BUSINESS

TURBULENT FORTUNES

THE BOEING CO. IS STRAINING TO FILL A RECORD NUMBER OF NEW ORDERS AS CONCERN OVER AIR SAFETY RISES

JOHN DALY March 13 1989
BUSINESS

TURBULENT FORTUNES

THE BOEING CO. IS STRAINING TO FILL A RECORD NUMBER OF NEW ORDERS AS CONCERN OVER AIR SAFETY RISES

JOHN DALY March 13 1989

TURBULENT FORTUNES

BUSINESS

THE BOEING CO. IS STRAINING TO FILL A RECORD NUMBER OF NEW ORDERS AS CONCERN OVER AIR SAFETY RISES

Within the space of only seven weeks, two tragedies cast shadows over the outstanding reputation of The Boeing Co. of Seattle, the world’s largest manufacturer of passenger jets. On Jan. 8, a practically new British Midland Airways Boeing 737 crashed in England after both of its engines failed. Forty-four of the 118 passengers died. The precise cause remains unknown, but an inspection over the next few weeks of the even-newer Boeing 757s by U.S. and British airlines revealed errors in the wiring of fire-warning systems in seven planes. And, on Feb. 24, part of the fuselage of a United Airlines Boeing 747, flying 22,000 feet over the Pacific Ocean, exploded into the sky. Nine of 336 passengers were sucked out to their deaths. That led Air Canada to recall its fleet of six 747s last week to check for cracks in the fuselage. At the same time, in Washington, D.C., the Air Transport Association of America released a report that recommended the world’s airlines spend $960 million to repair and upgrade 1,300 aged Boeing jets.

Boeing has been rushing to meet demand for its products in the hottest world market for two decades. New orders for Boeing commercial aircraft soared by 49 per cent to a record $36 billion in 1988. And the aerospace giant has a backlog of more than 1,000 planes on order.

Boeing is attempting to expand production and maintain its dominance over its two principal competitors—

St. Louis-based McDonnell Douglas Corp. and the European consortium Airbus Industrie. But, over the past year, several major customers, including Japan Air Lines and British Airways PLC, have complained in writing about delays and defects. Added Tacoma, Wash.-based author, pilot and airsafety expert John Nance: “There is no question that they have had some quality-control problems.”

Fuelled by the massive increase in passenger traffic that has resulted in part from airline deregulation, and by the need to replace old aircraft, total worldwide orders for new passenger

airliners have doubled since 1984. Paul Nisbet, an aerospace analyst with Prudential-Bache Securities Inc. in New York City, said that annual orders in the sector will average close to 700 planes per year for most of the 1990s. Boeing itself predicts that the total market for passenger airliners from 1988 to 2005 will amount to $492 billion. Boeing delivered 337 new passenger aircraft in 1988, out of a world total of 520. And this year alone, it plans to deliver 401 planes.

Evidence that increased demand had

strained Boeing’s production facilities first appeared a year ago. Last spring, executives from two major customers—Japan Air Lines and British Airways—wrote to Boeing to complain about a deterioration in quality. Donald K. Craig, British Airways’ chief engineer, technical and quality services, compiled a list of manufacturing problems at Boeing, which he said made it appear that the company was “on a different planet” from its two major competitors. And Japan Air Lines president Susumu Yamaji wrote Boeing chairman Frank Shrontz saying that defects in 747s and 767s “could indicate a lapse in Boeing quality.” In January, Boeing responded by reorganizing the production line for its new 747-400, and announced that deliveries of the 412-seat jumbo would be delayed. The company cited problems with electronic systems and parts availability as reasons for the holdup.

To reduce the backlog, Boeing has increased the workforce in its commercial aircraft division by 25 per cent to 56,000 over the past I two years. And in an attempt 8 to attract experienced em« ployees north from McDon§ nell Douglas’s sprawling 1 plant in Long Beach, Calif., á Boeing has advertised heavi-

ly in Southern California newspapers.

But some union officials and analysts say that Boeing still needs to expand its staff more— and quickly. Thomas Baker, president of the Boeing branch of the International Association of Machinists and Aerospace Workers, said that the company is relying “entirely too much on overtime” to increase production. The machinists’ current contract allows them to work up to 200 hours of overtime every three

months, with a guarantee of _

only one weekend off in five.

One employee at Boeing’s Renton, Wash., plant said that he often works seven 12hour days in a row, substantially supplementing his salary, because Boeing is trying to get back on schedule.

Thomas said that errors can result from fatigue and that extra work is required to correct mistakes made by new employees. Added Seattlebased aerospace analyst Leslie Childress: “Management just can’t increase production by fiat. These things aren’t cookie dough.”

Boeing spokesman David Jimenez said that the company does not want to overexpand its workforce because there may be a downturn in the aero-

space sector similar to the one that hurt the industry in the early 1970s. Said Jimenez: “Once you accelerate, it’s very hard to bring it down if you have a recession.” And although Jimenez conceded that the recent incidents may have hurt Boeing’s image, he said that they will not affect sales because customers are sophisticated aircraft experts and are generally satisfied.

In fact, even the firm’s competitors agree that Boeing’s image problems are not all the manufacturer’s fault. They point out that government regulators and airlines are responsible for inspecting and maintaining aircraft after they leave the factory. Added Airbus spokesman Paul Bond: “Since well over a half of the 6,000odd commercial airliners flying in the Western world at present were built by Boeing, there is every chance that

1 when something happens to

2 an aircraft it happens to a | Boeing.” Spokesmen for Airg bus and McDonnell Douglas u also said that they do not

expect that Boeing’s setbacks will result in an increase in orders for other companies’ planes because both companies are already working at peak capacity.

And there may even be some benefit to the company from the recent rash of accidents. William Deatherage, an aerospace analyst with the investment firm of Dean Witter Reynolds Inc. in New York City, said that the increased public concern about safety caused by the recent disasters might lead airlines to re-

_ examine their fleets. More

than 40 per cent of the world’s fleet is composed of two-decade-old models, including Boeing’s 707s, 727s and 737-200s and McDonnell Douglas’s DC-8s and early DC-9S. Most, if not all of them, will have to be replaced within the next decade. And if airlines follow the Air Transport Association recommendation to spend almost $1 billion refurbishing the world passenger-jet fleet, Boeing could take a sizable proportion of that business as well. 5Partly because of that, § Boeing’s earnings could soar § even higher in the future, y

I JOHN DALY with I LES GAPAY in Seattle and I PETER LEWIS in Brussels

LES GAPAY

PETER LEWIS