Boeing Gets 74% of $5.04-Billion Order for Jets; Airbus Gets Rest

Boeing won 74% of a $5.04-billion order for 130 new aircraft, believed to be the largest commercial jetliner sale in history, placed Monday by International Lease Finance of Beverly Hills. Airbus Industrie won 26% of the order and McDonnell Douglas was shut out.

The order will undoubtedly exacerbate the already tight commercial jetliner market--a seller’s market in which deliveries are sold out for at least two years in the case of some models.

“Prices are going up and supply is going to get tight,” said Christopher Demisch, aerospace analyst for the First Boston investment firm. “We are headed into a seller’s market for commercial airplanes.”

The 130 planes are scheduled to be delivered starting in 1989 and running through 1995. All of the aircraft are either newly developed or are derivatives of older models using the latest technology.

Boeing’s order is worth $3.69 billion. The Seattle-based firm’s 737 series of airliners took the biggest slice of the order--78 of the 100 Boeing planes that International Lease Finance ordered. In addition, Boeing sold nine 757s, nine 767s and four 747s.

The order Airbus received is valued at $1.35 billion for 30 aircraft: four A300s, six A310s, 18 A320s and two A340s.

Kenneth D. Taylor, International Lease Finance vice president, said McDonnell Douglas’ failure to get any orders was attributable to a lack of “aggressive” marketing and pricing, as well as a limited product line. McDonnell offers the MD-80 line of aircraft and the MD-11, which is under development.

Line Is Sold Out

“We are obviously disappointed,” said Nissan Davis, spokesman for the company’s Douglas Aircraft subsidiary. “But it is not going to harm any of our programs. We were not depending on this order to support any of our programs.”

Davis said the firm’s MD-80 line remains sold out for the time being and the company anticipates a flurry of MD-11 orders later this year to add to the 99 orders and options it now holds for the new plane.

Aerospace analysts said McDonnell’s failure to get any orders is not a major setback to the future of the company. “Why should McDonnell give its airplanes away?” Demisch asked, implying that it would have had to offer deep discounts to book the order.

But both winning manufacturers termed the agreement a marketing victory.

“It’s a tremendous order,” said Dean Thornton, president of Boeing Commercial Airplanes.

Airbus’ share falls only slightly shy of matching the consortium’s U.S. goal, which calls for gaining 30% of the market, said Gregg Schulte, spokesman at Airbus’ U.S. office in Herndon, Va.

“We feel like we got a very competitive part of the order.” Schulte said. “I think it was always going to be a split order.”

Airbus also announced Monday that it had received a separate order for 15 A320s from Iberia Airlines of Spain.

Taylor said International Lease Finance was anxious to place the large order because delivery schedules in the aircraft industry are rapidly being filled up. In addition, United and Delta airlines are reported to be close to placing large orders of their own.

Demand to Top Production

Taylor noted that 36% of the world’s passenger aircraft are more than 20 years old, indicating a massive requirement for new aircraft over the next decade that will exceed production capabilities.

“I guarantee you that a couple of hundred aircraft a year (the production capability of the three major producers) is not going to do it,” he said. “The demand to replace 36% of 3,000 airplanes gives them a long run ahead of them.”

The recent Aloha Airlines accident, resulting from a structural failure on an old aircraft, will hasten the replacement of older aircraft.

Taylor said the company will finance the purchases through cash generated by operations and by additional debt financing. The company earned an after-tax return of 28.6% on its equity last year and was able to reduce its debt ratio.

Demisch termed the company, which is the largest commercial aircraft leasing and resale broker with revenue last year of $180 million, “the epitome of success.”

He added, “They came from nowhere 10 years ago.” He said the company is “the very smartest customer” in its business, “otherwise they wouldn’t be able to buy $5 billion worth of aircraft.”

Until the International Lease order, the largest civilian airplane order was placed in 1986, when British Airways ordered and reserved 28 Boeing 747s worth $4.1 billion.

International Lease Finance also announced Monday that it has commitments to supply engines for the planes from General Electric-CFM International, Pratt & Whitney and Rolls Royce. The engines purchased will in some cases depend on the airline a particular plane is destined for, Taylor said.

The GE-CFM commitments are worth an estimated $700 million and the Pratt & Whitney commitments worth $230 million. A value was not given for the Rolls Royce share.