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Originally published Friday, December 21, 2007 at 12:00 AM

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No big holiday break for 787 workers

In the case of the 787, Boeing is departing from its usual holiday break schedule so that mechanics can continue the feverish catch-up work...

Seattle Times aerospace reporter

In the case of the 787, Boeing is departing from its usual holiday break schedule so that mechanics can continue the feverish catch-up work on the Dreamliner in Everett.

Though the company's production lines traditionally shut down at year-end for almost two weeks, this year 787 mechanics will work three shifts around the clock most of that period.

The six-month delay facing the Dreamliner program is a blot on Boeing's credibility in what otherwise was a remarkable year with record orders. In an end-of-year interview, Boeing Commercial Airplanes Chief Executive Scott Carson made plain he intends to erase that stain.

"We're working very hard to recover from that," Carson said. "You build a reputation over a long period of time and you can lose it in a heartbeat."

Now 2008 looms larger as a crucial year for the plane maker, marked with important milestones and big challenges:

• The 787 must fly by March, then complete rigorous test flights and win certification before delivery of the first Dreamliner to All Nippon Airways by year's end.

• In the first quarter, the Air Force will choose between Boeing's Everett-built 767 and Airbus' A330 for its massive refueling-tanker contract.

• The first Navy anti-submarine 737s are due to roll out of the commercial plant in Renton.

• And in the midst of all this, both the Machinists and Engineers unions will negotiate new contracts.

Carson reiterated his confidence in the revised 787 schedule and in the capabilities in Renton and Everett to accommodate the two military programs.

Boeing will continue to hire in 2008, Carson said, but "at more moderate levels" than this year. The company added more than 5,400 jobs in the region through last month.

On the labor front, new Machinist union leader Tom Wroblewski had unusual praise for Boeing management — talking up the improved atmosphere since Carson and his top labor negotiator, Doug Kight, took over in fall 2006 from predecessors Alan Mulally and Jerry Calhoun.

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"We're in the best shape we've been in in a long time to get a good contract," said Wroblewski, president of Machinist district lodge 751. "It's nice to know we've got a couple of guys over there engaging us in talks."

Rivalry is unabated

The year 2007 ends with Boeing and Airbus neck and neck in sales.

Boeing has net firm orders as of this week for 1,213 jets. Airbus had net firm orders for 1,095 jets as of the end of last month.

In the final tally, which won't be known until next month, analysts expect Airbus will squeeze past Boeing.

This year Airbus continued to grapple inconclusively with problems arising from its unwieldy corporate structure. As it tries to cut costs, sell off plants and shrink its work force, national rivalries have trumped all else.

When Airbus announced this week the winning bidders for its European plants, British, French and German firms won out over Spirit AeroSystems in Wichita, Kan., which had been considered for its composites expertise.

Yet, a year after losing the last order race to Boeing, top Airbus sales executive John Leahy had a good 2007. He won enough orders for the proposed new A350 to make it a serious — if late — contender against the Dreamliner.

Also this year, the first A380 superjumbo finally entered service with Singapore Airlines and is reportedly performing much better than expected.

Adam Pilarski, an industry analyst with Avitas, was impressed on a late November visit to the A380 final assembly hall in Toulouse, France.

"It looks like a real production line now," Pilarski said, "You can see work on a whole bunch of planes."

Tanker decision

Looking ahead to 2008, no order matters more than the one from the U.S. Air Force. The tanker contract, potentially worth $100 billion over the years, is a lot more competitive than most people ever imagined it could be.

After all, this is a U.S. military jet, and despite assurances from Airbus parent EADS that it will assemble the tankers in Alabama, it still struggles to reject the label "foreign."

"We are America's tanker," said Mark McGraw, Boeing's vice president of tanker programs. "This is a critical skill and capability that needs to be maintained in the U.S."

Yet the Air Force must be scrupulously fair after earlier scandals. And when the final bids came in, EADS and its partner Northrop Grumman surprised the Air Force.

For a tanker based on a bigger and more expensive jet than the 767, their proposal "was apparently a surprisingly low bid," said financial analyst Joe Campbell of Lehman Brothers, who spoke with chief executives on both sides of the competition.

In January, the Air Force is asking both sides to submit revised proposals. McGraw said Boeing's revision will reduce its price, though not radically.

One other factor may swing the competition for Boeing. In the first quarter of 2008, it will finally deliver two 767 tankers to the Japanese air force. Two more will go to the Italian air force in the second quarter. Both sets of aircraft are late after technical issues during flight tests that appear on the verge of being solved.

With the A330 tanker lagging the 767 in its development schedule, EADS/Northrop still has to face whatever major technical challenges may arise during flight tests.

If, as expected, the first Japanese tanker is delivered next month, in advance of the contract decision, it will be a clear sign to the Air Force that the risk in the Boeing program is reduced.

"It's clear to me ... the Air Force leadership's preference is for Boeing," Campbell said. "In my view, unless Northrop offers a superior proposal, Boeing will win."

Sales boom fades

On the commercial side, Boeing faces a year when orders are likely to fall off dramatically as the aviation sales boom fades. Analysts predict orders running at about half the level of 2007 — and that's assuming the world economy avoids a real recession.

But the enormous backlog of orders after three years of all-time record sales will keep Boeing's local factories humming for years.

Carson said the breadth of the geographical markets and business models among Boeing's airline customers will insulate it from economic hits in particular regions or business sectors.

Barring a U.S. recession, he expects the big American legacy airlines to place significant orders in 2008.

Boeing Commercial's main focus must be getting the Dreamliner back on track.

The year ahead will be filled with flight tests to win certification.

Carson said the certification process is well advanced, with more tests than usual completed in advance of first flight.

But this is a new airplane with the first all-electric systems, and he concedes an increased risk of unforeseen technical challenges emerging during flight tests.

"Are there likelihoods of any surprises? Man, that's a roll of the die," Carson said. "On balance, we think this is a reasonably achievable program — the kind of risks we have come to understand over the years."

In the Everett final-assembly bay where workers are still putting together the first Dreamliner, there'll be just a single shift on Christmas and New Year's eves and a day off on each of the two holidays.

Otherwise, even as other jet-production lines shut down, 787 mechanics will work around the clock.

Clearly, avoiding work disruptions will be crucial to Boeing in the year ahead.

That should put the unions in a strong position as both the International Association of Machinists and the Society of Professional Engineering Employees in Aerospace gear up for 2008 contract negotiations.

Carson can take comfort from Machinist leader Wroblewski's view that, perhaps to stave off any problems, the company is engaging with his union as never before.

"We've had more dialogue in terms of contract than we've had in a dozen previous years," Wroblewski said.

Just this week, the company agreed to a deal with the union that will see almost $1 million in back pay split among about 200 Machinists.

Boeing retroactively raised the pay rate for their job categories, matching a raise initially given only to later hires.

Carson appears to be working for a peaceful New Year in labor relations.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

Copyright © 2007 The Seattle Times Company

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