Boeing not closing 717 line

Gordon Werner · 12-11-2001, 04:33 PM

Boeing not closing 717 line

Small, California-built airliner kept alive, insiders say

Tuesday, December 11, 2001

By JAMES WALLACE
SEATTLE POST-INTELLIGENCER REPORTER

The Boeing Co. has decided not to close its 717 production line in Long Beach, Calif., although the company's smallest and shortest-range jetliner will be built at a slower rate because of the industry downturn, according to people familiar with the decision.

An announcement could come as early as tomorrow, they said.

The company's board of directors was told of the decision yesterday during its meeting at Boeing's new Chicago headquarters.

Boeing commercial airplane executives, not the board, made the decision to keep the line going after weeks spent talking with airline customers and trying to assess the future market for the jet that Boeing inherited in its 1997 merger with McDonnell Douglas. They also weighed what it would cost the company to close the line.

Boeing Chairman Phil Condit previously said the company would have to take a charge against earnings if the line were closed.

A number of factors reportedly led Boeing to conclude that it would be better to keep the line going.

In talking with current and potential customers, Boeing found there is stronger-than-expected support for the plane, even though that support has so far not been reflected in orders.

Also, support for the Airbus A318, which would compete with the 717 when it enters service, has apparently weakened. Keeping the 717 line going also puts competitive pressure on Airbus. Closing the line would cede the market to Boeing's archrival.

International Lease Finance Corp. is supposed to take delivery of the first A318 in a little more than a year.

John Thom, Boeing's chief spokesman for its commercial plant in Long Beach, declined comment last night when asked if a decision had been made about the future of the 717. He also declined to say what effect, if any, reduced production rates might have on employment.

About 4,500 workers are involved in the 717 program in Long Beach.

Workers were told last week, sources said, that production rates for the 717 would be cut even if the program survives.

Boeing is slashing production rates of all its jetliners by an average of 50 percent as a result of the current industry downturn in which many airlines are facing an unprecedented financial crisis. The crisis was triggered by the Sept. 11 terrorist attacks, although the industry was already in one of its classic down cycles before then.

Thom would not disclose the current 717 production rate, but it is believed to be about 2 1/2 planes a month. In late October, production of the 717 was switched to a more efficient continuously moving line -- an industry first.

Boeing has delivered 88 of the 137 planes so far ordered. Of the remaining backlog of 49 planes, most are for launch customer AirTran and for Pembroke Capital, an Irish leasing company.

Had Boeing decided to close the line, it would have had major consequences for suppliers such as Rolls-Royce, which builds the 717 engine.

Many analysts have long believed the 717 was an orphan plane from McDonnell Douglas that would not be able to survive without an order from a major carrier. That order never came.

Although TWA ordered 50 of the jets, it was in failing health at the time. It has since been acquired by American, which has the option to return 30 of the jets to Boeing.

Two of American's 717s can be returned every three months beginning next October, according to a spokesman. The carrier has not decided if it will return the planes to Boeing.

Condit had announced in October that Boeing had undertaken an extensive study to determine what would happen to the 717 in the face of the current downturn.

"We have looked at every one of our lines individually," he told analysts and the media during a conference call to discuss third-quarter earnings.

"The conclusion is that all of them are economic with the one exception of the 717."

Formerly known as the MD-95, the 717 is the last of the airplane programs that Boeing inherited from its 1997 merger with McDonnell Douglas. The other programs -- MD-80, MD-90 and MD-11 --were shut down following the merger.

Boeing has sold only six 717s this year, although Midwest Express ordered 20 of the planes. The Midwest planes have not yet been added to Boeing's order tally, however, indicating that negotiations have not concluded.

Other significant 717 customers include Hawaiian Airlines.

Although Boeing assembles the 717 in Long Beach, at the former McDonnell Douglas plant there, much of the plane is produced by risk-sharing partners.

It is not clear what financial exposure Boeing would have with those partners if it halted production.

McDonnell Douglas developed the MD-95 as a replacement for the aging fleet of DC-9s, which were built by Douglas before the merger with McDonnell. It was launched in October 1995 with an order for 50 planes and 50 options from ValuJet, which later changed its name to AirTran after a DC-9 crash in the Everglades.

P-I reporter James Wallace can be reached at 206-448-8040 or jameswallace@seattlepi.com

DeltaFlot · 12-11-2001, 07:36 PM

Great news for the people at Boeing. Hope to ride on esoon when I get around to visiting the neighbor islands.

12-11-2001, 04:33 PM	#1
Gordon Werner Insane Collector Join Date: Jun 1998 Location: Somewhere else Age: 37 Posts: 2,059	Boeing not closing 717 line Boeing not closing 717 line Small, California-built airliner kept alive, insiders say Tuesday, December 11, 2001 By JAMES WALLACE SEATTLE POST-INTELLIGENCER REPORTER The Boeing Co. has decided not to close its 717 production line in Long Beach, Calif., although the company's smallest and shortest-range jetliner will be built at a slower rate because of the industry downturn, according to people familiar with the decision. An announcement could come as early as tomorrow, they said. The company's board of directors was told of the decision yesterday during its meeting at Boeing's new Chicago headquarters. Boeing commercial airplane executives, not the board, made the decision to keep the line going after weeks spent talking with airline customers and trying to assess the future market for the jet that Boeing inherited in its 1997 merger with McDonnell Douglas. They also weighed what it would cost the company to close the line. Boeing Chairman Phil Condit previously said the company would have to take a charge against earnings if the line were closed. A number of factors reportedly led Boeing to conclude that it would be better to keep the line going. In talking with current and potential customers, Boeing found there is stronger-than-expected support for the plane, even though that support has so far not been reflected in orders. Also, support for the Airbus A318, which would compete with the 717 when it enters service, has apparently weakened. Keeping the 717 line going also puts competitive pressure on Airbus. Closing the line would cede the market to Boeing's archrival. International Lease Finance Corp. is supposed to take delivery of the first A318 in a little more than a year. John Thom, Boeing's chief spokesman for its commercial plant in Long Beach, declined comment last night when asked if a decision had been made about the future of the 717. He also declined to say what effect, if any, reduced production rates might have on employment. About 4,500 workers are involved in the 717 program in Long Beach. Workers were told last week, sources said, that production rates for the 717 would be cut even if the program survives. Boeing is slashing production rates of all its jetliners by an average of 50 percent as a result of the current industry downturn in which many airlines are facing an unprecedented financial crisis. The crisis was triggered by the Sept. 11 terrorist attacks, although the industry was already in one of its classic down cycles before then. Thom would not disclose the current 717 production rate, but it is believed to be about 2 1/2 planes a month. In late October, production of the 717 was switched to a more efficient continuously moving line -- an industry first. Boeing has delivered 88 of the 137 planes so far ordered. Of the remaining backlog of 49 planes, most are for launch customer AirTran and for Pembroke Capital, an Irish leasing company. Had Boeing decided to close the line, it would have had major consequences for suppliers such as Rolls-Royce, which builds the 717 engine. Many analysts have long believed the 717 was an orphan plane from McDonnell Douglas that would not be able to survive without an order from a major carrier. That order never came. Although TWA ordered 50 of the jets, it was in failing health at the time. It has since been acquired by American, which has the option to return 30 of the jets to Boeing. Two of American's 717s can be returned every three months beginning next October, according to a spokesman. The carrier has not decided if it will return the planes to Boeing. Condit had announced in October that Boeing had undertaken an extensive study to determine what would happen to the 717 in the face of the current downturn. "We have looked at every one of our lines individually," he told analysts and the media during a conference call to discuss third-quarter earnings. "The conclusion is that all of them are economic with the one exception of the 717." Formerly known as the MD-95, the 717 is the last of the airplane programs that Boeing inherited from its 1997 merger with McDonnell Douglas. The other programs -- MD-80, MD-90 and MD-11 --were shut down following the merger. Boeing has sold only six 717s this year, although Midwest Express ordered 20 of the planes. The Midwest planes have not yet been added to Boeing's order tally, however, indicating that negotiations have not concluded. Other significant 717 customers include Hawaiian Airlines. Although Boeing assembles the 717 in Long Beach, at the former McDonnell Douglas plant there, much of the plane is produced by risk-sharing partners. It is not clear what financial exposure Boeing would have with those partners if it halted production. McDonnell Douglas developed the MD-95 as a replacement for the aging fleet of DC-9s, which were built by Douglas before the merger with McDonnell. It was launched in October 1995 with an order for 50 planes and 50 options from ValuJet, which later changed its name to AirTran after a DC-9 crash in the Everglades. P-I reporter James Wallace can be reached at 206-448-8040 or jameswallace@seattlepi.com

12-11-2001, 07:36 PM	#2
DeltaFlot The Patriot Join Date: Jan 2001 Location: Laurel, MD Age: 35 Posts: 3,228	Great news for the people at Boeing. Hope to ride on esoon when I get around to visiting the neighbor islands. __________________ Febuary 15, 1898 December 7, 1941 June 8, 1967 September 11, 2001 Never Forget, Never Forgive If you kick the Tiger in the arse, you better be able to deal with the Tiger's teeth.

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