May Assure Jetliner Program Launch : Caledonian Orders Nine of Douglas’ Planned MD-11s
British Caledonian Airways on Wednesday ordered nine of McDonnell Douglas’ proposed MD-11 wide body jetliners for $1 billion, a commitment that virtually assures that the new aircraft will be put into production at the Douglas Aircraft subsidiary in Long Beach.
Douglas President James E. Worsham said the order moves the MD-11 “a giant step closer to program launch, which we expect to announce in the near future.” Industry sources said formal approval of production by the McDonnell Douglas board of directors could come as early as this month.
If the company launches the MD-11, it will require an investment of a half-billion dollars and create 6,000 new jobs in Long Beach and Torrance by 1991, Douglas officials said, as well as substantial employment at subcontractors throughout Southern California.
Derivative of DC-10
The MD-11 is a derivative of the DC-10, featuring new-generation jet engines, a redesigned wing, an updated cockpit and an 18.6-foot stretch of the fuselage to carry more passengers. It will fly almost 8,000 miles non-stop and carry 321 passengers in its basic configuration.
The McDonnell Douglas board has set a requirement of obtaining orders for 20 MD-11s from at least two major airlines before it will commit itself to launching the MD-11 program. The company had hoped to get the program under way as long as a year ago, but airlines have been slow to make commitments.
So far, Douglas is believed to have letters of intent from two European airlines for seven MD-11s in addition to British Caledonian’s new order for nine, according to aerospace analyst David J. Smith at Sanford C. Bernstein & Co, a New York-based investment firm.
Additional Verbal Commitments
That would still leave the company four short of the 20-plane requirement, but a number of verbal commitments have also been made, according to industry sources.
“We have some commitments from other airlines, but they are sensitive,” William Messecar, director of marketing for advanced programs at Douglas, said. “We have got different levels of commitments that may or may not develop.
“We are confident we are going to launch,” he added. “More than 20 airlines have expressed interest in Europe, South America and Africa. Any DC-10 user has to be interested in the MD-11.” A number of U.S. airlines are known to be considering the aircraft.
In fact, Douglas President Worsham was traveling in Europe on Wednesday and was scheduled to fly to Asia. “He’s out selling airplanes,” a Douglas spokesman said.
Swiss Air and Scandinavian Airlines System are believed to have signed letters of intent for MD-11s. SAS has been selling off its fleet of Boeing 747s, creating an obvious need for replacement aircraft, industry sources said.
If the program goes forward, Douglas will build two MD-11 development aircraft to certify the design and performance of the plane. The first flight would occur in 1989, and production models would roll off the Long Beach assembly line shortly after.
The aircraft program would include broad participation by subcontractors. General Dynamics’ Convair division in San Diego would build the fuselage. McDonnell Douglas Canada is likely to build the wings. International participation is likely on the horizontal and vertical stabilizer portions of the airframe, Messecar said.
General Electric and Pratt & Whitney are offering competitive engines for the MD-11. British Caledonian said it has not yet decided which engine it will select. It also wants to consider engines built by Rolls-Royce, company spokesman David Budgen said.
Aviation industry officials welcomed the news of the British Caledonian commitment and said they are greatly encouraged that Douglas appears set to continue building wide-body aircraft in competition with Boeing and Airbus Industrie, the two other major commercial jetliner manufacturers.
“The MD-11 is essential to the airline industry,” said Kenneth Taylor, vice president of Beverly Hills-based International Lease Finance, the world’s largest aircraft leasing and brokerage firm. “Otherwise, it is going to leave the long-haul market in the hands of one airplane, the 747. We hated to see operators stuck with only one option.”
Taylor, as well as other observers, predicted that the MD-11 would prove to be a financially successful program for Douglas, something that always eluded the DC-10. Douglas sold 410 DC-10s since they were introduced to service in 1972, but the program is believed to have never turned a profit.
“I think it will be profitable,” Smith, the aerospace analyst, said. “It is a fine aircraft and it fills a niche in the market. It is going to do very, very well.”
Taylor said he expects a large lease market to develop once Douglas makes a commitment to develop the MD-11. The availability of used DC-10s has all but dried up in the past year, and in recent months, Douglas has booked orders for five new DC-10s.
Once the MD-11 program is launched, Douglas is widely expected to stop taking orders for DC-10s, although the company said it has not made that decision yet.
British Caledonian said it would use the MD-11s to replace its existing fleet of nine DC-10s and “to expand competitiveness of our international operations, including non-stop service from London to such cities as Tokyo, Hong Kong, Seoul, Los Angeles and Lusaka, Zambia.”
Sir Adam Thomson, British Caledonian chairman, said: “We are pleased and proud yet again to be the pioneer and announce the first order for this very advanced aircraft to continue to provide the finest in intercontinental service for our passengers.
“I am entirely confident that other airlines will come to similar conclusions and McDonnell Douglas will take the decision to go ahead with construction of the MD-11 in the very near future.”
Analysts said that the initial order for the MD-11 may prove to have been the most difficult and that, with the British Caledonian order in place, a domino effect could quickly add orders for the aircraft.
