Boeing expects jet to taxi in at half the cost By Byron Acohido, USA TODAY SEATTLE =97 It won't be the biggest or fastest jetliner. But Boeing's newest= =20 model, the 7E7, should be relatively cheap to bring to market and very=20 economical to operate. Unlike the superjumbo 747X or the futuristic Sonic=20 Cruiser =97 neither of which got off the drawing board =97 Boeing conceived= the=20 7E7 entirely with cost cutting in mind. Aviation buffs won't be thrilled.=20 But that matters little to the airplane maker, which mainly hopes to=20 impress company shareholders and airline chief financial officers. Forget=20 capacity or speed: 7E7 hype focuses on its rock-bottom development costs.=20 Boeing expects to spend about half what it usually does to design and build= =20 its newest model. And the 7E7 will fly about 200 passengers long distances= =20 while burning 20% less fuel than comparable models. Borrowing a tactic from= =20 professional sports team owners, Boeing this week will even get taxpayers=20 to help pay for the 7E7's venue. Friday, Boeing expects to receive bids=20 from about 20 states outlining tax breaks and other incentives they'll=20 offer to land the 7E7 assembly plant. "This is purely a cost-driven=20 program," says Richard Aboulafia, aerospace analyst at the Teal Group. "In= =20 today's environment, you need to squeeze every penny out of cost to make=20 the business case to go ahead." Boeing makes no apologies. "The overriding= =20 consideration driving this process is the unrelenting competition we face=20 and pressure from our airline customers to ensure our products are ever=20 more competitive," says Boeing spokeswoman Mary Hanson. Boeing desperately needs a hot new program, but new jetliners are=20 inherently risky. Boeing spent an estimated $7 billion and took five years= =20 to design, test, certify and set up an assembly line for its newest model,= =20 the 777, before delivering the first plane to a paying customer in 1995.=20 The 747X, meant to counter European rival Airbus' newest offering, the=20 555-seat A380, fizzled. So did its successor, the Sonic Cruiser, which was= =20 supposed to fly at nearly the speed of sound but was too costly to build=20 and operate. At the Paris Air Show this week, Airbus has announced=20 billion-dollar orders to both Emirates and Qatar Airways. Many experts=20 thought Emirates would opt for Boeing planes. Instead, the fast-growing=20 Dubai carrier added insult to injury by including 21 A380s in its Airbus=20 order. This year, Airbus has grabbed 197 orders to Boeing's 37. Meanwhile,= =20 Boeing is about to capitalize on states' hunger for economic development by= =20 squeezing taxpayers for an unprecedented contribution. In mid-May, the=20 airplane maker issued its criteria for a suitable factory site along with a= =20 five-week deadline for submitting bids. That began a bidding frenzy. Along with access to a runway, a shipping port= =20 and skilled workers, Boeing also sought "local support for businesses" and= =20 "transportation enhancements" compatible with its factory. Having lost=20 Boeing corporate headquarters, which shifted to Chicago from Seattle in=20 2001, Washington Gov. Gary Locke immediately retained corporate consultant= =20 Deloitte & Touche Fantus to glean lessons from a decade's worth of deals to= =20 attract pro sports teams or new factories, including the $133 million in=20 tax breaks Texas recently pledged to Toyota in exchange for locating an=20 auto plant in San Antonio. Noting that Dallas had been a hot contender for= =20 Boeing's corporate headquarters and that the Texas Legislature recently=20 gave Gov. Rick Perry $295 million to close other such deals, Locke put=20 together a package of tax cuts and other incentives worth $3.2 billion over= =20 20 years, which the Washington Legislature quickly approved. That=20 translates into $133,000 a year for each of the 1,200 workers the factory=20 would employ. "I think Washington is now back in the running," says=20 aviation industry consultant Scott Hamilton. "After all, a $3.2 billion=20 corporate bribe is no small potatoes." Should Boeing keep the 7E7 plant in the Seattle area, where it already=20 assembles five of six models, it would also benefit from $9.8 billion in=20 regional transportation improvements now underway, including a $16 million= =20 pier earmarked to receive wing and fuselage sections from Japan. "It's a=20 very aggressive package," says Mark Klender, project leader at Deloitte &=20 Touche Fantus. "We did what we needed to do to be competitive with other=20 states." California Gov. Gray Davis is also expected to submit a generous=20 bid. Boeing, which bought McDonnell Douglas in 1997, could use the port of= =20 Long Beach to receive 7E7 sections. It could also reopen factories where=20 McDonnell Douglas once built the DC-10/MD-11, near where it continues to=20 build 717s, successor to the DC-9/MD-80. Davis is expected to offer tax=20 cuts, unemployment insurance benefit reductions and utility subsidies, says= =20 Jason Kimbrough, spokesman for the California Technology, Trade and=20 Commerce Agency. Taxpayers aren't the only ones anteing up. Boeing will rely heavily on=20 overseas partners to supply fully built-out sections, shifting much of the= =20 7E7's research and manufacturing costs to suppliers and allowing Boeing to= =20 dramatically reduce the number of factory workers needed for assembly. At=20 peak production in the 1980s, Boeing's 747 productionline employed 10,000=20 workers churning out a new jumbo jet every 23 days. Fuselage sections or=20 the pieces of the tail arrived by rail from suppliers. But Boeing workers=20 always built the wing, cockpit and thousands of subassemblies needed to=20 connect all of the pieces. With the 7E7, Boeing will require suppliers to=20 deliver ready-to-connect sections. Final assembly will require 1,200=20 workers to finish a jet every three days. Breaking with tradition, Boeing=20 will likely subcontract the wing, probably to Japan, which already supplies= =20 fuselage sections for the 777. "Boeing's competitive advantage really is in= =20 design, marketing, sales and product support," says Todd Watkins, professor= =20 of economics at Lehigh University. "It's no longer in assembling smaller=20 pieces." *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@xxxxxxxxx Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Mas Site: www.tntisland.com/tntrecords/mas2003/ Site of the Week: http://www.carib-link.net/naparima/naps.html TnT Webdirectory: http://search.co.tt *********************************************************