Tomorrow is the deadline for bids to arrive at The Boeing Company headquarters in Chicago for production of the company’s 777X, which will be the world’s largest and most fuel-efficient commercial airliner. San Antonio is one of 15 sites invited to bid, hoping to dramatically expand the current Boeing presence at Port San Antonio.
Local officials are not commenting, but Boeing’s decision to seek bidders in the wake of failed negotiations with its major labor union in Washington state have made the process an unusually open one where competing cities know the names of the competition and the public is getting a look at Boeing’s demands.
The city that wins the work will pay a very high premium. In return, it will win thousands of high-paying aerospace manufacturing jobs. For San Antonio, winning would be an economic game changer almost beyond description. Boeing is expected to announce a winner or multiple winning bidders early next year. If it does move the work out of Washington state, it could pick one site to manufacture the aircraft’s outsized wings and another to produce the fuselage.
The $377 million, 400-passenger 777-9X – the largest of two available models – is the next-generation airliner that follows the 777 and 778 Dreamliner models. The Wall Street Journal recently reported that Boeing booked 295 orders valued at $95 billion at the Dubai Airshow in November, its largest product launch in company history.
I can’t tell you what sort of financial incentives were outlined in the San Antonio bid, but suffice it to say San Antonio is putting its best foot forward to woo the world’s largest manufacturer of commercial aircraft. If the city bid has a weak spot, it’s probably the state of Texas and its unwillingness or inability to match incentives granted by smaller states with more aggressive economic development strategies.
Gov. Rick Perry has not spoken publicly about pursuing the Boeing work, although he is said to have met with Boeing officials at the recent governors’ conference in Arizona.
In contrast, Missouri Gov. Jay Nixon hurriedly convened a special session of the state legislature and pushed through an incentive package that could be worth $1.9 billion to Boeing over two decades. Texas legislators could match or surpass that package if they would allow the state’s Rainy Day Fund to be used for economic development, but that has never happened.
What Boeing Wants
Boeing is said to be asking for up to 400 acres of free land, suitable manufacturing facilities provided at no cost or minimal cost to the company, financial help recruiting and training a workforce, and long-term tax abatements. All that, if and only if the bidding site can satisfy Boeing’s needs for a 9,000-foot runway, ample hangar and plant facilities, rail and major highway connections, and access to a major port in the event the aircraft wings are manufactured at one site and the fuselages at another site.
Port San Antonio now has the available acreage. It has the rail and highway connections, and it has an 11,500-foot runway that already services Boeing’s wide body jet aircraft. San Antonio, however, can’t satisfy the need for major port access since the oversized aircraft wings will be too large to transport on flatbed trucks to and from the Texas Gulf Coast in the event they are manufactured elsewhere.
Knowledgable sources say San Antonio officials do not see the city as a front-runner at the outset, even though Boeing has a substantial presence at Port San Antonio, where the company’s Global Services & Support (GS&S) business unit operates one of the largest military aircraft maintenance, repair, and overhaul facilities in the world. Boeing is based at the Port’s Building 375, the largest free-standing hangar in the world. It can accommodate 15 wide body aircraft at a time and can be expanded to accommodate 22 wide body and 33 narrow-body positions.
When it established operations at Port San Antonio in 1998, Boeing did so to perform maintenance on military aircraft. It added commercial work in 2011, including the 787 Dreamliner and the company’s 747-8 Freighter. As military contracts dwindle, Port San Antonio officials consider commercial airliner work critical to its future vitality and growth, where more than 13,000 people now work in high-paying aerospace jobs.
Several months ago Mayor Julián Castro formed a special working group of civic, business and economic development leaders to explore new approaches to redeveloping the former Kelly Air Force Base. Port San Antonio currently finances its operations largely on rents and fees, a model that has proven inadequate to help tenants weather downturns in the aerospace economy. Current tenants are seeking and winning rent concessions, but Port managers will have to replace that income through other means to keep port operations viable. The task force is expected to make recommendations to Castro in a report later this month.
According to reports in the Seattle Times and Charlotte Observer newspapers, the Boeing call for bids came after company officials and Washington state union officials were unable to agree on a new long-term labor pact that would have included significant union concessions.
“The 31,000 member International Association of Machinists union on Nov. 13 rejected by a 2-to-1 margin a Boeing contract offer that would have secured the 777X work for Washington state,” the Seattle Times reported.
Washington state remains the frontrunner among the 15 locales under consideration by Boeing, but only if the union agrees to make significant concessions. Workers who now reach top wage scale in six years would do so only after 16-20 years and the company’s pension plan would be frozen and replaced with a defined benefit plan for new hires.
Long Beach, Salt Lake City, Charlotte, NC; St. Louis, North Charleston, SC; Huntsville, Ala. and San Antonio are among the other 14 sites.
Boeing, in essence, is testing the market to see if the company would be better served building the new 777X long-range carrier elsewhere. It’s an interesting calculation. The company’s capital investment in Washington state, where manufacturing lines can be adapted to each new generation of aircraft, can’t be matched elsewhere. That and the very high cost of labor there have to be matched against right-to-work states, mostly in the South and Southwest where unions are not a factor, where land is more abundant and available and where state and city officials are willing to bet big on luring new high-paying jobs to their districts.
The questions being asked in each potential site is this: Is Boeing serious about its threats to build the 777X outside Washington state, or is simply gaining leverage against its trade unions? My guess is both.
In this instance, unlike the Project Bullet bid that San Antonio made late last year as one three cities competing for 5,000 aerospace jobs that never materialized here or elsewhere, the usual shroud of secrecy has been dropped by Boeing and its union and some of the cities competing win the work. The public here and elsewhere presumably will be able to watch this competition play out over the next few months.