Next downturn may not deflate buoyant Boeing

PARIS -- Billions of dollars in jet orders are rolling in at the Paris Air Show and the airplane business is booming as if it were supersonic.

Yet Scott Carson, chief executive of Boeing Commercial Airplanes, knows somewhere down the runway there will be a downturn in the always cyclical airline business.

"I think there's still growth in the market," he said. "That leaves a lot of room for nervousness. But I'm not panicked about the end of a cycle."

How would he respond to a downturn?

"I would hope the customers we have are strong enough to weather a soft landing," Carson said. "And we would produce and deliver to them and maintain a stable work force in Seattle."

In a wide-ranging interview Wednesday, Carson also said he thinks Airbus has trapped itself with its strategy of developing an A350 jet that will take on the 777 at the same time as the 787 Dreamliner.

And he revealed Boeing is exploring a new way to create composite-plastic airplane parts that would avoid the expensive step of baking them in huge ovens.

Carson acknowledged a growing nervousness in the industry about how the soaring airplane business may land.

Earlier this month, worry was thick in the air at the annual summit of the world's major airline executives in Vancouver, B.C.

Many airlines have razor-thin or no margins.

They face falling revenue from increased competition, rising costs from high fuel prices, looming pressure from environmental groups and the potential for overcapacity as more new airplanes enter the market.

In an informal poll during one session in Vancouver, the majority opinion was that airline profits worldwide will peak within 18 months.

"The boom is going to boomerang," warned Michael Levine, longtime industry executive and now a professor at the New York University School of Law, during a panel discussion. "It will be more challenging than it's ever been in the history of this business over the next 10 years."

Some of the record orders won by Airbus and Boeing in the last few years would likely evaporate if an airline shakeout does hit.

Shallow slump

Yet here in Paris, Carson said he's optimistic the down cycle this time will be shallow for Boeing and that its fat order book will see it through any attrition among the airlines.

"We're sitting on a six-year backlog," said Carson. "That gives us some protection from an economic downturn. It's not iron-clad, obviously."

The new diversity in the industry -- in both geographic spread and in the different airline business models -- should leave Boeing with sufficient business, he said.

The last few years have shown U.S. airlines can tank while those elsewhere in the world grow. And traditional legacy carriers may bleed money even while low-cost carriers are profitable.

Carson said Asia, now fully a third of the airliner market, still has room for enormous growth.

Meanwhile, new business models are mushrooming, from business-class-only airlines to long-haul, low-cost carriers.

Carson expressed confidence in Boeing's choice of customers.

"We've been very careful, very prudentially aware of the economic strength of our customers," Carson said. "You don't see us selling to many startups."

He criticized Airbus for risking an airplane glut with its plan for a steep ramp-up of up to 40 single-aisle A320s a month from about 31 now.

"If you commit to produce more than the market is asking for, you will destroy the economics in an industry," Carson said.

"I do not believe there is demand for either manufacturer to be at 40 a month."

Carson also took a look ahead at two big strategic issues: airplane development and manufacturing technology.

777 updates

Chief Executive Jim McNerney said recently that Boeing will consider revamping its hugely successful big twin-jet, the 777-300ER, if Airbus brings out an all-composite A350-1000 of similar size.

Carson said that means only incorporating improved technologies as Boeing has done on other programs.

Boeing won't need a new airplane or even a major new 777 derivative to counter the A350-1000, he said, because Airbus' timing is off.

That biggest version of the A350 isn't due to enter service until the middle of the next decade.

But Carson said that's about the time Boeing expects to announce its next airplane program, after the 737's replacement It would be a 777 successor to enter service around 2020.

"They are going to be trapped, I continue to believe this, a half a generation between our normal improvement cycles," Carson said.

"The 777 is great. If they try in mid-generation to replace it ... we trump them one more time with better technology."

Composites not cooked

Carson reiterated a point made by 787 chief Mike Bair on Monday that there's plenty of room for improvement in composites manufacturing.

The results of tests on the first version of the 787 should allow engineers to take out weight where it isn't strictly needed and significantly improve later versions of the jet.

"We've just scratched the surface," Carson said.

He said Boeing is also studying an entirely different way of curing, or hardening, the composite plastic material, that would reduce the cost of the manufacturing process.

Carson described the 787 as "a cooked airplane," because its massive structural sections are cured in big autoclaves, or high-pressure ovens. Autoclaves are expensive to buy and to operate.

"If you could cure your materials outside an autoclave, you could once more dramatically change the manufacturing flow," Carson said.

He said he doesn't know if the research could be put to use by the time Boeing develops its next new airplane, the 737 replacement. But because the high production rates on those smaller jets would mean a heavy use of autoclaves, some engineers "would like to have it ready," he said.

Dominic Gates: 206-464-2963

or dgates@seattletimes.com