Overall, titanium composition in Boeing aircraft has gone from 7% in the 777 to 15% in the 787 Dreamliner. This growth has been important for Pittsburgh-based of titanium suppliers RTI International Metals, Inc. (NYSE:RTI) and Allegheny Technologies Incorporated (NYSE:ATI) as it has led to huge contract wins for both companies. For example, RTI is supplying a precision-machined titanium seat track component as part of a 10-year $900 million contract while fellow titanium supplier Allegheny’s contracts with the aerospace giant are worth billions. Needless to say, both companies have a lot riding on the success of the Dreamliner.
As titanium grows in its importance to Boeing, another metal, aluminum, appears to be losing its importance. What made up 70% of the materials in the 777 is now just 20% of the materials in the Dreamliner. Titanium has taken some of that share, but its composites that have really taken over. This overall trend hasn’t been kind to Pittsburgh-based aluminum giant Alcoa Inc. (NYSE:AA) .
The company is a leading supplier of aluminum-based products, which again make up 20% of the materials used in the Dreamliner. One of the important components Alcoa has developed is the specialty fasteners used to secure the composites and the metals of the Dreamliner. These aluminum and titanium alloy fasteners are both lighter and easier to install.
Still, the Dreamliner will use 80% fewer fasteners and 1,500 fewer aluminum sheets on each barrel section. Needless to say, that isn’t good for Alcoa’s business. It’s one reason why the company is working feverishly to develop new aluminum alloy solutions to be used in next-generation aircraft.
Foolish bottom line
While any massive production delays down the road could be devastating for Boeing, the Dreamliner contracts represent small revenue streams for the companies listed above. Sure, setbacks might lead to a missed quarter or two, but the overall impact on the Pittsburgh economy would be minimally felt, if at all. For instance, the titanium components manufactured by RTI come from facilities in Houston and Montreal. And while the other companies have regional — or even local — production capabilities, their largest contributions to the Pittsburgh economy come from managerial positions at downtown headquarters. It appears that Pittsburgh is cleared for takeoff.
The article Will the Dreamliner Ground Pittsburgh’s Economy? originally appeared on Fool.com and is written by Maxx Chatsko and Matt DiLallo.
Fool contributors Matt DiLallo and Maxx Chatsko have no positions in any stocks mentioned, and neither does The Motley Fool.
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