Boeing May Shut Down Production

A quick read of the economic tea leaves shows Boeing may well be on the way toward dumping its 717 and shutting down production of the aircraft at its Long Beach (CA) plant.

The program has been in trouble for well over a year now. In 2001, Boeing delivered 49 of the Last year, the company delivered just 13.

"When people stop buying them (717s), we will shut it down. There are ongoing campaigns. If those are successful, it will continue on. I'm not trying to be flip or glib about it at all," Boeing's new CEO Harry Stonecipher said during a review of Boeing's 2003 full-year performance and fourth quarter reports.

A new Securities and Exchange report from Boeing indicates that could be just what's in the works now. The company wants a one-time $400 million charge off on its sales campaign for the 717, which could signal an end to its marketing efforts.

"Program continuity is dependent on the outcomes of current sales campaigns," the Boeing SEC filing says.

"The 717 has been on borrowed time for years," said Richard Aboulafia, with The Teal Group in Fairfax (VA). "It's not the plane's fault. The plane is excellent."

But it faces stiff competition from less expensive aircraft that offer most of the 717's advantages. Most notably, Air Canada last year decided to go with regional jets rather than the smallest commercial aircraft made by Boeing.

The possibility that Boeing might drop its 717 production line has some 14,000 workers in Long Beach on pins and needles. While the same plant manufactures the C-17 military transport, the commercial operations at Long Beach could be drastically curtailed if the aircraft's production cycle is abruptly ended.

It's not like the 717 hasn't been struggling. Boeing almost dropped the program more than two years ago, after the 9/11 attacks severely curtailed air travel worldwide. Boeing has recently tried to revamp the small jetliner by offering a business class version.

Still, the 717 has its supporters. AirTran recently conducted an economic impact analysis, determining the 717 could be operated more efficiently than its Air Wisconsin-owned JetConnect service, which features regional jets. AirTran will phase out its JetConnect operation starting in July. The 14 cities now served by Air Wisconsin RJs will then be served by AirTran 717s.

AirTran is Boeing's biggest 717 customer. It recently ordered 10 more of the small jets, along with 100 737s.

FMI: www.boeing.com