(Reuters) – Boeing is in advanced talks with a leading union to assemble its new 777X jet and build its wings in the Seattle area, a source familiar with the negotiations told Reuters.

Where the jet should be built is one of the most keenly awaited decisions in U.S. aerospace, with workers at Boeing’s commercial base in the state of Washington facing competition from lower-cost, non-unionized states in the South.

Boeing is seen as keen to keep costs on its new 777 as low as possible as it faces competition from the all-new Airbus A350-1000 and industry sources say there will be pressure on all sides to make concessions in location talks.

Under the proposed deal, final assembly of the 777X would be at Boeing’s Everett plant near Seattle, home to all its wide-body production except the 787 Dreamliner, whose assembly is split between Everett and North Charleston, South Carolina.

The plane’s expanded wings would be built in the surrounding Puget Sound region, the source said, asking not to be identified because the talks remain confidential.

Talks are “in the final stages, but are not done yet,” the source said, adding that the negotiations, which were initiated quietly between Boeing and the International Association of Machinists union around a week ago, were “intense”.

Barring an agreement, Boeing is expected to open up similar negotiations with other potential locations.

In Europe, a spokesman for Boeing declined to comment.

Designed to carry up to 406 people on some of the world’s longest routes, the 777X may enter service in 2020 and is expected to be produced well towards the middle of the century.

The U.S. planemaker is expected to launch the latest version of its popular 777 mini-jumbo with at least 100 orders from Gulf carriers at the Dubai Airshow this month.

The discussions with the IAM union come despite recent signs that Boeing was diversifying beyond the Seattle area where the current 777 was designed and is being built.

A recent internal memo suggested Boeing would place a significant amount of design work for its new 777X in a handful of cities around the U.S. and overseas <ID:L1N0IK1GO>.

Media reports have suggested South Carolina has an increasing chance of winning the coveted assembly deal.

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