Paine Field Airport Faces Churn but Remains Profitable, Even as Boeing and Airlines Contract

May 7—For the past year, Paine Field airport officials have watched commercial aviation collapse around them. And yet, as Boeing cut work severely and smaller aviation businesses at this key employment center struggled to survive, airport director Arif Ghouse said the county-owned operation fared well.

"Last year was good for us," said Ghouse. Tenants continued to pay their leases, and so "even though it was terrible for the industry ... we still came out in the black."

On a recent tour of the expansive airport site, Ghouse forecast that Paine Field will emerge stronger than ever within a few years.

Rather than worrying about companies shrinking or leaving, he touts the airport land available for expansion and development.

"We have very few buildings emptying out where we don't have potential buyers or people asking questions," said Ghouse. "We've always had more people asking for facilities and land than we have available."

His buoyant outlook contrasts starkly with the state of the business operations located on the periphery of Paine Field's 9,000-foot runway.

Boeing, by far the biggest presence at the airport and a key economic engine for Snohomish County and the state, employs tens of thousands of production workers and design engineers for widebody jets at its manufacturing facilities and offices north of the airfield.

Pre-pandemic, production of the 787 Dreamliner was booming and aviation observers looked to the forthcoming 777X as another premium airplane program in Everett's near future.

But Boeing this year sent all 787 assembly away to South Carolina after already slashing production rates on other jet programs.

The assembly line that builds both the older model 777 and the 777X is down to two planes a month, and the first 777X delivery has been pushed out until late 2023, three years later than originally planned. .

Those production cuts pitched suppliers around the airfield into distress, particularly those with 787-specific work.

In the Bomarc business park on the northeast corner of the airport, the Collins Aerostructures unit that completed and integrated the 787 engine pods, or nacelles, is moving that work to Alabama and closing down, with the loss of 85 jobs.

Next door, XPO Logistics delivered parts to the 787 assembly line from a building leased from Boeing. It's closing and laying off 104 employees.

Cadence Giddens, an aerospace machine shop in the same building that employed about 200 people before COVID hit, closed in February. Boeing has put the building up for sale.

The airline downturn hit other neighboring businesses hard as well.

Aviation Technical Services, which maintains and repairs jets for U.S. airlines, saw its business drop by almost half in 2020. It cut its Everett workforce in the past year from about 1,100 to some 800 employees.

Late last year, ATS let the lease expire on a large hangar, consolidating all Everett work at its main facility on the south end of the airport.

Passenger terminal 'losing a massive amount'

The new Paine Field commercial passenger terminal was equally slammed by the COVID-19 pandemic: Passenger traffic is still down more than two-thirds from its enormously successful first year.

The terminal opened in March 2019 and was handling 48 daily arrivals and departures before the pandemic paralyzed air travel.

"We went from 3,000 passengers a day down to 80 a day," said Brett Smith, CEO of Propeller Airports, which designed, built and operates the terminal in a public-private partnership with the county.

Though the operation has recovered now to 14 daily arrivals and departures of almost-full 76-seater Embraer 175 regional jets for Alaska and United, he said it's still "losing a massive amount of money."

Fortunately for Propeller, Smith said, New York City-based owner Global Infrastructure Partners — which manages $71 billion in worldwide assets, including Gatwick and Edinburgh airports in the U.K. — has "deep pockets" that can support the relatively small Paine Field terminal operation through to a recovery in passenger traffic.

U.S. airlines now anticipate a robust recovery in domestic air travel this summer and fall — good news for ATS and Propeller.

For Boeing and its suppliers in Everett, the way back will take much longer.

The big jets Boeing still builds in Everett fly international routes that won't bounce back soon. Inside the widebody assembly plant, production rates likely won't go back up before 2023.

At this chaotic, unpredictable moment, Ghouse and his team are preparing a new Airport Master Plan, the blueprint for development over the next two decades. He'll be inviting public input this fall.

A "gem" of an airport with diverse uses

Snohomish County owns 1,250 acres at Paine Field, originally constructed in 1936 as a Works Progress Administration project to create jobs.

Mission accomplished. Boeing built its jet assembly plant next to the county airport in the late 1960s to house the then-new 747 jumbo jet, and expanded it greatly since. The plant, engineering offices, airplane delivery center and ramps now occupy an additional 1,100 acres.

Ghouse points to a state Department of Transportation airport impact study that in 2018 assessed Paine Field, including Boeing, as generating $60 billion in annual business revenue and supporting 158,000 jobs, of which 46,000 were directly at Boeing's plant or the airport.

"Those numbers are bigger than Sea-Tac (airport) in terms of sheer impact," he said.

Paine Field and Boeing Everett together, he added, represent a Washington state "gem" that creates a lot of economic value for the county, the state and the nation.

The airport's annual operating revenue of about $29 million comes from user fees — paid by operators of the planes that come in and out.

In 2019, that included about $10 million in land and building lease payments, $17.2 million in nonpassenger aeronautical revenue, and almost $2 million from ticket fees on the passengers flying out of the terminal.

In 2020, though passenger fee income fell to just less than $850,000, increased lease rates made up the difference. Paine Field showed a net operating income of $2.5 million, slightly higher than 2019.

The airport is home to a richly diverse set of aviation-related businesses.

On the northwest corner is a Hilton Garden hotel. The adjacent Future of Flight museum showcases aviation, and is open; before the pandemic, it served as the starting point for tours of the Boeing plant that drew 350,000 people annually.

Also on county airport land are a couple of flight schools and two community college outposts that train aviation workers.

Both the Seattle Museum of Flight's airplane restoration center and Paul Allen's Flying Heritage and Combat Armor Museum of vintage military aircraft and tanks are currently closed.

The fate of Allen's war museum is uncertain. Director Adrian Hunt said there's been no direction decided upon yet and that "all options are open."

The airport is also the hive for a swarm of about 500 small private planes based there.

Private plane traffic from the airfield increased in 2020 as aircraft owners took more opportunities to lift off from the restrictions of the mask-wearing, pandemic-ridden land and enjoy freedom for an hour or two in the air.

Ghouse said there's a long waiting list of plane owners who want to lease a hangar or even an open-air tie-down spot.

Aerospace suppliers under stress

Still, Boeing's airplane manufacturing and engineering site looms largest over the Everett airport's future.

About 30,000 employees are currently assigned to Boeing Everett, with several thousand of those working from home during the pandemic, according to the company. That's down from about 35,000 employees at the beginning of 2020, following job cuts due to the steep drop in air travel.

Nine majestic giant 777Xs, their unique wingtips folded upward, are parked nose-to-tail on an inactive runway in the center of Paine Field — a symbol both of trouble for Boeing Everett and of a paralyzed international air traffic system.

Despite the move of the 787 work, many Dreamliners are parked around the airfield, awaiting a fix for a defect discovered at their fuselage joins before they can be delivered.

Currently four are parked at what was the depot for unloading the large 787 sections arriving from Japan, Italy, Kansas and South Carolina on Boeing's customized Dreamlifter cargo planes.

Snohomish County invested $30 million in building that Dreamlifter Operations Center as part of the enticement to keep the 787 for Everett. Now Boeing has emptied it out and is set to transfer the 30-year lease to FedEx.

The remaining aviation companies around the airport — including two more Collins facilities that make cabin interior fixtures and landing gear, as well as a Korry electronics plant — have been hit by Boeing's drastically reduced production rates.

And many suppliers still feel the lingering financial hit from the almost two-year grounding of the 737 MAX.

On a short, disused military runway on the west side of the airport, parked nose-to-tail with two Boeing KC-46 tankers are two long-grounded "whitetail" 737 MAXs, now without a buyer. Those were originally built for Air Italy, an airline that went out of business early last year.

The 2021 survival playbook for companies rooted in commercial aerospace is to hunker down, pare costs to the bone, diversify where possible into work in other fields such as defense, apply for government aid funds — and try to limp through to next year.

Boeing's future at Paine Field

Yet, Ghouse remains bullish on the airport's prospects.

He predicts that any vacated workshops, hangars, warehouses or buildings will "get snapped up by other people who can see that the economy is going to be picking up and that they'll need facilities."

Companies are "looking ahead to five years from now and saying okay the economy's gonna come back. They want to be ready," Ghouse said

FedEx's willingness to take over Boeing's Dreamlifter Operations Center is a case in point.

Kenmore Air, which flies mostly seaplanes to Canada and the San Juans or scenic flights from Lake Washington and also does maintenance work on private planes, has been badly hit by the pandemic. Nevertheless, it's another candidate to grow at Paine Field.

In July, Kenmore moved its still-steady maintenance operation, which services its three Cessna Caravans as well as private planes, from Boeing Field to a cheaper hangar on Paine Field.

Kenmore president Todd Banks said he expects people to get back to leisure flying in early 2022. "We'd like to expand scheduled service out of Paine Field," he said.

Ideally, passengers would board Kenmore's Cessna Caravans at the Propeller passenger terminal. But not just yet.

With Canada currently closed to Kenmore's scheduled services — half of its flying business — and its workforce cut from about 170 employees before the pandemic to less than 80 today, it doesn't have the resources right now to staff a desk at Propeller's terminal.

"We haven't pushed it hard," said Banks. "We have higher priorities dealing with COVID."

Still, Banks said, early in an air travel recovery, Paine Field could be a good bet for new business.

The single greatest uncertainty over the future of Paine Field comes from Boeing's unwillingness to commit to build its next new airplane there, despite all the excess space now free inside its giant assembly plant.

As part of the next Airport Master Plan, Ghouse said, the runway where all the 777Xs are currently lined up may be slated for redevelopment rather than its use since 2008 as a storage location for excess Boeing jet inventory.

Does that threaten to take away space Boeing will need for any new airplane?

Not to worry. "When we land that new airplane," Ghouse said, pausing to knock on a wooden conference table, "there will be capacity to accommodate that need."

Whatever layout is developed for the new Airport Master Plan, he said, "is a blueprint, but it's not set in stone."

Around the edges of the airport "we have a lot of space still available," Ghouse said. "We can grow out."

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