Boeing to move headquarters from Chicago to Arlington, Va.

Boeing to move headquarters from Chicago to Arlington, Va.

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Boeing is moving its headquarters from Chicago to Arlington, Va., a sign the aerospace giant is leaning into its military wing and better positioning itself to navigate the political quagmire.

The move, first reported by The Wall Street Journal, comes as Boeing struggles to shrug off financial burdens from the 737 Max, the pandemic’s smothering effect on travel and the fallout from severing ties with Russia. The company reported a $1.2 billion loss in the first quarter. Its stock is down 25 percent year to date.

“We are excited to build on our foundation here in Northern Virginia. The region makes strategic sense for our global headquarters given its proximity to our customers and stakeholders, and its access to world-class engineering and technical talent,” Boeing’s chief executive David L. Calhoun said in a statement Thursday.

The company insisted it would “maintain a significant presence” in Chicago and the surrounding region despite the move. Boeing is also planning to develop a research and technology hub in the area “to harness and attract engineering and technical capabilities,” according to the statement issued by the company. The hub will focus on developing innovations in cyber security, autonomous operations, quantum sciences and software and systems engineering.

The administration of Gov. Glenn Youngkin (R) has been working for the past couple months with Boeing to lure the company to the state, according to three people familiar with the deal who spoke on the condition of anonymity because the company had planned to wait until next week to make the announcement. They said the governor, a former Carlyle Group executive, has a personal relationship with Calhoun.

The state has not offered Boeing any “significant” financial incentive to the company, according to the three people .

Sen. Mark R. Warner (D-Va.) had also been working for several months on getting Boeing to move to Virginia, a person familiar with the negotiations said.

Arlington County spokesman Jessica Baxter said in a statement that “for competitive reasons and to protect confidential company information, we cannot comment on current or potential economic development prospects.” Arlington County Board Chair Katie Cristol (D) also declined to comment.

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The move comes as Boeing has faced heightened scrutiny from the Federal Aviation Administration in recent years, a shift that came after lawmakers pointed to close ties between regulators and the company after 737 Max crashes in 2018 and 2019. Moving executives to Washington could help to smooth that relationship, but it could also rankle front line engineering and manufacturing staff, who previously have raised concerns about being overruled on safety issues by company executives and senior FAA officials.

Boeing moved the headquarters of its Defense, Space and Security division from St. Louis to Arlington in 2017. The company currently operates a large office in Arlington’s Crystal City neighborhood, less than a mile from the Pentagon and on the edge of the district that local officials have dubbed “National Landing.” Amazon is building a second headquarters — also a few blocks away — that is meant to anchor development in the area.

Boeing’s move to Arlington confirms the predictions of many National Landing boosters, who said Amazon’s arrival in the area would spur economic growth in a neighborhood that had long been considered underused and underdeveloped. After a federal panel’s 2005 recommendation to move defense contractors, Crystal City lost about 17,000 military and defense workers who occupied about 4 million square feet of office space.

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As part of the push to create a high-tech corridor in National Landing, Virginia Tech has planned a new graduate engineering campus in Alexandria’s Potomac Yard area. Last year, Boeing donated $50 million to the school for financial aid and other diversity initiatives, and university leaders have also said they plan to work closely with the aerospace company on student projects and career initiatives.

Told of the company’s plans to move, Ed Pierson, a former senior manager at the Renton, Wash., 737 factory, said his “stomach dropped.” He said it will be important for executives to keep in contact with their manufacturing operations in the Seattle area and South Carolina.

“My immediate reaction was Chicago was very far away and to think it was going further away was stunning,” said Pierson, who came forward to Congress as a whistleblower after the crashes.

Much of the FAA’s attention is focused on the 787 Dreamliner, which is manufactured in South Carolina. Quality problems with the planes have piled up and Boeing has halted deliveries of the planes to customers.

The company said when it released quarterly earnings last week that it has submitted paperwork to the FAA that would clear the way for deliveries to start again, but it remains unclear when regulators might give their approval.

An investigation into the Max crashes by the House Transportation Committee pointed to Boeing’s 1997 merger with rival McDonnell-Douglas and the subsequent move to Chicago as marking a shift in the company’s core philosophy, placing less emphasis on engineering prowess and more on financial success. The committee pointed to profit-chasing by Boeing as the reason it decided to develop the Max to compete with new Airbus jets, rather than choosing the more costly and difficult — but potentially safer — approach of designing a new plan from scratch.

On Thursday, Committee Chairman Rep. Peter A. DeFazio (D-Ore.) said the company moving its headquarters to the capital region was “another step in the wrong direction.”

”Boeing’s problem isn’t a lack of access to government, but rather its ongoing production problems and the failures of management and the board that led to the fatal crashes of the 737 MAX,” DeFazio said in a statement. “Boeing should focus on making safe airplanes — not lobbying federal regulators and Congress.”

Boeing moved its global headquarters to Chicago in 2001, but its commercial airplane division remains headquartered in Renton, Wash., outside Seattle, where the company was founded in 1916. That move signified Boeing’s effort to cement itself as a global aviation powerhouse, bringing it closer to customers and investors on Wall Street.

In 2020, Boeing executives had signaled they were looking to relocate from its 36-floor, $200 million riverfront skyscraper, which one worker described to Reuters as “a ghost town.”

Peter Rousselot, a leader of the civic group Arlingtonians for a Sustainable Future, said the company’s move to the Northern Virginia suburb would be a “net positive” for the county of about 240,000 people.

He said the county has a high office vacancy rate — about 20 percent, depending on the neighborhood — and that an influx of more office workers could help reduce that figure. For comparison, average office occupancy across the country’s top 10 metropolitan business centers was over 43 percent as of May 2, according to data monitored by Kastle Systems.

Traditionally, Arlington has relied on a 50-50 split between commercial and residential property tax revenue to fund county services, though that ratio has been changing: In calendar year 2022, commercial taxes made up about 46 percent. “This isn’t going to magically change that,” he said, “but it’s a good step in that sense.”

But Rousselot, whose group advocates for more measured growth in Arlington, also said that a lack of long-term planning from the county means it is impossible to measure how the influx might affect its roads, sewers and schools. (ASF has been calling on the county to produce a long-term financial plan and a 10-year budget operating projection.)

“The fact that it [the new Boeing headquarters] is likely to generate more and more residents and employees means that it’s going to put even more pressure on the county,” he said. “We don’t know what the net effect is going to be, but it’s going to be a concern because of those infrastructure services.”

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