American air travelers have reason to celebrate. American Airlines is trading in its fleet of outdated gas-guzzlers for a brand new crop of planes. It’s a welcome development, since the country’s third largest airline is notorious for carting customers around in some of the industry’s shabbiest and noisiest planes. It’s also good news for the economy. The deal — which amounts to 460 new planes (200 coming from the U.S.’s Boeing and 260 from Europe’s Airbus) is the biggest airplane order in history. The $40 billion deal has already boosted the stock prices of Boeing and companies like GE, a big player in Boeing’s production line. But with the country’s major multinationals focusing more and more of their attention abroad, it’s worth asking if deals like these will actually get beyond shareholder celebrations to creating U.S. jobs.
Thankfully, the answer in this case is yes. Although many big multinationals, such as U.S. automakers, have moved the bulk of their manufacturing closer to new sources of demand (China, India, and Mexico, for example), neither Boeing nor Airbus have followed suit. 96% of Boeing’s basic manufacturing facilities are still located in the U.S., which means tens of thousands of U.S.-based jobs could come out of the American Airlines deal, according to Robert Shapiro, an economist at economic advisory firm Sonecon.
Of course, that doesn’t make the deal a catch-all for the country’s job woes. With the U.S. part of the deal valued around $20 billion, the Boeing sale can’t prop up a $14 trillion economy. But the deal — a 5-year plan to produce engine-upgraded versions of Boeing’s 737 — will boost the fortunes of the communities where Boeing manufacturing is concentrated. And where is that? Most of the assembling for Boeing’s 737 takes place at a factory in Renton, Washington, south of Seattle. But the plane is made up of some 367,000 parts, many of which come from suppliers in states all the way from Kansas to Delaware.
Some see the deal as a lost opportunity for Boeing and the U.S. economy, since Boeing forfeited half the sale to European rival Airbus, which manufactures out of Germany and France. The deal also ends Boeing’s long-held monopoly over American Airlines’ plane-buying business. But it’s worth remembering that this is just one deal. And Boeing is lucky to get the business, since what American Airlines ultimately wanted was a more energy-efficient fleet, which Airbus already had on offer. To win its share of the deal, Boeing had to backtrack on fledgling plans to build a new, more energy-efficient plane and turn to work on upgrading the engine of its existing 737. “While the technology was there to do a [new] airplane, the production system was not well understood to be able to get to 60 planes per month,” Boeing CEO Jim Albaugh said of the decision.
Boeing’s task now will be to leapfrog Airbus on a new energy-efficient model. Boeing’s directors are still mulling whether to push that forward. In my opinion, they should make haste. A Boeing replacement plane that’s more energy-efficient than Airbus’s suped up A320 would be an easy sell in growing markets like Asia, where locally-based airlines are coming up and occupying a bigger chunk of the world’s fuel demand. “Boeing got a big American deal. But what about in 10 years when Air China is flying all around the world? It’s a safe bet that the cost of airplane fuel is not going to go down,” says Shapiro. If Boeing can get a leg up in those markets, America’s green job prospects are sure to head up.