SAS Orders $1.5 Billion of MD-80s : Thai Airline Also Signs for Four McDonnell MD-11 Jets
McDonnell Douglas Corp. has won an order worth about $1.5 billion for up to 61 MD-80s to replace the short-haul fleet of the Scandinavian Airlines System, the companies said Monday.
McDonnell said it also received an order from Thai International Air for four MD-11s worth up to $398.6 million.
The MD-80 is a modern version of the DC-9 that SAS currently flies. The aircraft, to be delivered between 1990 and 1995, will be powered by United Technologies Corp.’s Pratt & Whitney engines.
“This order is in line with our expansion strategy, helping to make SAS one of the five top airlines by 1995,” SAS President Jan Carlzon said at news conference after the signing of the contract. SAS already flies 20 MD-80s and has another 17 on order, bringing the eventual size of the MD-80 fleet to 98 planes. SAS flies 60 DC-9s.
McDonnell Douglas President Jim Worsham said it was the St. Louis-based company’s second-largest order ever for MD-80s. “This order means a lot to us. It enables us to continue making our planes through the transition period until production of the MD-91s and 92s,” he said.
But U.S. airline analysts said the order did not improve McDonnell Douglas’ prospects for competing in the jetliner business.
“These awards are obviously nice for the company, but they don’t change the long-term prospects for the (commercial aircraft) division,” said analyst Philip Friedman at Drexel Burnham Lambert in Chicago. “It’s still a company that doesn’t have a full family” of commercial jet products.
Still in Development
McDonnell has been struggling for orders for the MD-11 and now has 34 firm orders and 69 conditional orders, a spokesman said. Douglas is spending about $700 million to develop the MD-11, a wide body with a long range that it adapted from the money-losing DC-10 of the early 1970s. The plane is still in the development stage.
The MD-80, on the other hand, has a substantial order backlog.
“I wish the larger order were for the MD-11. It would firm up the program,” analyst George Podrasky of Duff & Phelps said. “Still, it’s $1.5 billion in revenues coming in. That’s helpful.”
“But looking ahead to the 1990s you have to ask questions about a two-plane strategy and if there will be enough demand for the MD-11 for it to be profitable,” Podrasky said.
Analysts said McDonnell must produce more than just two jetliners and sell them profitably to compete with industry giant Boeing Co., and Airbus Industrie, the better-financed European consortium. Both of these jet manufacturers have a more complete product line.
Carlzon said the larger, modern fleet should help SAS in its so far unsuccessful search for an international partner. With a home market of only about 18 million people, Carlzon believes that SAS has to broaden its Scandinavian base for future survival among the major airline companies.
SAS, which is 50% owned by the governments of Sweden, Norway and Denmark and 50% by private investors, said it intends raising loans to finance half the 9 billion crown order.
SAS had been keenly interested in Boeing’s 7J7’s prop-fan plane as a possible successor to its current European fleet, according to Carlzon. But last December, Boeing announced plans to delay indefinitely development of the prop-fan aircraft.
“I won’t rule out the possibility that we will take another look at the 7J7 if Boeing decides to bring it up again. It had all the makings of a truly passenger-pleasing plane,” he said.
