End of line for Boeing tanker?

Without an Air Force tanker deal or new commercial orders, The Boeing Co. could close its 767 production line in Everett in 12 to 18 months, the head of Boeing's defense and space business said yesterday.

That is sooner than expected.

After visiting Boeing's defense and space workers in the Puget Sound area, Jim Albaugh told reporters that ending 767 production would drive up the cost of any future tankers when the line was restarted for the military program.

It could even mean no 767-based tanker.

"The cost of starting it up could be prohibitive," Albaugh said, "and would deny the country from having a commercial derivative 767 tanker."

The 767 is Boeing's only tanker offering that will meet the Air Force requirements, he said, noting the planned 7E7 can't be modified structurally for that role.

Albaugh's comments were the most specific yet by a Boeing executive about how much longer the 767 line will remain open without a tanker deal or additional commercial orders.

He also disclosed that Boeing is having internal discussions about whether it can modify 767s on the Everett production line as tankers, which could make the planes less expensive to build and a tanker deal more attractive for the Air Force.

Boeing took this approach to recently beat out Lockheed Martin for a Navy contract to supply 737s as sub hunters. Rather than flying the assembled 737 jets to Wichita, Kan., for military modifications, much of that work will be done during final assembly in Renton.

Under the tanker deal now considered dead, Boeing would have flown the 767s to Wichita for major modifications.

The controversial $23.5 billion deal to buy and lease 100 767s as tankers -- they would begin to replace the aging fleet of Air Force KC-135s -- has been shelved until at least November. That's when an analysis of alternatives ordered by the Defense Department is expected to be finished.

But Albaugh said he remains confident the Air Force will eventually pick the 767 as its next tanker.

"Because of the need, the tanker program will go," he said. "It's just a question of when and what the contract will look like. I can't tell you when, and I know the contract won't look like anything before. But I do believe it will go."

The 767 is nearing its end as a production jetliner. It will be replaced in the Boeing commercial lineup by the 7E7, due to enter service in 2008.

As of the end of May, Boeing had 22 more 767s left to build. It has since received orders for two 767 freighters.

Four of those 24 planes are tankers that have been ordered by the Japanese and Italian air forces.

That leaves 20 of the widebody jets on firm order from commercial customers.

In order to stretch out the remaining 767 backlog, Boeing has lowered its production rate of the plane to a 30-day cycle, which means about one plane is finished every month and a half. On paper, that's enough production to last two years or more.

But the backlog number is misleading. Of the remaining planes on order by airlines, the bulk are for two carriers in Japan -- All Nippon, with eight planes on order, and Japan Airlines, with six on order.

All Nippon recently became the launch customer for Boeing's 7E7. It will take delivery of two more 767s this year, three in 2006 and the final three in 2008, the same year it takes delivery of the 7E7.

Some of those last ANA 767s are expected to be swapped out for 7E7s.

Japan Airlines is also a potential 7E7 launch customer, and some of its remaining 767 orders could also be swapped for 7E7s.

Last month, Boeing commercial boss Alan Mulally said a decision to end production of the 767 could come in the next few months.

"If they want it, we're ready to make it," Mulally said of the 767 tankers for the Air Force. "But if they can't make that decision soon, we'll have to shut the line down. We are getting to the place in the next few months that we're going to have to make a decision."

Boeing Chief Executive Harry Stonecipher later said a decision on when to end 767 production did not need to be made until early next year.

More than 2,500 Boeing workers are involved in the 767 program, though only several hundred machinists actually assemble the planes.

On other matters, Albaugh also told reporters:

The Air Force needs both Boeing and Lockheed Martin for military satellite launches. A congressional report just made public suggests the government pick just one.

Boeing's military launch program, known as Delta 4, is no longer being used for commercial missions. If the Air Force went with just Lockheed Martin, Albaugh said, Boeing would close down its Delta 4 program, including the Alabama plant where the rocket is now assembled.

"For the time being, we need two launch providers," he said, "until one or both demonstrate reliability and only then does it make sense to down select to one."

Boeing has been suspended from bidding on future Air Force launch contracts because of ethical misconduct.

It was found to have more than 25,000 pages of stolen Lockheed Martin documents.

That suspension is not expected to be lifted until later this year.

Albaugh said Boeing's military and defense employment in Puget Sound has grown by about 27 percent in the last year, to about 6,500 workers today.

About 1,200 more commercial and military workers will be added for the Navy 737 program that Boeing just won. About 400 of those will be needed for the military part of that work this year and another 500 in 2005, Albaugh said.

P-I aerospace reporter James Wallace can be reached at 206-448-8040 or jameswallace@seattlepi.com

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