Resurgent Union Troubles
Remember back in 2011 when the National Labor Relations Board (NLRB) accused Boeing of violating federal labor law when it opened its new Dreamliner plant in non-union South Carolina? The government said that the new plant was illegal retaliation by Boeing against union machinists for their multiple strikes against the company. BA got the government to drop the suit by inking a four-year contract extension with those Washington state machinists that included a commitment to expand future aircraft production in the Puget Sound area.
But the honeymoon between BA and the International Association of Machinists was short: The union rejected a contract extension last week that would have kept production of the 777X in Washington state. Boeing says it’s done talking to the union until 2016, when the current contract expires, and is checking out moving 777X production to other states — and perhaps even outsourcing major fabrication like the jet’s composite wings to Japan.
This game of chicken cannot end well for either side. While union stands to lose tens of thousands of jobs, it will be challenging for BA to move production to a new site and remain on schedule. BA has not ruled out building parts of the 777X in the Middle East. And BA also could be hamstrung again if the NLRB sides with the machinists in this current dispute.
The Tough Task of Repairing the 787’s Composite Fuselage
Boeing is busy repairing the Ethiopian Airlines 787 that caught fire in London in July. The plane, damaged by fire while parked at Heathrow airport, is currently being patched under a tent at the airport as this photo suggests. The operative word there is “patched” — the Dreamliner is unique among these next-generation aircraft in that its carbon-composite skin is comprised of huge, barrel-type sections instead of riveted panels.
The fire broke out in the upper part of the aircraft near the tail — one of the areas most critical to airworthiness. Because of this, composites experts had expected BA to replace the entire barrel section of fuselage rather than construct and apply a composite patch. There is no margin for error with a repair that must undergo thousands of pressurization/depressurization cycles in its lifetime, and any problems that crop up later on could make Boeing liable for compensation.
Boeing scored a slam dunk win at the Dubai Air Show — you can’t understate the importance of $100 billion in orders. But considering the stock’s gravity-defying rise this year, the downgrade and hedge fund exits, as well as the other challenges Boeing faces, I think now would be a very good time to take profits on Boeing stock.
As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.