Contest to land new Boeing plane lacks one thing: a promise to build jet

Wednesday, June 11th 2003, 12:00 am
By: News On 6

SEATTLE (AP) _ As communities around the country devise tax breaks and other sweeteners to persuade The Boeing Co. to build its next new jet in their states, there is one element missing in the 7E7 sweepstakes: the guarantee that Boeing will ever build it.

The company has been soliciting bids from states that hope to land a new factory where the mid-sized, fuel-efficient jet would be built. The factory would mean about 800 to 1,200 jobs in assembly and support.

Fourteen states are competing for the 7E7 project, with community bids due June 20.

Late Tuesday, the state House in Washington _ where Boeing already assembles all but one of its commercial jets _ passed tax breaks for the company worth $400 million through 2009, and up to $3.2 billion over 20 years.

But a standoff developed when the Republican Senate approved Boeing-backed unemployment and workers' compensation bills and refused to vote on the tax package until the Democratic House passed the unemployment bill. The House demanded a more labor-friendly version.

The debate came months before Boeing's board of directors will make the most crucial decision _ whether to proceed with the first all-new jet since the 777.

The 7E7 is Boeing's third proposed jet in the past two years.

In 2001, Boeing scrapped its plans for a 747 jumbo jet called the 747X, instead focusing attention on a new proposal to build a jet that would travel near the speed of sound, called the Sonic Cruiser.

Then last December, in the midst of an economic downturn and with the commercial airlines struggling to stay in business following the terrorist attacks of Sept. 11, 2001, Boeing formally mothballed the Sonic Cruiser and unveiled plans for a more conventional, fuel-efficient jet, now dubbed the 7E7.

The 7E7 is to go before the Boeing board for approval in late 2003 or early 2004. If it is authorized, Boeing would officially begin the program in 2004 and offer the jet to airline customers.

In some ways, the 7E7 has a much better shot at production than the Sonic Cruiser, independent airline consultant Scott Hamilton said.

It would seat about 210 passengers, travel a little faster than a 777, and could fly at about 43,000 feet, Boeing said. It would also save airlines considerable money by using 20 percent less fuel than other airplanes.

``If indeed Boeing can cut the operational costs of the 7E7 by up to 20 percent, that is a quantum leap for airlines,'' Hamilton said. ``That would be a huge, huge thing.''

In fact, Boeing's previous proposed airplanes lacked that same kind of strong market need, said Paul Nisbet at JSA Research.

``If Boeing doesn't proceed in that direction, to me, it would be a very clear indication that they don't see the airliner market as one worth investing significant amounts into,'' he said.

Work on the 7E7 is progressing, said Boeing spokeswoman Yvonne Leach, although the company declined to reveal how many people are working on the project. The company is early in the development stage.

But Boeing is committed to the program, she said.

``We feel very confident about this program moving forward,'' Leach said. ``We've analyzed the market and it's the right segment to target. We also have a high degree of confidence in the customer base and the solution we're bringing forward for the customer.''

The company even started a name-the-new-airplane contest on the Internet, collecting votes on whether to rename the 7E7 one of four choices: Global Cruiser, Dreamliner, eLiner or Stratoclimber. The results are to be revealed next week at the Paris Air Show.

In recent years, Boeing has been showing less commitment to commercial airplanes and more of a commitment to preserving profit margins, said Richard Aboulafia, with Teal Group aerospace and defense consulting firm.

``They're not going to make investment decisions on the basis of heritage or legacy,'' he said. ``They're strictly doing it on a profitability basis.''