircraft already on the market. In all, fourteen 747s, most of them good as new, are available for immediate delivery to anyone in the market for a jumbo jet. Most of the jets were ordered by airline carriers which, at this time, can't afford to fly them.
Although suffering from declining profits, Boeing seems to be playing the game better than some aircraft builders.
For example, the Lockheed Corporation in Burbank, Calif., is ending production of its L-1011 wide-body jetliner when current orders are filled. There are only 14 of them, and delivery is expected by late next year; then Lockheed's long association with the commercial aircraft industry will end.
Things are not too bright over in Long Beach, Calif., either, where the Douglas Aircraft Company turns out its DC-9s and 10s. Only there DC-10s are on production line now, with one more on order. There are 23 firm orders for DC-9s.
By comparison, Boeing has orders for 547 planes of all models. At the end of the first 1982 quarter, these civilian transport orders were valued at $16.5 billion.
Commercial aircraft sales generally account for some 85 percent of Boeing's total revenues. For the three months ended March 31, the Boeing Company reported sales of $2 billion and profits of $61 million, compared with year-before results of $2.4 billion in sales and $144 million in profits.
Boeing's chairman, T. A. Wilson, says the drop in profits was due ''primarily to significantly lower commercial jet transport deliveries; a continued high level of research, developmental, and engineering expenses related to new jet transport programs; and lower interest income.''
For 1981, the Boeing Company reported sales of $9.7 billion and profits of $ 473 million, compared with year-before sales of $9.4 billion and profits of $600 .5 million.
In addition to its commercial plane division, Boeing has its military airplane division in Wichita, which is responsible for a B-52 bomber updating program and other military programs. The Boeing Aerospace Company in Kent, Wash. , turns out the new air-launched cruise missile and is awaiting final go-ahead for five AWACS (airborne warning and control system) and six 707 tanker-cargo planes for the government of Saudi Arabia.
Boeing's future economic health is tied, however, to the three new aircraft - the 757, the 767, and the 737-300 short-range jetliner. More than half of all Boeing's new plane orders are represented by that lineup. To develop the three, the company has invested between $3 billion and $4 billion.
Richard W. Welch, president of the Boeing Commercial Airplane Company division, calls that a ''fantastic'' investment which is, without question, the largest in the history of American aviation.
''It's long been a characteristic of our industry to undertake tremendous gambles,'' Mr. Welch admits. The spending is a ''risk,'' he says, but ''Boeing is extremely happy with the response by airlines to its new products.''
Initial optimism over carrier acceptance of the two completely new jetliners has, however, been dampened. Boeing was rocked earlier this year when American Airlines canceled its $600 million order for 15 of the 757s in the face of the depressed economy. And United Airlines had planned to spend $1.6 billion for 39 of the 767s. But United says it will delay or possibly even cancel its plan for twenty 767s.
Air Canada says that it is going ahead with delivery of the first of its 12 orders for 767s but that it will delay its decision to acquire 18 more of the planes at least until Sept. 15.
Such reverses have taken their toll at Boeing. The Boeing Commercial Airplane Company has 46,700 employees, down by some 4,000 within the last year as production of the famed 747 jet slowed from seven planes a month to an average of 21/2 a month. Only two 727s are turned out a month now, compared with a dozen two years ago.
Foreign airlines have long bought a majority of Boeing's commercial planes, and the company still looks overseas for customers. But that market is clouded now. Blamed are policies of the Export-Import Bank which are becoming, in Boeing's view, too restrictive. This policy comes at a time when American planemakers face growing competition from Airbus Industrie, a consortium that includes the governments of France, West Germany, and the United Kingdom.
Airbus Industrie produces a twin-jet, wide-body jetliner called the Airbus A 300 which competes head-on with Boeing's new 767 and, to some extent, the older 747. Boeing charges that the development and manufacture of the A300 has been subsidized with as much as $5 billion by the governments of the three cooperating countries. In testimony before the Senate Appropriations Committee subcommittee on foreign operations in mid-June, Boeing's president, Malcolm T. Stamper, called for Export-Import Bank policies to be corrected ''so that the bank encourages - rather than discourages - the export of commercial jet airplanes.''
Boeing insists that its aircraft are superior to the A300 in performance and fuel economy but that more favorable financing and perhaps ''government-to-government leverage'' available to Airbus customers have already cost it sales. Boeing cites comments made by Eastern Air Lines and Singapore Airlines officials indicating they realized millions of dollars in savings by buying Airbus.
These amounts, Boeing insists, come from financial advantages denied customers of the Eximbank. Says Mr. Welch, ''There is no way that American business can compete with government consortiums on any equal basis.''''
For all of the problems Boeing faces, Richard Welsh, of the commerecial airplane division remains optimistic. ''We have, in the past, sustained substantially worse conditions,'' he says. ''We do not believe that the airlines of the world are going to continue to operate obsolete equipment in the numbers they now are, once traffic and the economy turn around.''