Air traffic will be normal by August, Boeing jet sales lag

Posted: Thursday, May 16, 2002

SEATTLE -- Airline passenger traffic is expected to be back to normal levels by August, but airplane sales won't fully recover from the aftermath of the Sept. 11 terror attacks until around 2004, Boeing Co. executive Nicole Piasecki said Tuesday.

Piasecki, vice president of business strategy and marketing for Boeing Commercial Airplanes, said many airlines are increasing passenger loads through deep ticket discounts, and that cuts into their profitability.

''They have to be profitable before they start buying airplanes again,'' she told an investment conference sponsored by Ragen MacKenzie, a division of Wells Fargo.

Boeing, which moved its headquarters to Chicago last year after 85 years in Seattle, maintains its commercial airplanes division and primary airplane production plants in the Seattle area.

Piasecki, who noted that airlines have doubled the number of planes idled to about 2,000 since Sept. 11, said Boeing expected to deliver about 380 new planes in 2002, compared with 527 the previous year. The airline expects only 275 to 300 deliveries in 2003.

''We see this as the bottom of the cycle, and recovery occurring in 2004,'' she said.

Long term, Boeing believes the post-Sept. 11 downturn actually will be healthy for the airline industry, since it is causing larger carriers to look hard at cutting costs and copy many of the practices that have made smaller discount carriers such as Southwest successful, Piasecki said.

For example, some large carriers may decide to drop shorter routes, and some may merge, she said.

In other, longer-term changes, Boeing expects to increase its bottom line not so much by increasing new plane sales, but by offering airlines engineering, modification and information services carriers now handle in-house.

The company sees a huge potential in that area, Piasecki said, noting that Boeing, which has around a 60 percent market share in new jetliners sold, accounts for more than 80 percent of all ''seats'' currently in the air.

She said Boeing is confident it will maintain its edge over Europe's Airbus, its primary competitor. Where Airbus is betting on very large planes flying from large airports fed by smaller routes, Boeing is focusing on jets such as the 777 and 767 that can fly longer nonstop routes formerly served only by the superjumbo 747.

Piasecki said the company faces negotiations this year with unions representing 70 percent of employees. Talks begin in September with the International Association of Machinists, representing production workers. Talks with engineers, represented by the Society of Professional Engineering Employees in Aerospace, begin in December.

Piasecki said Boeing would take a collaborative approach to this year's talks, but she added that ''Clearly, we have leverage, given the downturn in the industry.''

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