Boeing Production to 'Stay Ramped Up': CEO
Staff Writer, CNBC.com
The aerospace sector is “closer to the beginning than the end” of an upswing in orders, the chief executive of Boeing told CNBC Monday.
“We are ramping up production and it’s going to stay ramped up,” Jim McNerney said at the Paris Air Show, where the industry gathers for what is expected to be a bumper year of orders. “We are going to see a lot of Boeing wide bodies, and a lot of Airbus narrow bodies.”
Aerospace is a cyclical business, with airlines reducing or ramping up orders according to passenger demand and other economic factors.
McNerney added that “high oil prices and better technology” are helping keep the cycle at the boom stage.
Boeing announced the biennial Air Show’s first big-ticket order on Monday, when it said that Qatar Airways has ordered six 777 jets in a deal worth $1.7 billion at list prices.
McNerney said that the company was not repeating the mistakes made during an earlier cycle, when it ramped up production in 1998.
“Even big old fat companies learn from their mistakes,” he said. “We are very, very sensitive to what our suppliers are doing, and whether they are able to keep up with us.”
Move to South Carolina
The general counsel of the National Labor Relations Board (NLRB) has filed an unfair labor charge against Boeing, after the company announced that it would move a production line to South Carolina.
“This will probably have long legs,” McNerney said. “It will probably end up in the courts where we are confident we can win. This complaint has no basis in law that we can find.”
He declined to comment on whether a court case would have any material impact on Boeing, and added that Boeing was “trying to work with” the NLRB. “We are not changing one thing,” he added.
The situation has reignited debate over labor issues in the US, with Republican politicians such as Blake Farenthold arguing that if companies aren’t allowed to relocate within the US easily, they could take their production overseas instead.
“People won’t put work anywhere if they can’t move work out of a union state,” McNerney said. “The impact will likely be offshoring more jobs. We have confidence after a lot of turbulence and some uncertainty that this will be resolved.”
Asked whether William Daley, President Obama’s Chief of Staff who used to serve on Boeing’s board, had approved the move, McNerney declined to comment, but added that the move to South Carolina was backed by the board.
Upgrade to Fight Airbus
Boeing will make a decision over whether to upgrade the existing 737, to rival the Airbus Neo, or design an entirely new airplane, by the end of 2011, according to McNerney.
“We have got time to make this decision,” he said. “In either case we will catch up to and get past where the Neo is today. If we manage it well, the combination of existing demand and even stronger demand for new airplanes then things will be substantially better than what’s out there today from both of us.”
The Neo, an upgraded version of the A320, promises a 15 percent cut in fuel consumption compared to the current models, at a time when high oil prices and increasing environmental concerns are putting pressure on airlines.
Boeing has unveiled the 747-8, a new version of the 747 which will be the first major rival to the A380, the biggest plane in the world.
The air show has not started well for Airbus, which traditionally battles Boeing to announce the most orders over the duration of the show. On Sunday, one of its A380 super-jumbo airplanes suffered a small collision and had to be withdrawn from a planned flying display.
The A400M or “Grizzly”, its new military aircraft which has suffered several high-profile delays, was withdrawn from air display after a gearbox problem. It will be able to perform in a flypast when French President Nicolas Sarkozy officially opens the biennial event later on Monday.