A Future of Shared Success

Trade Development Alliance of Greater Seattle, Seattle, WA

Raymond L. Conner
Vice Chairman, The Boeing Company
President and Chief Executive Officer, Boeing Commercial Airplanes

June 25, 2014

Good evening everyone.

As I look around this room, it’s really impressive to see so many accomplished people coming together to support Washington’s global trade development.

To note just a few: Mayor Murray; Commissioner Albro; council members from Seattle, Snohomish County and King County; and so many others.

And a special welcome to the ambassadors attending tonight.

We greatly value our international partnerships and we are very fortunate to have so many countries represented here tonight where Boeing customers are based.

I’d like to take a moment to congratulate and thank His Excellency Umarov and Air Astana, the airline of the Republic of Kazakhstan, who will take delivery of their third 767-300ER from Everett tomorrow. Air Astana is also a 787 customer, and will now add another Boeing aircraft to its growing fleet.

Tonight I’d like to discuss the critical role that global aviation plays in the economies of the state of Washington and the United States.

I also want to share some thoughts about the longstanding partnership between Washington and aerospace, and our prospects for a future of shared success.

I’d like to begin with a short video that conveys who we are – and what we do – at Boeing Commercial Airplanes.

What an amazing team. When people ask me to define the Boeing culture, I come back to two things: our spirit of innovation and the incredible pride of the people who invest years of their lives in designing, building and supporting our airplanes. You hear them say, “my 737,” or “my 777.” When you roll a plane out for the first time, it collects fingerprints, because people want to touch it and feel that connection – each individual is part of building that airplane.

Increasingly, the airplanes we roll out of our factories are headed for customers outside the United States. In the last 10 years, we’ve received orders from customers in more than 70 countries. That in itself has a significant impact here in the state of Washington, because aerospace represents nearly half of our state’s exports.

And we have an opportunity to build on that together as we compete for a $4.8 trillion market for 35,000 airplanes over the next 20 years.

To give you a little insight into the importance of global aviation, I’d like to share a personal story.

Like some of you, I grew up with the Vietnam war. As a family, my brothers and I watched the war play out on TV every night. My brothers were about 10 years older than me so the likelihood of them going to war was very real, even though Vietnam was so far removed from my daily life. When they registered for the draft, the war felt more personal. Fortunately, they ended up not going to Vietnam.

That was, for the most part, my experience with Vietnam until the year 2000, when I was the head of Asia sales for Boeing Commercial Airplanes. Vietnam had just opened up as a market, and the prime minister at that time, Phan Van Khai had a strong desire to advance the relationship with the United States and a real need for new aircraft to support their expanding economy. That provided an opportunity to sell directly to Vietnam.

I still remember flying into Hanoi for the first time to meet the Prime Minister. It was a strange feeling to look out on approach and see the crater shapes in the ground from the B-52 carpet bombing that had taken place during the war. It was surreal.

But here’s what developed out of that visit: The Prime Minister and I struck up a friendship that continued for many years. Vietnam went on to buy four 777s directly from Boeing, leased four more from United States leasing companies and years later purchased eight 787 Dreamliners.

That same year, President Clinton made a historic visit to Vietnam. And in 2005, Prime Minister Khai became the first Vietnamese senior official to travel to the United States in over 30 years. On his way to the nation’s capital, he stopped in Seattle to visit Boeing, and I was fortunate enough to travel to Washington, D.C. to participate in the rest of his visit. Later, after 12 years of negotiations, Vietnam joined the World Trade Organization.

And today, Vietnam Airlines not only operates Boeing airplanes, the country has developed some aerospace manufacturing capabilities by building partnerships with our suppliers and are now part of Boeing’s extended supply chain.

Boeing and the global aviation industry were at the leading edge in developing a trade opportunity that allowed the United States and Vietnam to forge a new alliance for the 21st century.  

I tell the Vietnam story to illustrate several points – not least of which is the power of personal relationships in developing trade.

First, the world has become more interconnected, not less, and as a result businesses and governments are becoming more global – much like the aviation industry.

Second, aviation is a powerful force for shaping our world. And, as the nation’s leading exporter, Boeing and the aerospace industry are key economic drivers for the United States, Washington state and the Puget Sound region, where the largest part of our commercial workforce is based.

Finally, Boeing and Washington state have a shared future. By taking steps to remain competitive in a challenging industry environment, we will ensure that Washington continues to benefit from the jobs, revenue and technological skills we contribute to this region.

Our shared future grows out of our shared past.

The aviation industry grew up side-by-side with the state of Washington. The state was only 27 years old when Bill Boeing assembled the Bluebill – the first B&W seaplane – in his boathouse on Lake Union.

That same year – 1916 – he incorporated Pacific Aero Products Co. and moved his operation to a shipyard on the Duwamish River. Today we know it as the Red Barn, which is now part of the Museum of Flight.

As we approach the Boeing centennial, I’m incredibly proud of our Puget Sound roots and our continuing presence here as a generator of jobs, revenue and trade.

Boeing is the state’s largest private employer, with over 81,300 employees based in Washington. That’s up 10,000 jobs since 2010.  Like any healthy business, we’re constantly making adjustments to respond to our markets and better serve our customers, but despite impressions left by some, Boeing is not leaving Puget Sound; our footprint has grown.

Many of those employees work in the division I lead – Boeing Commercial Airplanes – which is headquartered in Renton, Wash.

A couple of other units are based in Puget Sound as well – our finance arm, Boeing Capital Corporation; and Shared Services Group.

In addition, our corporate Engineering, Operations & Technology group has many people here as well, which supports Boeing’s business across the country.

Then there’s the supply base. Last year we spent $5 billion doing business with nearly 2,000 Washington suppliers.

All told, aerospace supports more than a quarter of a million jobs in Washington.

Those jobs pay 11 percent of all the wages earned in this state.

And you don’t have to look far to find people in this area who have Boeing in their family tree. I’m from a Boeing family myself. My dad started as a mechanic on the B-17. My brother was 19 when he worked as a mechanic repairing airplanes in service around the world. I joined Boeing in 1977 as a mechanic, working on the 727. Together, the three of us – my dad, my brother and I – have almost 120 years of service. And there are countless other families like ours.

Clearly Boeing has a big footprint here – in terms of our workforce and our facilities. We’re investing heavily in our Puget Sound sites as we prepare for production of the 737 MAX and the 777X.

At Boeing Field, we’re doubling the size of the Commercial Delivery Center to support  increasing production rates at our 737 factory in Renton.

In Everett we’re building a new composite wing center for the 777X. It will be 1.2 million square feet – the size of 24 football fields – and will house three of the largest autoclaves in the world. We’re also modifying our factory to make room for assembly of the 777X wing. With a span of over 235 feet, it’s the largest wing we’ve ever built.

The job site will cover more than 60 acres ringed by two miles of construction fencing. That’s the length of the Alaskan Way Viaduct replacement tunnel. Portions of the construction will go on 24/7 – the equivalent of six trucks per minute working around the clock, seven days a week, for four months.

Down South in Frederickson, our Fabrication Composite Manufacturing Center will build the 777X horizontal stabilizer and vertical fin, just as they do on today’s 777.

We’re investing billions of dollars in the future of the company and the region as we design and develop the 777X and the 737 MAX. These two ground-breaking airplanes represent the future of our company, and our region.

Although the vast majority of our production system and supply chain is in Washington and the United States, our customers span the globe, and those markets are shifting.

In 1992, North American and European airlines carried more than 70 percent of all air traffic.

Less than 20 years from now, that proportion will shrink to 39 percent as emerging nations continue to leverage aviation as a tool for economic development.

At the same time, the efficiency and range of our new airplanes is allowing carriers to open up new, direct routes.

It’s a similar story in Seattle, where these new airplanes are fueling the city’s growth as an international hub. For example, ANA opened a direct route between Seattle and Tokyo flying the 787, Emirates launched direct travel between Seattle and Dubai with the 777, and Korean Airlines between Seattle and Seoul.

Every one of us in this room should take pride in the fact that we, here in the Puget Sound, are changing the world for the better, and connecting more people than ever, through the work we do in this industry.

Boeing ushered in the Jet Age in 1958 when Pan Am took delivery of the first commercial jetliner in the U.S. – the 707 – and launched the first daily Trans-Atlantic jet service from New York to Paris.

Today, while regions outside North America, such as the Middle East, Latin America and  Africa are seeing tremendous growth, the Asia Pacific region – which includes China, Northeast Asia, Southeast Asia and Oceania – is the fastest-growing aviation market in the world.

Over the next 20 years, we forecast that Chinese airlines alone need nearly 6,000 new airplanes valued at $780 billion. And project that nearly half the world’s air traffic growth will be driven by travel to, from or within Asia Pacific. That means more than 4 out of every 10 airplanes we build, will deliver to the Asia Pacific region.

Today, nearly 1 in 3 of the 737s we build in Renton are delivered to our customers in China.

The growth in each of these emerging markets is good news for Washington, because the more airplanes we sell to China and other growth regions like the Middle East and Latin America, the more work it creates for our factories in Renton and Everett and in Boeing Fabrication.

Beyond just the regions I’ve mentioned, we’ve developed valuable partnerships throughout the world -- partnerships that include both sales and supplier partnerships. 

A great example of this is Morocco. We have a joint venture company called MATIS aerospace in Morocco. MATIS is a highly productive supplier of wire bundles for Boeing’s 737 and 777 programs. Due to its strategic vision, Morocco has attracted other suppliers as well and continues to grow its capacity and capability in aerospace. We are proud to not only have them as a customer, but to be part of their growth.

Partnerships like these are an important tool for any global company to grow sales, especially in highly competitive markets.

That leads me to my final point: The need to ensure we can compete for the long term against Airbus and the threat of new competitors moving into our market space.

Our survival depends on it – and the state of Washington has a lot at stake.

In 2012, Boeing’s commercial airplane division pumped $70 billion into the state economy and generated $476 million in state tax revenues.

Every $1 Washington has invested in aerospace since 2002 has generated $3 in economic benefits to the state.

We need each other, so it’s important to understand the competitive environment that’s driving Boeing’s decisions.

In my 37 years at Boeing Commercial Airplanes, I’ve never seen such a fierce marketplace. The realities of our business require us to constantly renew and refresh our focus to ensure we can compete and win.

Our customers’ success is contingent upon products that deliver increased capability, efficiency and performance, but at a much more affordable cost. This is a reality that’s here to stay.

In order to win and maintain customers, we must – both internally and throughout our supply chain – drive productivity, increase profitability, deliver innovation and, more importantly – provide unmatched value to our customers – at a competitive price.

I know it can be confusing to some people, because we’re doing so well at the moment, but in our industry, business cycles are long. It takes years to develop new airplanes and bring them to market. Our customers typically operate an airplane at least 15 or 20 years before replacing it with a newer model. When we lose a sale, we feel the impact for a long, long time.

So we can’t rest on our laurels. We have to take the long view.

To sum up, global aviation has opened up enormous opportunities for us to connect and shape the world while strengthening our economies and our communities back home.

At Boeing Commercial Airplanes, global markets will continue to be a growing share of our business, supporting the U.S. balance of trade, the tax base of the state of Washington and tens of thousands of jobs in the Puget Sound region.

It’s been quite a century. I think Bill Boeing would be proud of what he started.

I want to thank the people of Washington for allowing us to be part of this community – and part of your lives – for the past 98 years.

I’m looking forward to our second century of shared success. Thank you.