In the past, some people might have seen labor negotiations as a difficult, but necessary task to get through. But in 2008 we’re taking the view that the conversation getting underway today represents a tremendous opportunity.

As Boeing begins negotiating new contracts with the International Association of Machinists and Aerospace Workers (IAM), it’s our intention to move away from the culture of last-minute bargaining. As our V.P. of human resources, Doug Kight says, we want to make this an open and transparent process.

That’s why we’ve agreed to start discussions with the union sooner than we did in past years. We want to spend more time listening, understanding issues, and making sure our employees and their families have a grasp on the value of the contracts when members vote in September.

Clearly, the challenge as we go forward these next several months is to continue the momentum we’ve had as a company, and work together to stay competitive, keep our commitments to our customers, and to sustain good jobs for generations to come.

During the negotiations process, we’ll discuss, listen, and continue to communicate even when we disagree. The ultimate goal is to arrive at solutions that are in the best interests of our employees, and our customers and communities, as well as the company.

You can check out our 2008 labor negotiations Web site. And you can also read more about the start of contract talks here.

HONG KONG - I’ve been on the road again this week, first in Thailand, and now in Hong Kong for a speech at the Royal Aeronautical Society and to meet with some reporters.

Typically, in my travels, one of the top 2 or 3 questions people pose is: “When are we going to see a “single-aisle” (737-size) replacement?” I think this is a good time to update you on that question.

It’s hard for me to believe, but the last time we talked about this in the blog was a couple of years back when my colleague, Mr. Baseler, shared his unique double take on the subject.

So, you might ask, has anything changed? Well, I’d say that our thinking has not so much changed, but evolved a bit.

We still believe that the Next-Generation 737 is a great product – in fact it’s the most efficient single-aisle airplane operating today, and is still the all-time best-selling commercial airliner. So, you can imagine that developing an airplane that delivers a better value is proving to be a tremendous challenge.

In Renton, the moving production line makes it easy to incorporate enhancements onto Next-Generation 737s. About 90% of 737 operators now choose to add fuel-saving, emission-reducing Blended Winglets. And Boeing will incorporate the latest announced enhancement - weight-saving carbon brakes - into the production line later this year.

We’re continuing to study the market, and learning more about what our airline customers need for the future. Obviously, a significant improvement in operating efficiency remains the common thread. And when I say significant, I mean significant. For instance, 15-20% improvement in fuel efficiency and 20-30% reduction in maintenance cost.

As I and my Boeing colleagues have said many times and in many forums, to do this is going to take real breakthroughs in every part of the airplane. We need new engine technologies, and improvements in materials and aerodynamics, as well as new aircraft systems.

Based on how technology is evolving, and what we know today, we now believe the replacement of the Next-Generation 737 will be ready late in the next decade.

In the meantime, we’ll also be studying ways to create even more value in our Next-Generation 737. We’ve steadily enhanced this airplane over the past several years, improving performance, comfort, and navigation precision. We’re looking at possible additional improvements such as interior enhancements, lower weight and drag, and improved engine efficiency.

Boeing and our partners will continue to invest in all the technologies needed for a new generation narrow-body (it may or may not have a single aisle), that will economically replace the 737 and A320 – to ensure the earliest possible entry in to the market.

I’ve always said that our product strategy is shaped by our market forecast, by technology, and most importantly by working with our customers to understand their needs and requirements.

This is a case where there’s clearly a market – more than 17,000 airplanes in the next 20 years. But just as clearly, first the technology needs to be developed in order to produce the right airplane to satisfy that huge market.

This week we loaded the newest 787 Dreamliner into position in the Everett factory, and I wanted to share a couple of pretty amazing photos with you.

The newest Dreamliner – designated ZA003 – in first position in the 787 factory. In this view you can see all the major assemblies for the airplane (minus the wings) in the pre-integration area of Final Assembly.

It’s remarkable how the handful of large assemblies come together with the wings to form the airplane. We took this photo yesterday, just a couple of days after the first image.

When it’s completed sometime this summer, this airplane will represent the first time we’ll get a look at something close to “delivery configuration.” ZA003 is scheduled to be fitted with an interior as part of its certification and flight testing.

By the way, this is airplane number 5 on the production line, but it’s actually flight test airplane number 3 – hence the ZA003 designation. Two other airplanes are destined for static testing and fatigue testing and will not be delivered to customers. They are all among the 25 Dreamliners in various stages of production right now around the globe.

The start of final assembly is always a significant milestone. But in this case it’s a historic adventure as well.

Boeing Renton employees received the first fuselage from Spirit AeroSystems earlier this month, and final assembly is underway on the first P-8A Poseidon - the multi-mission maritime aircraft that Boeing and our partners are building for the U.S. Navy

Members of the P-8A team greet the first fuselage at the Renton factory.

The historic part is the fact that with the arrival of this fuselage from Wichita, the Renton site has opened manufacturing operations on our new Final Assembly Line 3. It’s the latest chapter in Boeing’s long and successful Renton legacy – as we begin building a military derivative of the best-selling airplane in the world, the Next-Generation 737.

That legacy, our company historian reminds me, features an impressive list of Renton-built military aircraft over the years, including:

• B-29 Superfortress
• TB-50H
• KC-97 Stratofreighter
• KC-135 Stratotanker
• E-3 AWACS
• VC-137
• T-43A
• E-6
• C-32
• C-40

A depiction of the P-8A over Mount Rainier.

The P-8A Poseidon is a derivative of the 737-800. As the team puts it, the Poseidon will be a “long-range anti-submarine warfare, anti-surface warfare, intelligence, surveillance and reconnaissance aircraft” for the Navy.

And here’s a key piece of this story: the P-8A program benefits from and builds on the proven production system and performance of more than 5,655 Boeing 737s delivered to date.

First flight of sorts – as the P-8A fuselage swoops into position by crane over the factory floor.

Thanks to Commercial Airplanes and Integrated Defense Systems (IDS) teams working closely together as one Boeing team, the program has moved from “design” to “build” rapidly. Production started on the P-8A fuselage for the first test aircraft at Spirit in December, and it was completed on schedule last month. This approach enables the program to build the aircraft in a moving line - as we do with commercial versions of the 737 - with major military changes built and integrated up front as the aircraft goes through final assembly in Renton.

This is a significant change. In contrast with other business models that modify “green tail” commercial airplanes to fit military applications, the Poseidon will be ready with all provisions to “plug-and-play” its required mission systems.

Click on the image to view a short video about the arrival of the first P-8A fuselage in Renton.

One interesting side note to this story is that the opening of the P-8A line in Renton coincided with opening day for baseball in Seattle earlier this month. In fact, the fuselage, carried by rail, rolled past the sold-out crowd at Safeco Field during the bottom of the second inning of the Seattle Mariners’ opener.

BCA is scheduled to hand off the first P-8A Poseidon to IDS later this year, with subsequent mission systems installation, flight test, and delivery of the first aircraft to the U.S. Navy in 2009.

By the way, the home team won their opener. And we believe the P-8A is going to be a winner too.

The Boeing Company shared some strong financial results today, and projected some solid growth to come.

You can read through a lot of the details in our first quarter earnings release. But I wanted to briefly touch upon some of the key points for Commercial Airplanes.

BCA delivered 115 airplanes this past quarter, and reported 289 orders. For the 787 Dreamliner there were 75 orders in the quarter – and the program continues its record-setting sales pace with 892 firm orders and 57 customers since launch.

As we learned earlier this month, we’ve shifted the 787’s first flight to the fourth quarter of this year, with deliveries moving to third quarter of 2009. The plan is for a more gradual ramp-up to full production. The delays have been a deep disappointment to us and to our customers. But we think the new plan reduces the schedule risk a great deal. We’re talking with our customers now about how the schedule will affect them, and how we can reduce the impact.

During the earnings call with investors and media, Jim McNerney mentioned his recent visit to the 787 factory. He saw good progress on Airplane #1 toward meeting our commitments for power on and first flight. He also mentioned that the static and fatigue airplanes are moving along, and that the condition of the assemblies we’ve gotten in Everett from our partners are noticeably improved on Airplanes #2 and #3.

Much has been said about the 787 and the problems we’ve encountered on the program. However, from this earnings report it’s clear that our core business continues to deliver improving performance. Our 737, 747, 767, 777 and services teams are executing their plans very well.

I also want to point out that we’re moving ahead on other development programs, including the 777 Freighter, and the 747-8.

Major assembly for the 777 Freighter began in the first quarter. And final assembly got underway this month. This is a view during “final body join” of the first 777F in the Everett factory.

On the guidance side of the message, we’re expecting to deliver between 475 and 480 commercial airplanes this year, and between 500 and 505 in 2009. We also expect 2010 deliveries to be higher than in 2009.

Let me also touch briefly on what we’ve heard about the U.S. economy as it affects our industry today. Capital markets have weakened and we saw some small airlines file for bankruptcy in the first quarter.

As we look at these economic conditions going forward, it’s important to note that our total backlog is strong and diverse by region, product and customer. For example, only 11% of BCA’s backlog is from airlines based in the United States. A large piece of the commercial backlog is with customers in Asia and the Middle East, where economic conditions are more favorable.

Demand globally remains strong for new, more efficient commercial airplanes due to high fuel prices and environmental concerns. So, while the market has become more volatile, as you can see from our guidance, the delivery up-cycle continues.

And, as Jim McNerney put it earlier today, if there’s a more significant downturn, we think we’re in a good position to weather it.