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Boeing scandal jeopardizing 767

The ethics scandal that has engulfed the Boeing Co and led to the firing of two top executives and the resignation of its chairman may yield another casualty -- the 767 jetliner.

The government's inquiry into a US$17 billion deal for Boeing to convert 100 767 jets as air-refueling tankers to the US Air Force further delays a contract essential to keeping the plane in production.

With few new orders, a shrinking backlog and a production rate already at a crawl, Boeing needs a quick resolution to the inquiry to avoid more layoffs or shutting down production of the 22-year-old 767 altogether.

"There isn't a lot of time," said Scott Hamilton, an independent aviation analyst based in suburban Seattle. "The 767 was dying a slow, natural death anyway."

The 767, a twin-aisle jet that holds as many as 300 passengers, is facing increased competition from the prospect of a new commercial jet in Boeing's future -- the proposed midsize 7E7.

On Tuesday, US defense officials announced a delay in its 767 acquisition and ordered an inquiry into the deal. The announcement capped two weeks of trouble for Boeing, which late last month fired two executives for alleged misconduct.

A week later, Boeing chairman and chief executive Phil Condit resigned, saying he wanted to help the company distance itself from the scandals and make way for new leadership.

A Boeing spokeswoman confirmed reports from employees that Boeing had hoped to start turning out tankers in January at its Everett factory, but declined to comment further on potential effects of the contract delay.

"We're going to just keep working to fill in the backlog," spokeswoman Leslie Nichols said.

But there's not much backlog left. As of October, the most recent figures released by Boeing, the company had just 26 767 orders to fill. Production has already slowed to just one plane every six weeks. This year, Boeing has gotten only 10 orders for the 767.

Analysts say they can't predict how long Boeing's 767 line can keep creeping along while a government inquiry or congressional hearings play out. And if the investigation turns up significant wrongdoing, Boeing could face losing the tanker deal altogether.

Paul Nisbet, an analyst with JSA Research, said he thinks Harry Stonecipher, the former Boeing executive brought back from retirement to replace Condit, will likely be able to salvage the deal.

"I think after having Stonecipher grovel in the mud for six months or so he'll probably get everything he's looking for," said Nisbet. "But he'll have to grovel."

Bigger threats are how much profit the delay will cost Boeing, and whether the company, which has already cut nearly 40,000 positions in two years, will have to lay off even more employees.

The ups and downs of the 24-month tanker negotiations have been draining on workers, said Tony Perry, an electrician who works on 767s in Everett.

"Every time something happens, there's been a setback," Perry said.

"We could end up losing more jobs," he said, noting that crews are so small it's already "like a ghost town."
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