:: October 2008 Letter ::


Dear Fellow Aviation Tourists,

I grew up in Long Island. Somebody had to. It wasn’t without its consolations. LI was a major cluster of aircraft production, with a proud legacy of important planes, some of which helped win World War II. I tried to total it all and gave up after I got well above 30,000 aircraft. Unfortunately, the last Long Island plane – a Grumman F-14D – was delivered in 1992, eleven years after I moved away. That final plane affected me then, and it still affects me today. You see, aviation centers are almost impossible to create, but they can easily be destroyed. I think Seattle will be the next to go.

First, let’s define major cluster, or supercenter, or whatever. There are five aviation clusters in the world: Dallas-Fort Worth, Montreal, Puget Sound/Seattle, Toulouse, and Wichita. These zones either have one huge, dominant player (Seattle and Toulouse) or enough players to reach a similar level of critical mass (Fort Worth, Montreal, Wichita). There are many other important aviation sites – from Savannah to Săo Jose Dos Campos to Shenyang – but these five clusters are responsible for about 65% of the world’s aircraft production – roughly $80 billion in new deliveries. They also perform huge volumes of MRO, spares, development, and aero-engine work.

These clusters are historical legacies, created by wartime needs. In Europe, the last cluster and most historic clusters relate to Germany. To fight Germany, all of Great Britain and Northern Ireland became a giant aviation cluster. France located almost all of its aviation sites far from Germany, in Toulouse and the Southwest. Most of Russia’s aviation industry was also moved far away from Germany. Today, strangely, Germany’s aviation work is moving away from Germany too.

Aircraft clusters are fragile. Three of the biggest historical clusters– the UK, Southern California, and Long Island – no longer have major aircraft industries (although all retain a respectable presence in aerospace). The last UK civil jet was delivered in 2001, and after the Eurofighter and Hawk lines close, UK aircraft production will cease. The last California-built civil jet (a 717) was delivered in 2006. The last military jet (a C-17) will be delivered in the next five years.

These three clusters didn’t die because the market imploded – the end of World War II and the Cold War were painful, but the civil market has enjoyed long term growth. They died because manufacturing disaggregated and airframes became less important. The first trend meant that planes were assembled from structures built elsewhere. Britain gave up jetliners but got to build jetliner wings. The second trend meant that electronics and other components absorbed a greater part of each aircraft’s value. That also helped disaggregate aircraft manufacturing, along with lower transport costs and globalized trade links. When former 787 program manager Mike Bair proposed a supersite for future aircraft production (see my November 2007 letter), he was actually proposing a move back to the days before these developments transpired. Whether or not Bair had a good idea, the history of the aircraft industry has consistently moved against this concept.

State and local politicians can help defend clusters – look at Washington State’s tax breaks and incentives for Boeing. But politicians can’t create new clusters. The three biggest US state aerospace initiatives have accomplished very little. Alabama’s Airbus tanker efforts have been frustrated. Florida got some Embraer work, but the ACS program’s collapse and the DayJet disaster thwarted any real achievement. Then there’s New Mexico’s imbecilic Eclipse support, a failure in a class by itself. Efforts to create clusters outside the US have been failures too (although if Embraer’s business jet initiative works out Săo Jose Dos Campos will get there). Aviation is a defensive business.

Back to Seattle. IAM 751 undoubtedly has some legitimate grievances. Over the years, Boeing management has shown that it knows as much about labor relations as the producers of Predator III knew about science fiction. It doesn’t matter. This strike, following myriad others and with little hope of improved relations, will almost certainly precipitate a BCA exit. Over the next ten years, BCA will move to southern states with weaker unions and right-to-work laws that diminish union power. As the car companies realized, it’s easier to train flexible workers than it is to work with experienced but inflexible workers. Even the international auto makers have located in right-to-work states. Organized labor, like central air conditioning, has provided an enormous boost for economic development in the southern US.

This move will likely happen in phases, with new programs such as 737-X and 777-X established elsewhere and the 787 line shifting locations. Bair’s proposed supersite is the opposite of what will likely happen. The Puget Sound aviation cluster won’t be moved in one giant piece; rather, like every other ex-cluster, it will disaggregate. The final assembly lines will move to right-to-work states. Outsourced major airframe sections will continue to be shifted to multiple locations, either abroad or to right-to-work states.

Seattle has a much more diverse economy than it did 30 years ago when everything revolved around Boeing. The city won’t wind up like Detroit after the car guys left. Nevertheless, a BCA departure will hurt. Union manufacturing jobs provide a good wage, benefits, and a pension to workers who don’t need a university degree. My dad was a union man, albeit a white collar one. After the war, in a time when the government still cared about veterans, the GI bill gave him vocational training. He had his job for over 50 years with great benefits and a pension. That’s the kind of story you almost never hear these days. Those IAM 751 members may well have legitimate grievances. They also have little appreciation for the fragility of what they’ve got.

Southern California provides a good historical lesson for Seattle’s future. After LA ceased to be one of the world’s biggest aviation hubs, the economy survived, but much of the middle class disappeared. The area was left with a mix of lower paid service economy jobs and higher paid information-age jobs for people with degrees (the only thing left in the middle was government jobs). The extreme simplification: a mix of lawyers and the people serving them lattes.

I doubt any kind of settlement will prevent this BCA departure. When the striking Boeing machinists return to work, they should start saving for the future. If they want their children to have the same standard of living that they enjoy, they will need a university education. Even if the next generation follows the BCA lines to Texas, or wherever, they won’t have what the machinists have now.

As for Long Island, all that’s left are a few good museums, some aircraft electronics and component businesses, and a great special supplement in Newsday covering the last F-14 (July 21st 1992; available for a fee on Newsday’s website). And back here in right-to-work Fairfax, Virginia, we’ve updated the Citation Series, A380, Embraer’s Phenom/Legacy series, the C-5, CRJ series, and the Premier One. Have a great month.

Yours, Until Industry Analysts Unionize,
Richard Aboulafia


© Richard Aboulafia 1997-2006, All rights reserved.
  ~  Last updated on January 08, 2006