Testimony of Raymond W. Bracy
Business Director, Asia Pacific
President, Boeing China, Inc.
Boeing Commercial Airplane Group
Before the House Banking and Financial Services Committee
February 3, 1998
Mr. Chairman, Members of the Committee. My name is Ray Bracy. For the past year, I have managed the Asia Pacific sales portfolio of The Boeing Companys Commercial Airplane Group and will soon be Boeings chief representative in China. We appreciate the opportunity to share The Boeing Companys perspective on how the current Asian financial crisis is affecting Boeings current and future airplane deliveries. I also want to share some thoughts on how the United States can develop a comprehensive response to the turmoil in Asia that will deepen our relationships with this critical region.
Before proceeding further I want to make an important point. The Asian Crisis is not a "Wall Street" or "Corporate America" or "big bank" issue. It is plainly and simply a "Main Street" issue. How the United States addresses this crisis will dramatically affect the fortunes of millions of regular Americans across the country in terms of their jobs, their purchasing power and their security.
Mr. Chairman, I would like to share our assessment of how the turmoil in Asia and the related decrease in air traffic growth could affect Boeings forecast for new airplane orders and our near-term delivery schedule.
Over the next ten years, the Asia Pacific region is expected to be the fastest-growing market for air travel and for new commercial airplane purchases. We anticipate that carriers in this region will purchase approximately 30 percent of the worlds orders for commercial aircraft, equivalent to approximately $150 billion. Unfortunately, future sales to this region will be jeopardized if we stand by and let the current economic crisis in Asia continue.
We forecast the demand for aircraft based upon growth in economies around the world. As the actual air traffic growth in the Asia Pacific region slows, we are revising the forecasts for new airplane deliveries. This is a continual process and we are in constant, close communication with our airline customers.
We believe that most of the Asian economies have the potential to reverse the current situation, that they will take necessary steps to do so AND that the crisis will not spread to other regions of the world. This region has the potential to recover quickly and remain the fastest growing market for air travel. But this forecast will become a reality only if the United States and the international community continue to play an active role to restore confidence and stability to the region.
In addition to our forecast of future deliveries, we have also assessed how lower traffic in the region might affect deliveries over the next three years. We have numerous airline customers in this region of the world and are currently planning for over 300 deliveries to our Asian customers for 1998, 1999 and 2000. This represents approximately one-fifth of our total production for this same period. Most deliveries of narrow-body aircraft (737s and 757s) are destined for the Peoples Republic of China. The remainder are mostly wide-body, intercontinental aircraft -- predominantly 747s and 777s.
Our most recent analysis shows that we can reasonably expect 60 fewer deliveries to Asia. For the most part, airlines are indicating that they will take their 1998 deliveries. This implies that most of the vulnerability to our production planning resides in the 1999 and 2000 time frame, or beyond and is limited primarily to the 747 and 777 lines. The demand for those aircraft in other parts of the world is robust and we have confidence that we will be at the levels of production in that time frame that we enjoy today. Additionally, those deliveries are far enough into the future that we can proactively manage our production. However, should the Asian economies fail to recover or the situations worsen, we will have to revise our analysis.
While the near-term economic effects on Boeing and its workforce may be manageable, I cannot overstate the key role of the U.S. Government and the international community in developing constructive solutions to the problems facing the Asian economies.
Mr. Chairman, as you have clearly recognized a key element of the United States response must be to provide sufficient resources for multilateral institutions such as the International Monetary Fund (IMF). The psychological impact of a failure by the United States to provide financial support for the IMF would be very damaging. But IMF funding is not sufficient we need to work with countries in the region to rebuild their economies in a manner that strengthens our ties in Asia. We need to think more broadly about the U.S. response to the crisis and develop policies that reinforce the Asian economies efforts to take the difficult steps required to reverse the current crisis. Our work in Asia taught us the importance of relationships. We have an opportunity to strengthen those relationships through our words and our deeds.
For example, we need to acknowledge and reinforce the critical role that China is playing in the Asian crisis by integrating China more deeply into multilateral institutions such as the global trading system. We need to maintain U.S. support for open trade and resist the temptation to adopt trade-restricting policies to accommodate the anticipated influx of imports into the U.S. market. Our ability to sell U.S. goods and services, including airplanes, depends upon Asias ability to grow out of their economic problems with balanced economic policies that will include exports to the global marketplace.
Finally, we need to ensure that EX-IM Bank has adequate funding and competitive programs to correct for gaps in the private marketplace. The alternative is to lock ourselves out of these markets for decades to come. These are just a few ideas that might be incorporated into a broader U.S. approach.
Mr. Chairman, Members of the Committee. There is no doubt that if the U.S. Government does not respond forthrightly and deliberately to the problems in Asia, The Boeing Companys sales in the region and the jobs of American workers will be adversely affected. The stakes are very high. The United States must recognize that our fortunes and those of the Asians are linked. American workers jobs including workers at Boeing will be directly affected by either the success or the failure of U.S. policy in this region.