Boeing 717


Firm orders:

136

Options:

95

Total planes delivered:

68

Cost per plane (current):

$35 million to $39 million

Seats:

106

Maximum flight:

1,600 miles

Average cruising speed:

504 miles per hour

Maximum takeoff weight:

110,000 pounds

Length:

124 feet

Wing span:

93 feet

Source:

Boeing Co.

Production cuts threaten boeing’s long beach unit

Stiff competition in the 80- to 106-seat commercial jet market has sent Boeing Co.’s 717 operation into a tail spin, forcing it to cut production and raising the specter of prematurely shutting down the program, which is based in Long Beach.

With increased competition in the narrow-body jet market from Airbus Industrie, BAE Systems and other foreign manufacturers, Boeing’s operation might not land enough contracts to maintain a long-term production rate of 24 planes per year needed for the plant to break even.

When Midwest Express agreed in April to buy 20 planes, with an option for 30 more, it was the first major 717 contract that Boeing secured since AirTran Airways committed to 50 planes with options for 50 more in 1995.

Although smaller orders have been signed, the company was forced this spring to begin a string of layoffs that will total 600 by the end of the year.

Now Paul Nisbet, an analyst who just completed a 10-year forecast of the narrow-body airline market, has concluded that Boeing will cut its production of 717s from four to two per month in 2002, citing a poor overall market and the competitive edge that foreign plane makers have through subsidies from their respective governments.

“The outlook is iffy at this point,” said Nisbet, a partner in JSA Research Inc. “Right now the program is languishing for lack of orders. I’m thinking they will probably reduce the rate of production so they won’t run out of planes to build. They’re stretching it out hoping that in the interim they will have more time to get more orders. Once they’ve stopped building they probably will never build again.”

His report did not predict whether further layoffs will ensue because Nisbet said does not know whether the 600 pink slips account for poor anticipated sales next year.

The program took a major hit when American Airlines Inc. bought TWA last April and immediately dropped 20 of the 50 firm orders and all 50 options that TWA agreed to before the merger.

“That airplane is kind of in a no man’s land right now,” said Peter Jacobs, an analyst for San Francisco-based Wells Fargo Van Kasper. “Airlines are still trying to figure out how they are going to incorporate that size of aircraft into their fleet. The 717 is almost premature. It would be great to put that program in a closet for two years and then bring it out. But they don’t have the luxury just to shut it down for two years.”

When the layoffs are complete, the Long Beach operation will employ slightly more than 2,000 people.

Boeing officials cite outside market forecasts that call for 3,000 90- to 120-seat planes over the next 20 years. Also, the company’s 136 firm orders and 95 options are more than any other narrow-body plane maker has secured.

“The whole commercial airplane industry is down, including the 100-seat market,” said Warren Lamb, a Boeing spokesman. “But we’re hopeful that the market will turn around. The airplane is doing very well in service and our customers like it. (American Airlines’ decision) was a disappointment but we recognized that American made the decision based on business reasons. It wasn’t based on any dissatisfaction with the airplane.”

Mark Slitt, a spokesman for American, confirmed that his company rejected the 717 not because of quality but through a need for larger planes, which include Boeing’s 134-seat 737.

Boeing officials, meanwhile, are contemplating an expansion of its line to create more options for airlines. New versions would consist of the 86-seat 717-100X and the 125-seat 717-300X.

The success of these programs and the number of options that are picked up ultimately will determine the long-term fate of the 717, which Boeing officials would like to be in production for decades.

“It’s a plane that’s different than all other Boeing planes because it was designed by McDonnell Douglas,” said Nisbet. “It stands alone so users of the aircraft would probably like to have other versions of the aircraft, both larger and smaller. We’re projecting that (total closure) won’t happen. But the hopes had been that (sales) would materialize by now. After a while, you begin to wonder if they are going to.”