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Fewer subsidies from state won't affect 7E7

By Dominic Gates
Seattle Times aerospace reporter

THE SEATTLE TIMES Harry Stonecipher says the 7E7 is on even if the U.S. uses the state's package as a bargaining chip in trade talks.

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Stonecipher said yesterday Boeing is "willing to discuss everything and anything" but that Europe would have to be willing to put on the table its indirect subsidies to Airbus.

The 7E7, he said, will go forward in any case.

And Stonecipher is also confident, if exasperated, about the stalled Air Force tanker program.

He's still betting the Everett plant will get to build the 767 tankers without having to vie for the contract all over again in competition with Airbus.

In conference calls with U.S. and European journalists yesterday, Stonecipher spoke mostly about the growing trade dispute with Europe. The dispute escalated last week when the U.S. unilaterally pulled out of a 1992 bilateral agreement and filed a complaint against European support for Airbus plane development with the World Trade Organization.

He defended the state tax incentives for the 7E7, cited by the European Union in a counter filing with the WTO, as standard "economic incentives that have been a practice not just in this industry but in every industry ... on both sides of the Atlantic."

He compared this state's 7E7 package to regional industrial improvements in Hamburg, Germany, and Toulouse, France, related to the Airbus superjumbo A380 program.

"They've been widening the roads in Toulouse," Stonecipher said. "That's not because the French are buying big SUVs. That's so they can move big chunks of a big airplane through there."

Asked about remarks by senior U.S. trade officials that appear to present the state's package as a possible bargaining chip in negotiations, Stonecipher said the U.S. government would decide what was negotiable.

But he was unfazed by the possibility that portions of the state 7E7 support package, worth more than $3.2 billion, might in the end be eliminated.
 
"It would not affect our plans one iota in terms of going forward with the 7E7," Stonecipher said. "The 7E7 is going ahead. It was going ahead with or without the Washington state tax incentives."

Stonecipher described unproductive meetings last month in Europe with Airbus CEO Noël Forgeard and with Phillipe Camus, chief executive of Airbus parent company EADS.

He said the European executives were "out of touch with what's going on in this case" because they suggested to him the issue is political and may be allowed to die quietly after next month's presidential election.

"On a one-on-one level, (Forgeard) doesn't think we have a case," Stonecipher said. "He didn't think we'd go forward ... he thinks this is presidential politics."

"I told him, 'If you think Mr. Bush's statement is strong, you ought to go read Mr. Kerry's,' " Stonecipher said. "This is not going to go away after the election."

Forgeard told him directly, said Stonecipher, that Airbus intended to produce the so-called A350, a threat to the 7E7.

It's unclear whether the A350 would be a completely new airplane or a derivative of the existing A330.

"I'd be surprised if you didn't build something," Stonecipher said he replied to Forgeard. "As long as you do it with your own money, no problem."

Stonecipher conceded Europe has reason to doubt the resolve of Boeing and the U.S. government in pushing the subsidy issue.

"This has started two or three times before, and nothing ever happened. It got stonewalled and stopped, and the Boeing Co. played a role in stopping it," Stonecipher said.

He said the company backed off taking a similar case to the WTO in 1999 because "we did not believe it was in the interests of both of us to have it going on at the time."

Five years later, though, with a new airplane program launched, he's adamant Boeing will follow through this time.

Stonecipher also addressed the ethical scandals clouding the 767 tanker program's future.

Early this month, Darleen Druyun, a former U.S. Air Force senior procurement official, admitted in a plea agreement that she had provided proprietary Airbus tanker information to Boeing as "a parting gift" before leaving the Air Force to join Boeing. She also added damaging new information: She had illegally favored Boeing in earlier contract negotiations, for C-17 and C-130 military transports.

Stonecipher said he's unsure about the effect of this revelation on those two contracts.

"I don't know if they're tainted or not," he said. "I haven't seen the evidence that backs up the plea agreement. But if they're tainted, we'll fix them."

The Air Force said in a statement yesterday it has asked Pentagon Inspector General Joseph Schmitz to examine the award of the C-130 contract.

While it probably won't lose the C-130 work, Boeing could face penalties from the Air Force or legal challenges from Lockheed Martin, Boeing's rival for that contract.

As for the stalled tanker deal, Stonecipher said that if it goes through, he's confident Boeing will get it.

"The only lack of confidence I would have in this thing is if they decided, no, we don't want to do it right now," Stonecipher said. "That's a decision they could make."

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

Material from Bloomberg was included in this report.

Central Asian carrier orders two Boeing 717s

Turkmenistan Airlines has decided to buy two Boeing 717-200s next year, the Central Asian carrier and the manufacturer announced.

The two twinjet aircraft, assembled in Long Beach, Calif., and valued at $80 million at list prices, are scheduled for delivery in August, said a joint news release issued Sunday.

The Turkmenistan flag carrier, which in 1992 became the first from the former Soviet Union to order Boeing planes, now has five 717-200s, three 737-300s and four 757-200s.

The order boosts the total for the 717, Boeing's smallest passenger aircraft, to 169 planes; 134 have been delivered.

Separately yesterday, Boeing said it had received five new order commitments for its business jets and had placed six aircraft from the existing fleet with new customers.

The Associated Press and Reuters