The 787 Dreamliner has been a driving force in Charleston's industrial reawakening, having added more than 4,000 manufacturing jobs to the region. The Boeing Company (NYSE:BA) recently poured millions into expanding and upgrading its manufacturing campus there in an attempt to ramp up production to 10 planes a month by the end of 2013 and beyond. It goes without saying that any major setback to the Dreamliner's adoption will serve a crushing blow to the city and region.
While Seattle and Charleston fret over each setback, it is much less obvious that Pittsburgh's industrial economy is caught in the crosshairs as well. The city is home to companies supplying the Dreamliner's titanium, aluminum, and even its innovative cockpit and passenger windows. With billions of dollars in supply contracts hanging on every twist and turn, investors will want to keep an eye on the continuing saga
Should you run for the hills or stay put? Exhale. Take a deep breath. The two of us -- both natives of the Steel City -- will break down the potential for disaster and opportunity that lie ahead.
Why does it matter? Even without a fix to electrical systems to its beleaguered Dreamliner, Boeing has announced that it will continue production of its 787-8 airliner and brazenly forge ahead and develop its larger sibling, the 787-9. With production lines unfazed (for now) by recent woes, aren't suppliers in the clear? It seems that way at the moment, but delays bring angry airlines and angry airlines bring lawsuits.
According to The New York Times, Japan's All Nippon Airways lost an estimated $15.4 million in January by keeping its 17 Dreamliners in the stable. The company has canceled 450 total flights that affected nearly 60,000 customers, which didn't exactly help its brand. Executive Vice President Kiyoshi Tonomoto said the airline will discuss the possibility of financial compensation once the total effect of the delays becomes clear.
While lawsuits are unlikely to directly affect suppliers, failing to find a timely fix could. After all, it doesn't seem too far-fetched for airlines to boycott the Dreamliner altogether. Let's not forget that airlines got along just fine before the 787 arrived. Any pullback in market demand would ultimately lead to fewer aircraft being produced, which will result in less titanium, aluminum, and specialty coatings being supplied. This could end very badly for Pittsburgh-based companies.
How bad? Before we can understand the ramifications, if any, we need to first realize how deep the relationship is between Pittsburgh-based suppliers and the Dreamliner. What most people don't realize is that when you're looking at a Dreamliner, you're seeing Pittsburgh innovation at its finest.
Take the windows, which are designed using innovations from PPG Industries, Inc. (NYSE:PPG) . They were developed with three goals in mind: simplify maintenance, reduce costs, and enhance the flying experience for the crew and passengers.
The company did just that with windshields kept clear of ice thanks to gold and indium-tin oxide heating systems while passengers can enjoy their flight by looking through Alteos window systems. The Alteos feature electrochromic window shades powered by an interactive system controlled by the passenger. With a simple push of a button, passengers can switch from a bright, clear state to a completely dark state.
Not only was PPG Industries instrumental in the design of the windows but it also supplies the coatings system. This is not your average can of paint. This strippable system of coatings saves airlines time when the plane is in need of a new paint job. Saving time is important because, as they say, time is money.
PPG isn't the only Pittsburgh-based company bringing innovation to the Dreamliner. In fact the city's innovation goes even deeper into the structure of the 787. You see, in order for the aircraft to meet the fuel efficiency needs of its customers, Boeing needed to increase its use of titanium. While titanium isn't as well-known as other commodity metals, it has the highest strength-to-weight ratio of any metal. That's key for increasing fuel efficiency without sacrificing safety. Those properties have made titanium one of the fastest-growing components used by the aerospace industry and a reason why its usage is projected to grow 8.5% annually through 2019.