The last time machinists at Boeing Co.’s commercial airplane unit went on strike, in 1995, it took 69 days for them to return to building jets.
But that was not just a different decade, it was a different era in the ultracompetitive airline business, in which it was theoretically easier for Boeing to wait out a labor walkout because it had a much bigger share of the business.
No more. European rival Airbus SAS not only is a much stronger company than it was in 1995, it also has surpassed Chicago-based Boeing by one mark, delivering more jets to customers for several years running.
It adds up to a much more intense situation for Boeing, which has to begin weighing whether a strike risks alienating customers and driving them toward Airbus. Some customers may choose to avoid the uncertainty of a work stoppage by switching orders in midstream.
“It depends upon the kind of airplane the customer needs, and how quickly they want it,” said Mary Ann Greczyn, a spokeswoman for Airbus. “We’re always in a position to talk to our customers.”
The idea of Boeing losing customers to Airbus is not so far fetched. While buying a new airplane is a serious commitment, and it is often years between order and delivery, airlines also make meticulous plans for accepting new planes. A delay of several months could make life complicated enough for an airline to consider canceling a Boeing order and buying from Airbus.
Presumably, it would require a penalty, because contracts generally would protect Boeing in the case of a work stoppage.
Richard Aboulafia, an analyst with the Teal Group in Fairfax, Va., said that a lengthy strike for Boeing means “watching some customers defect to Airbus.”
He predicted Cathay Pacific, a Hong Kong-based international carrier, could be among the first to bolt because it operates Boeing and Airbus planes.
Scott Hamilton, an analyst with Leeham Co. in suburban Seattle, agreed.
“If it lasts four, five or six months, then Boeing risks losing one customer for each month of the strike,” he said. “Airbus can do some positioning games to help customers defecting from Boeing.”
Toby Bright, who was Boeing’s top salesman until he left the company late last year, said tour operators could be pinched hardest. They schedule routes well in advance, have smaller fleets and are much more dependent on getting new planes delivered on time. For the tour operators, the 1995 strike generated some “bad blood,” he said.
Employees and analysts say Boeing would have to delay delivery of at least 30 planes if the strike lasts through the end of September. Another 30 would be delayed each additional month the strike continues.
Analysts say a strike lasting through Sept. 30 would cost the aircraftmaker company more than 14 cents per share in third-quarter profit.
Observers think the strike may last a while, validating concerns about jet orders.
“Settling the strike now will damage [Boeing’s] long-term cost structure, hurting market share. They’ll probably go for the short-term pain. This means a long strike,” said Aboulafia, noting that the 86 percent union vote in favor of striking indicates workers are digging in.
Alan Mullaly, chief of Boeing’s commercial airplane unit, acknowledged the challenge of reaching a settlement. In a message last week to Boeing managers, he agreed with union negotiators that the two sides are “miles apart.” He claimed the union’s demands for improved benefits would cost the company “$1 billion” more than it has offered.
Agreeing to the union’s offer would have “eroded our ability to compete” and wiped out the cost savings achieved since the 2002 contract, he said. But Mullaly also recognized that Boeing’s customers have options.
“We are up against a competitor with a complete product line that has some [order] positions available,” he said.
The machinists union, District 751 of the International Association of Machinists and Aerospace Workers, wants to protect benefits. It rejected a company proposal to increase wages by 5.5 percent over three years and a $6,000 cash payout, while raising costs for health care about $120 a month.
Boeing also offered to raise pension contributions by about 10 percent, to $66 per month for each year of service from $60, but the union said the increases were less than what it sought.
Union President Mark Blondin, who says he doesn’t understand how Boeing came to the $1 billion figure, said the machinists’ proposal could have been paid almost entirely by the reported $500 million settlement the company is negotiating with federal officials to avoid prosecution in two investigations of corporate misbehavior.
The feeling among many workers is that they granted concessions during the last negotiation in 2002 because the company was underperforming. Now that Boeing’s business is surging, many workers feel that should be rewarded this time. “We’ll be out here until New Year’s,” predicted machinist Kurt Johnson.
Securing a higher pension will be key to any contract, said Linda McCleary, who works in quality assurance in the Everett, Wash., assembly building.
“A huge percentage of us are Baby Boomers getting ready to retire, and we’re very concerned,” said McCleary.
The union has had more than two years to prepare for this strike. Many of its members have been earning more than $100,000 per year as a result of mandatory overtime due to Boeing’s rising sales.
But if the union is girding for a long strike, so is the company, going so far as to have moved corporate headquarters to Chicago from Washington several years ago, in part to prevent negotiations from becoming entangled in emotions. During the last contract talks with the machinists union in 1999, former Boeing Chairman and Chief Executive Philip Condit went to Seattle’s Doubletree Hotel to secure a deal.
So far, Boeing’s new chairman and CEO, James McNerney, has remained on the sidelines, and there have been no talks at all.
In the meantime, to prevent defections by customers to Airbus, Mullaly said the company is investigating alternatives for providing planes.
Experts said Boeing could help some customers by arranging for the lease of planes that have been parked in the Mojave Desert by struggling airlines.
Ginger Hardage, a spokeswoman for Southwest, said the airline, which is slated to receive two planes each month until the end of the year, is staying in close touch with Boeing. She said some Southwest planes that had been serving New Orleans could be shifted to other routes if Boeing is unable to deliver new ones.
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jschmeltzer@tribune.com
