Boeing yanks big Evergreen contract
Business | Sat, 03/06/2010 - 12:05 pm | Read 1120 | Commented 4 | Emailed 0
By Nicole Montesano
McMinnville’s Evergreen International Aviation has lost a large, lucrative and prestigious piece of business to arch-rival Atlas Air — its long-term contract with Boeing to fly 787 aircraft assemblies across the ocean for final assembly domestically in a fleet of Dreamlifter super freighters.
Boeing has informed Evergreen that it plans to shift the Dreamlifter contract to New York-based Atlas when Evergreen’s five-year deal expires in September. Chairman Tim Wahlberg said Evergreen was given no reason, no prior notice and no opportunity to submit a rival bid.
Wahlberg said Evergreen had “bent over backwards to make sure there was not one flaw in this program,” which was still in test mode, due to repeated slippage in Boeing’s 787 production schedule.
“We have eaten costs as a result of that,” he said. “We’ll continue to run a perfect program, but, yeah, it just doesn’t go down real well.”
Wahlberg said the job was expected to run about 35 years. He said the contract was subject to renewal every five years, but Evergreen had been given no reason to think the review would be anything but routine.
Loss of the contract puts a number of jobs at risk, he said. Some 75 pilots, mechanics and ground handlers are assigned directly to the Boeing program, he said, and another 200 or so have some level of supporting involvement.
According to the Seattle Times, Atlas may have enjoyed a piece of special leverage in wresting the contract away from Evergreen — its pending order with Boeing for 12 new 747-8 cargo carriers. The Times reported: ”Because of a severe contraction in the air cargo market over the last couple of years, Boeing has been negotiating intensely with the initial customers, including Atlas, to reschedule 747-8 deliveries.”
Boeing has fitted four 747 cargo carriers with greatly enlarged fuselages. That enabled the planes, which it has dubbed Dreamlifters, to ferry large pieces of its next-generation 787 airliner from initial assembly plants in Italy and Japan to final assembly plants in the U.S.
Evergreen was elated when it submitted the winning bid for the business in 2005. It has been working closely with Boeing on the project ever since — and very successfully, by its account.
Wahlberg said Boeing had regularly praised Evergreen for the job it was doing. He said there were no reports of problems.
“We were on time all the time,” he said. “We ran a perfect operation.”
In November, he said, Boeing notified Evergreen that it was undertaking an evaluation of the operation that was just standard procedure, thus nothing to worry about.
“Then, about a month ago, they said were looking more seriously at how to reduce cost, how to get best value, and they were possibly looking at some sales, or going to a third party, or possibly using Evergreen,” Wahlberg said. “So then we’re starting to get a little shaky.
“We said, ‘Wait a minute. Make sure you give us ample notice to bid on renewing the contract.’”
Instead, he said, “Last week, we got a call from this gentleman from Boeing,“ terminating the deal. “That leads us to believe the award was totally unrelated to the operation that we’re running.
“We don’t know the facts. We thought would be nice if Boeing would have explained the facts to us. I don’t know what to say.”
Wahlberg said it was too early to say whether Evergreen would be able to find new work for affected employees or have to resort to layoffs.
“The job continues until the end of September, so we don’t have to figure that out today,” he said. “I hope we can further employ these people doing something else.”
But he said, “It really puts us in a bad position. So to say we’re disappointed, absolutely.
“And we’re really disappointed that Boeing hasn’t come clean on what the deal is. It kind of hurts our reputation.”
However, Wahlberg denied an anonymously sourced report in the Times that Evergreen was trying to sell the airline and aircraft maintenance arms of its business to reduce debt. He also challenged a December analysis in which Standard & Poor’s urged that kind of action.
The bond-rating agency concluded Evergreen’s “extremely limited liquidity position” left it “highly vulnerable to unexpected profit pressures.” For that reason, it recommended the company sell off assets to trim its debt load.
Wahlberg countered, “Evergreen is really in an excellent position.”
It is not planning to sell off assets. In fact, it is laying aggressive plans to acquire new ones, he said.
“S&P, they don’t really understand our business,” Wahlberg said.
Unlike other air cargo companies, many of which are experiencing financial troubles, Evergreen is doing well because it is able to make its flights do double duty. It is able to pick up a paycheck both coming and going, he said.
“We take military freight outbound, to the Middle East primarily, to Iraq and Afghanistan, and then position ourselves into China,” he said. “We bring cargo from China to the U.S., primarily to Chicago and the New York area.”
Wahlberg said the company’s airline “has got more work than we have aircraft to provide services for.” In fact, it is planning to pick up a used 747-400 freighter in Singapore next month, and to add three Air France BCFs to its cargo fleet later this year.
He said Evergreen’s helicopter division is also poised for expansion. “Our plan is to grow 15 percent a year, in spite of what goes on,” he said.