Boeing Likely To End Some Douglas Jet Lines
Seattle Times Business Reporter
Boeing will likely phase out the MD-80 and MD-90 airplane lines it acquired from McDonnell Douglas, but keep two other Douglas lines in production, a Boeing official said yesterday.
"Further development of the MD-80/90 product line seems very unlikely," Bruce Dennis, vice president of marketing for Boeing Commercial Group, told air-cargo executives in Seattle. "The MD-11 and the MD-95 hold the most promise for continued future production and development."
Boeing is to formally decide the fate of Douglas Aircraft , based in Long Beach, Calif., by Nov. 1. The financially weak passenger-jet unit of McDonnell Douglas employs 11,000 workers.
While there has been much speculation on the fate of Douglas product lines that in some cases compete with Boeing's own, yesterday's remarks were the strongest indication yet that Boeing eventually plans to shut down slow-selling Douglas commercial-jet lines.
Boeing paid $16 billion to acquire McDonnell Douglas, its longtime rival, primarily for its defense business.
McDonnell Douglas sold just 38 commercial planes last year, compared with 559 for Boeing. Sales of the MD-80 and MD-90 models, which compete with the Boeing 737, have nearly dried up, while the three-engine MD-11 has been converted almost entirely for use as a freighter.
Boeing has shown keen interest in McDonnell's 100-seat MD-95, however. That plane, slightly smaller than the MD-90, was launched in 1995; its first delivery, to ValuJet, is scheduled for 1999. The ValuJet order is for 50 airplanes with an option for 50 more.
Douglas employment is not expected to change in the short term, even if Boeing shuts down two of the four production lines. Boeing has said it will commit to building out Douglas' firm backlog of orders.
That represents several more years of production and employment for Douglas workers.
"In the longer term, it means people will be moved around a little," said Bob Saling, a Boeing spokesman for Douglas Aircraft.
The MD-80 and MD-90, twin-engine derivatives of the popular DC-9, have firm backlogs for a total of 112 airplanes. Douglas workers have been producing them at a rate of four airplanes a month.
Boeing, facing its own unprecedented backlog of orders, is considering temporarily hiring 200 to 400 production workers from out-of-state companies. Boeing officials say they likely won't bring up Douglas workers because of union jurisdictional questions and the steady workload at Douglas factories.
Douglas officials are hoping that production of the MD-95 or MD-11 will pick up as production tapers off on the MD-80/90. That could prevent layoffs.
Boeing officials have been interested in the features of the MD-95. They cite its lower production costs and the fact that the new commuter jet fills a hole in Boeing's product line.
"We're encouraged by what we've learned about the MD-95, and hopeful that it could give us entry into the smaller-jet market," Dennis said. "We've been looking at prospects for such smaller, low-cost jetliners for a long time. . . . But we've consistently had a very difficult time coming up with a business case that made sense for both our customers and our shareholders."
For the MD-95 to prevail, Boeing officials say, they would have to offer various models between 70 to 120 seats that could fly about 1,500 nautical miles.
Boeing officials said the company is deciding whether to enter the jet into the growing commuter market, which is projected to need more than 2,000 planes over the next 20 years. The MD-95 would be the only new jet aimed at that market.
"We think there is a potential family of airplanes for the MD-95, but it's a matter of understanding the cost, the price and the market," said Janice Hayes, a spokeswoman for Boeing Commercial Group.
Demand for the passenger version of the widebody MD-11 trijet has nearly vanished with the emergence of the Boeing 777 and Airbus A330/340. Its survival depends on the demand for a cargo version, which Boeing believes complements its own 767 and 747-400 freighters.
Boeing is still evaluating whether demand for the MD-11 freighter can be met by converting existing MD-11s or if there is ample long-term demand to support continued production.
"The safest statement to make is that we're mainly interested in the MD-11 for its freighter capability," Dennis said. "The market will determine whether that means continued production, or mainly conversions."
Boeing's 737 and Airbus' A320 narrowbody airplanes have virtually eliminated the Douglas MD-80 and MD-90. The 140- to 150-seat market is the most competitive segment of the industry.
The MD-80 and MD-90 do not have a sufficient market base to develop a broad line of derivative airplanes, Dennis said.
But Boeing has one important customer still interested in the MD-90: the Chinese. McDonnell Douglas and the Chinese are producing MD-90s in Shanghai, in a joint-production venture.
Dennis said Boeing will continue to support the current production of these planes.
"We're going to work with the Chinese manufacturers to determine the best future direction for this important production program," Dennis said. "Best for both the Chinese manufacturers and for the airline customers."
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