QANTAS CANCELLATION PUTS MORE PROFITABILITY
PRESSURE ON BOEING
Australian airline Qantas announced this week that it was canceling an order for thirty-five Boeing 787 Dreamliner aircraft – putting additional pressure on the company to turn a profit from its costly new plane.
Qantas’ decision means $8.5 billion in lost profits for the Chicago-based aerospace manufacturer – which received hundreds of millions of dollars in taxpayer-funded incentives in 2009 to open a Dreamliner assembly plant in North Charleston, S.C. In addition to this lost revenue, Boeing must also pay Qantas $433 million in refunded deposits and compensation for delays.
Qantas CEO Alan Joyce said the Dreamliner “is an excellent aircraft and remains an important part of our future.”
“However, circumstances have changed significantly since our order several years ago,” he added.
Originally scheduled to be delivered to customers in May of 2008, the Dreamliner project has been literally one nightmare after another – including an engine failure last month that briefly shut down the Charleston (S.C.) International Airport. Qantas was supposed to have nearly 30 Dreamliners in service by the end of 2011, but has received none of the planes.
Boeing must now sell more than 1,100 Dreamliners to turn a profit on the program. It currently has orders for 824 of the planes, of which it has filled seventeen.
Made of 50 percent carbon fiber composite material, the Dreamliner is lighter, stronger and more fuel-efficient than most commercial jets – which are made primarily of aluminum. With fuel prices rising, such planes are obviously in high demand – or at least they were back when Boeing was supposed to have been cranking them out.
Now? Well let’s just say it’s becoming increasingly obvious why this company always has its hands in taxpayers’ pockets.
In addition to its massive state incentives package (championed by S.C. Senator Hugh Leatherman), Boeing also receives subsidies from the federal government via the U.S. Export-Import Bank, which gives foreign airlines a taxpayer-funded competitive advantage over U.S. carriers.
How will Qantas’ decision impact South Carolina workers? S.C. Department of Commerce spokeswoman Amy Love did not respond to our inquiries – nor did the office of S.C. Gov. Nikki Haley.