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Boeing Deal Makes More Growth Possible

Mon, 12/16/2013 - 2:07pm
Warren L. Wise, The Association For Manufacturing Technology

(McLean, Va.) - Boeing will nearly triple its footprint near Charleston International Airport with the acquisition of even more land than expected in a $49 million deal announced Friday.

The land purchase comes one day after the Chicago-based aerospace giant announced hundreds of new research jobs for the Charleston area. Analysts believe the land deal paves the way for Boeing to eventually move all 787 production to North Charleston.

Boeing declined to comment on the speculation.

This expansion makes future growth in North Charleston possible, said Jack Jones, vice president and general manager of Boeing South Carolina. While we expect to begin the permitting process immediately for this property, we have no specific plans for the land other than where we will locate the new paint facility.

In addition to the new 230,000-square-foot structure to paint finished Dreamliners in customers colors, Boeing will also add a fully equipped fire station.

The new 10,000-square-foot fire station will sit on its main campus behind the welcome center. It will be completed late next year.

Also, a second autoclave will be added in 2016 to support aftbody composite fabrication. An autoclave is a pressure vessel used to process parts and materials which require exposure to elevated pressure and temperature.

Our commitment to South Carolina is visibly demonstrated every day as our growth and expansion continues, Jones said. I don t expect that ending anytime soon.

In addition to the 267 acres the Chicago-based aerospace giant is acquiring beside its 264-acre, 787 Dreamliner assembly plant, Boeing will add another 201 acres with the purchase of the former Trailwood Mobile Home Park and wooded acreage across from Glynn Terrace subdivision.

Boeing, through an arm of the state Commerce Department, is paying $13.8 million for the 267 acres Charleston County Aviation Authority is selling at the airport. The additional 201 acres is being bought from Truluck Properties for $35.2 million. Both land purchases are through a long-term lease with Palmetto Railways, a division of the Commerce Department. Boeing has the option to buy all 468 acres when the lease expires in 2027.

The land deal and new buildings are part of the $120 million in incentives awarded to Boeing in April in return for a $1 billion additional investment by the airplane maker by 2020.

The Aviation Authority is very pleased with the arrangement, and we look forward to continued success with Boeing and working with them in the future, Aviation Authority Executive Director Paul Campbell said.

The Aviation Authority has about 488 other acres available at the airport should Boeing decide to expand further in the future.

Though not part of Friday s announcement, Boeing will also undertake an extensive mitigation effort to address wetlands on the property along International Boulevard included in the 267-acre deal. About half of that acreage is considered wetlands. Other wetlands exist at the former mobile home park.

Boeing is buying property throughout the Lowcountry to make up for the wetlands it will fill near the airport. The replacement land will be placed in conservation easements, Eslinger confirmed.

A more detailed wetlands mitigation plan will be announced in January, she said. 

Boeing growing

Aviation analysts said whatever Boeing intends to do with the property it is collecting, its presence in the Lowcountry is going to expand.

The long-range plan at Boeing is to shift all 787 production to Charleston, said aviation analyst Saj Ahmad with StrategicAero Research in England. You don t buy that much land and do nothing with it. It s only a matter of time before all 787s emerge from Charleston.

He said the teething issues affecting production on a revolutionary airplane will be worked out, and Boeing will not allow its Charleston investment to be a one-trick pony.

Boeing is not expected to announce where the 787-10 will be built until next year, but Ahmad said it s a no-brainer that the biggest version of the Dreamliner will be constructed completely in North Charleston.

The sheer size of the jet means that it won t fit in the current Dreamlifter, he said in an email, referring to the size of the 787-10 s fuselage. I see no logical business, economic or strategic benefit of it being anywhere other than in Charleston. There has to be a pretty big disaster production-wise for Boeing to look elsewhere. As it stands, the 787-10 is Charleston s to lose.

Aviation analyst Scott Hamilton of Leeham Co. in Washington state said he believes North Charleston is sitting pretty for 787-10 production and the local Boeing campus will one day rival the company s massive operation in Everett, Wash.

That s going to be built down there, he said, referring to the 787-10 in South Carolina.

The production of other aircraft could follow in decades to come, he said.

It s obvious Boeing plans to continue growing Charleston, Hamilton said. Whether that happens sooner or later is dependent on what happens with the 777X. Over the next 10 or 15 years, Charleston is going to continue to grow. In the next 25 to 50 years, Charleston could be equal to or greater than the size of Everett.

Everett, Wash., is the hub of Boeing s commercial airline industry, including the original production site of the 787.

Hamilton said he believes the next new airplane, a replacement for the 757, will be built in Charleston when the current plane ends service by 2030.

Other aviation analysts hailed Boeing s acquisition of more land as good news for the Charleston area.

It is only a great thing for South Carolina that Boeing is looking to take more land and increase the size of that campus, said aviation analyst Greg Raiff, CEO of New Hampshire-based aviation consultant firm, Private Jet Services.

Strategically, it would be a wonderful thing for South Carolina if it were the only place in the world you built a 787, Raiff said.

Aviation analyst Richard Aboulafia of the Teal Group of Virginia agreed.

It shows a commitment by Boeing, and that s great for Charleston, he said.

Boeing s 787 final assembly plant in North Charleston was built to accommodate future expansion, Eslinger said.

Aboulafia said he thinks the 787-8, which is currently built in North Charleston and Everett, will eventually be phased out in favor of the new 787-9 and 787-10.

Boeing already makes parts for the 787-9 in North Charleston, but final assembly happens in Washington state, Eslinger said. The 787-10 has not started production, but it will be the largest airplane in the class with a seating capacity of 330 when it s first delivered in 2018.

I don t think the dash 8 will survive the introduction of the dash 9 and dash 10, Aboulafia said. It s more likely to get phased out. 

The 777X

As for production of the 777X, Boeing s new twin-engine, more fuel-efficient 777 model, Boeing continues to wrangle with the machinists union in the Pacific Northwest over its location.

Union leadership rejected a proposed new contract offer from Boeing on Thursday, pouring water on Washington state s hopes of landing the lucrative deal that could generate 8,500 jobs in a $10 billion investment. Boeing maintains the offer has not been withdrawn, and it s in the union s hands to accept or reject.

The main sticking point with the International Association of Machinists is the loss of its traditional defined-benefit pension. Boeing wants to replace it with a 401(k)-style defined-contribution savings plan.

The revised proposal presented Thursday also withdrew an earlier offer to dramatically slow wage growth for new hires. The new offer would have kept in place the current rate at which employees rise to the top of the pay scale.

The offer comes after the union soundly rejected Boeing s first offer in November by a 2-to-1 margin. 

That led Boeing to open bidding for the 777X to sites across the U.S. More than 54 sites in 22 states, including South Carolina, submitted proposals, the company said Thursday. Boeing is expected to start winnowing them down over the weekend.

Boeing announced in November some of the engineering work on the 777X will come to North Charleston as well as three other sites across the U.S.

Boeing hopes to start construction on the new 777X plant in November 2014 with airplane assembly in 2016 and the first flight by the end of the decade.

The company said it will make a decision on site selection early next year, but a new deal with the union would sideline other states bids.

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