What's Good For Boeing Is Good For Seattle

`BOEING still drives our economy," says Seattle Mayor Norm Rice of the aircraft manufacturer that employs 99,000 workers in the area.

The company helped Seattle prosper in the late 1980s as jet orders surged. But now the region's economic "driver" is downshifting.

The No. 1 jetmaker announced Jan. 26 that it would slow production and lay off as many as 20,000 workers because of slack demand from the airline industry. The job losses, coming atop 6,500 layoffs last year, will have a ripple effect; each manufacturing job at Boeing supports about four other jobs in the local economy, researchers say.

The news is particularly bitter since Boeing has tried hard to overcome its history of boom-and-bust cycles. The company paced production to retain a huge backlog.

Company executives have "managed their work force quite well" through the current downturn, Mayor Rice said in an interview prior to the latest cutbacks.

The company's problem is that "virtually every airline in the US is unprofitable," says John Mitchell, chief economist with US Bancorp in Portland, Ore. Carriers operating under bankruptcy protection have been slashing fares to stay in business, which has in turn devastated healthier rivals.

American Airlines, one of the strongest carriers, recently reached agreement with Boeing to delay delivery of eight aircraft, for example.

And GPA Group PLC, a struggling aircraft-leasing company based in Ireland, pressed Boeing and other jetmakers to allow it to cut its firm orders from about $11 billion to $4 billion.

Despite the slowdowns at its assembly plants in Renton and Everett, Boeing will keep building planes and hoping for a brighter future as US airlines recover and the Asian market grows rapidly. The company recently agreed with four European aerospace companies to explore the feasibility of a jet for 600 or more passengers. The project is too costly for any one company.