section 2. aerospace in washington state

103 Pages·2013·3.65 MB·English

by  Erin Gengo

Community Attributes tells data rich stories about communities
that are important to decision-makers.

Principal: Chris Mefford
Lead Analyst: Spencer Cohen

Analysts: Erin Gengo
Diana Haring
Alexandra Hudson
Bryan Lobel

Community Attributes Inc.
1411 Fourth Ave, Suite 770
Seattle, Washington 98101
www.communityattributes.com
EXECUTIVE SUMMARY
Introduction
The aerospace industry and Boeing Commercial create enormous amounts of
economic activity and fiscal benefits to the State of Washington—more than any
other single private sector employer or industry. The findings of this study detail
the scale and reach of these benefits, which include aerospace-supported tax
revenues—via direct and multiplier effects—of more than $4 billion between
2004 and 2012; of this Boeing Commercial alone has supported more than $3.3
billion over this period.
For many decades the Washington State economy was defined by commercial
aircraft production, and a dependence on natural resources. From Boeing’s
beginnings in 1916, through the War years, to today’s diverse cluster of activities
spanning aircraft final assembly, research, and defense activities, the aerospace
industry has been a driver of economic growth in Washington State. Aerospace
continues to be a foundational industry in Washington State, driving innovation,
economic development, and jobs.
Today, Boeing Commercial is the largest exporter in the U.S., attracting large
inflows of income into the State of Washington. Boeing Commercial is
Washington State’s largest private sector employer, pays good wages, and anchors
an extensive supply chain centered on final production in Renton and Everett. In
recent years the supply chain has diversified—an increasing number of firms have
expanded into other supply chains in the U.S. and abroad, including Bombardier,
Airbus, and more recently the Chinese aircraft manufacturer COMAC. Rich
networks of suppliers serve these programs from across Washington State,
including firms engaged in:
 Air Framing and Aero Structures
 Aerospace Engineering, Research, and Design
 Avionics and Navigational Systems
 Composites and Advanced Materials
 Tooling
 Interiors
 Maintenance, Repair, and Overhaul
This report examines these economic and fiscal impacts to the State of
Washington for the aerospace cluster as a whole, as well as for Boeing
Commercial specifically. Boeing Commercial, which produces the company’s 737,
747, 767, 777 and 787 aircraft lines, is at the center of Washington State’s
aerospace cluster. This analysis goes deeper than past aerospace reports and looks
at the impact of Boeing Commercial by each of its major commercial production
lines in Washington State. The findings will serve leaders and stakeholders across
Washington State by meeting the following two objectives:
Washington Aerospace Partnership November 2013 Page i
Aerospace Impact Analysis
1) Update and demonstrate the important and impactful contributions of the
aerospace industry and Boeing Commercial specifically to the Washington
State economy, from jobs, income, business sales, and tax revenues, both
directly and through multiplier effects throughout the economy; and
2) Understand the alignment between Washington State’s investments and
aerospace and the fiscal and economic benefits accrued from Boeing’s related
activities from 2004 to 2012.
Findings
Washington State Investments
Between 2004 and 2012, Washington State supported Boeing and aerospace
companies with tax incentives and non-tax investments in direct support of the
aerospace industry, totaling more than $1.4 billion in value in 2012 dollars,
adjusted for inflation. Of this total, the largest share came from tax incentives,
which summed to $978 million between 2004 and 2012 (2012 dollars). Additional
investments in the cluster came from non-tax investments in infrastructure,
workforce and local and federal investments across the state.
Direct Impacts
In 2012, there were 175 aerospace business establishments in Washington State,
with an additional 1,175 locations for aerospace-related businesses, for example,
machine shops. Boeing Commercial has five manufacturing sites in Washington
State, all concentrated in the Central Puget Sound region.
Aerospace revenues in 2012 totaled $51.2 billion, of which an estimated $48.9
billion were generated directly by Boeing Commercial activities. Another $8.7
billion in sales were generated by businesses related to aerospace.
Employment in the aerospace industry totaled 94,200 jobs in 2012, of which
approximately 72,900 were estimated within Boeing Commercial. Aerospace
employment equaled approximately 3.3% of all non-farm employment in
Washington State (the highest share since 1999, when aerospace firms employed
3.7% of the State’s non-farm workforce). An additional 38,300 workers were
employed in sectors closely tied to aerospace, such as plastics manufacturing,
machine shops, and electronic component manufacturers.
An estimated 47,000 Boeing employees were directly employed in aircraft
program-specific activities, with another 25,900 workers engaged in activities
indirectly in support of aircraft final production. These activities included
customer service, finance, marketing, sales, and other overhead and related work.
Wages paid out among aerospace firms totaled more than $9.1 billion (before
benefits), or approximately $96,684 per covered employee, compared with
statewide median household income of $56,444. Boeing Commercial alone paid
out an estimated $7.2 billion in wages in 2012, or $9.7 billion inclusive of benefits
(Exhibit E1).
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Aerospace Impact Analysis
Exhibit E1. Direct Economic Impacts of Aerospace Industry and Boeing
Commercial in Washington State, 2012
Wages
($ Gross Business
Establishments billions) Jobs Income ($ billions)
Aerospace Industry 175 $9.1 94,200 $51.2
Boeing Commercial 5+ $7.2 72,900 $48.9
Related Industries 1,175 $2.4 38,300 $8.7
Sources: Community Attributes Inc.; industry sources; Washington State Employment Security
Department; Washington State Department of Revenue.
Note: Wages here are exclusive of benefits. Later estimates for Boeing Commercial include
estimates of benefits.
Indirect and Induced Impacts
After factoring in the broader impacts of aerospace activities, including through
supply chain, vendor sales, and additional income created and spent throughout
the economy, the aerospace industry supported 253,400 jobs across Washington
State, nearly $76 billion in revenues, and $19.8 billion in income and benefits
(Exhibit E2). For every direct job in aerospace, an additional 1.7 jobs are
supported elsewhere in the state economy. Likewise, every million dollars in
aerospace sales supports almost five workers across Washington State.
Exhibit E2: Aerospace Direct, Indirect and Induced Impacts, 2012
Jobs Revenues Income*
(millions $) (millions $)
Direct 94,200 51,240 11,843
Indirect 32,600 5,209 1,761
Induced 126,600 19,328 6,187
Total 253,400 75,777 19,792

*Includes estimated benefits.
**Note: some columns may not sum to total due to rounding.
Sources: Community Attributes Inc.; Washington State Office of Financial Management.

Fiscal Impacts
Adjusted for inflation, the aerospace industry in Washington State directly paid
more than $1.2 billion in taxes to the State between 2004 and 2012, largely in the
form of B&O taxes. Factoring in the indirect and induced effects through the
activities among suppliers and the spending of additional wages throughout the
economy, the total fiscal impact of aerospace over the period was nearly $4.1
billion. In 2012, State of Washington tax revenues supported by aerospace via
direct and multiplier effects totaled $544.1 million (Exhibit E3).
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Aerospace Impact Analysis
Between 2004 and 2012, each $1.00 of State investment in aerospace over this
period is associated with $4.10 in state tax revenues. Boeing Commercial alone is
estimated to have supported more than $3.3 billion in tax revenues over this
period, including direct impacts and multiplier effects.
Exhibit E3. Estimated Total Fiscal Benefits from Aerospace, 2004-2012

Millions (2012 $)

Other Taxes

Sales Tax

B&O Taxes

Sources: Community Attributes Inc.; Washington State Office of Financial Management; Washington State
Department of Revenue.
Impacts by Boeing Commercial Program
In 2012, the 737 and 777 directly employed an estimated 9,600 and 12,100
employees, respectively. Including indirect jobs within Boeing in support of final
production, total Boeing employment for the 737 and 777 programs totaled
20,500 and 19,700 workers, respectively (Exhibit E4). In terms of direct wages
and benefits, the 737 program brought in $2.7 billion, while the 777 program was
responsible for $2.5 billion. Factoring in multiplier effects of Boeing Commercial
across Washington State, the 737 program supported over 20,000 jobs, while the
777 program supported just under 20,000 jobs. Boeing Commercial activities
overall support—via direct and multiplier effects—an estimated 208,800 jobs,
nearly $70 billion in sales, and $16.4 billion in wages and benefits (Exhibit E5).
Boeing Commercial Fiscal Impacts
In 2012, the 737 program directly contributed an estimated $56.5 million in B&O
taxes to the State of Washington, while the 777 program paid an estimated $39.2
million. Factoring additional taxable activities throughout the state supported via
multiplier effects from Boeing programs, total State of Washington tax revenues
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Aerospace Impact Analysis
supported by the 777 program summed to $133.1 million, while the 737
supported $169.3 million (Exhibit E5).
Exhibit E4. Direct Boeing Commercial Impacts in Washington State by
Program, 2012
Program Jobs Direct Wages & Estimated
Benefits Direct Tax
Supporting within
($ billions) Payments
Direct Jobs
Boeing
($ millions)
737 9,600 10,900 $2.7 $56.5
747 6,200 3,200 $1.2 $16.6
767 5,100 1,400 $0.9 $7.3
777 12,100 7,600 $2.6 $39.2
787 14,000 2,800 $2.3 $13.9
Total 47,000 25,900 $9.7 $133.5
Sources: Community Attributes Inc.; industry sources; Washington State Department of
Revenue.
Exhibit E5. Boeing Commercial Impacts by Program, 2012
Program Jobs Statewide Business Total Wages & Taxes
Sales Benefits Supported
($ billions) ($ billions) Statewide
($ millions)
737 65,100 $27.6 $5.0 $169.3
747 26,700 $8.8 $2.1 $60.3
767 17,300 $4.3 $1.4 $34.4
777 56,900 $20.1 $4.4 $133.1
787 42,800 $9.1 $3.6 $79.3
Total 208,800 $69.9 $16.4 $476.2
Sources: Community Attributes Inc.; industry sources; Washington State Department of
Revenue; Washington State Office of Financial Management.
Additional Benefits of Boeing
This study also considers the “softer” impacts of Boeing’s presence in
Washington State such as spinoff companies generated both within and outside
of aerospace, technologies shared across Washington State’s manufacturing
landscape, Boeing’s partnerships with Washington State universities, and the
company’s sizeable charitable contributions. Each of these activities plays a role
as a driver of research, innovation, and economic development in Washington
State.

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CONTENTS
Section 1. Introduction ........................................................................................................................ 1
Background and Purpose ................................................................................................................. 1
Methods ............................................................................................................................................. 1
Organization of Report .................................................................................................................... 2
Section 2. Aerospace in Washington State.......................................................................................... 3
History of Aerospace ....................................................................................................................... 3
Supply Chain Components .............................................................................................................. 3
Workforce and Human Capital ....................................................................................................... 6
Section 3. State Investments in Aerospace, 2004-2012 ..................................................................... 7
Tax Incentives ................................................................................................................................... 8
Non-tax Investments in Aerospace ............................................................................................... 14
Project Olympus ............................................................................................................................. 15
Project Pegasus ............................................................................................................................... 18
Spokane’s Investments in Aerospace ............................................................................................ 18
Section 4. Measures and Impacts ...................................................................................................... 20
Establishments ................................................................................................................................ 20
Revenues ......................................................................................................................................... 23
Jobs .................................................................................................................................................. 27
Wages and Occupations ................................................................................................................. 34
Indirect and Induced Impacts ....................................................................................................... 41
Fiscal Impacts ................................................................................................................................. 48
Long-Term Economic and Fiscal Benefits from Aerospace in Washington State .................... 53
Section 5. Additional Benefits from Boeing Commercial ................................................................ 56
Boeing Spinoff Companies ............................................................................................................ 56
Boeing-Specific Technology Transfer ........................................................................................... 57
Boeing Partnerships with Washington Universities ..................................................................... 57
Aviation Biofuels ............................................................................................................................ 58
Philanthropy .................................................................................................................................... 58
Section 6. Aerospace Cluster Linkages ............................................................................................. 60
Medical ............................................................................................................................................ 60
Maritime .......................................................................................................................................... 60
Sports & Recreation ....................................................................................................................... 60
Wind & Solar Energy ..................................................................................................................... 60
Section 7. Commercial Space and Military Aerospace in Washington ........................................... 61
Commercial Space .......................................................................................................................... 61
Defense and Unmanned Aerial Vehicles ...................................................................................... 62
Section 8. Findings and Conclusions ................................................................................................ 63
Appendices .......................................................................................................................................... 65
Bibliography ........................................................................................................................................ 87

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