McDonnell Gets Jetliner Order Worth $1 Billion : Economy: Long Beach division says deal will lead to 1,900 new jobs. ValuJet Airlines is buying 50 MD-95s.

Scoring a huge victory that will help keep thousands of its Long Beach workers on the production line, McDonnell Douglas Corp. won a $1-billion contract Thursday to sell 50 of its new MD-95 commercial jetliners to a fast-growing regional airline in Atlanta.

The company’s Douglas Aircraft division had been awaiting a sizable award to formally launch production of the plane, which has been on the drawing board for four years. The jets are being sold to ValuJet Airlines, which also took an option to buy another 50 MD-95s.

Analysts said the order is likely to sway other airlines that are considering buying the newly designed 100-seat aircraft. Douglas will now likely sell at least 200 to 300 of the twin-engine jets, said Byron K. Callan, aerospace analyst at Merrill Lynch & Co. in New York.

The ValuJet deal also represents a personal triumph for Harry C. Stonecipher, who vowed to revitalize the company’s commercial operations when he was named McDonnell’s president and chief executive last year. He persuaded ValuJet to buy the MD-95 only after a long battle against Boeing Co.’s popular 737 and other rival jetliners.

“We feel like winners today,” Stonecipher said at a news conference in Washington, as he and ValuJet President Lewis Jordan raised a toast of Coca-Cola, whose operations are also based in Atlanta. “I almost get emotional about how long it’s taken, and the dedication of our people.”

The ValuJet award also is a major boost to struggling Long Beach, where 75-year-old Douglas Aircraft is the largest private employer and a linchpin of the economy. The deal means Douglas should remain a sturdy competitor--at least in the market for smaller aircraft--against the world’s two dominant commercial aircraft builders, Boeing and Airbus Industrie of Europe.

“The city is absolutely elated,” said Jerry Miller, Long Beach’s manager of economic development.

Douglas, which employs about 9,500 people in Long Beach in commercial aircraft production, said the award will require 400 new engineering and development jobs. Also, 1,500 production jobs will be created when assembly of the MD-95s begins in 1998, the company said.

The MD-95’s launch also will benefit subcontractors in Southern California that will supply parts for the plane. They include AlliedSignal’s aerospace group in Torrance, which will build the brakes, wheels and avionics, and Teledyne, whose units in Marina Del Rey and City of Industry will make electronic components and engine castings.

“This is great for the L.A. aerospace community,” said Jim Shaw, AlliedSignal’s director of Douglas operations.

Douglas--which also builds the mid-size MD-80 and MD-90 commercial jets and the wide-body, three-engine MD-11 in Long Beach--has suffered a dearth of new orders in recent years that has left the company a distant third behind Boeing and Airbus.

That had led to repeated speculation that the division might be closed by its St. Louis-based parent company, which is also one of the nation’s biggest defense contractors. (About 8,700 other McDonnell Douglas workers build the C-17 military transport airplane in Long Beach.)

The outlook turned especially grim last spring when Scandinavian Airlines System placed an order for a new model of Boeing’s 737. Douglas had high hopes that SAS would be the launch customer for the MD-95.

But Stonecipher said the ValuJet award is “a big step” toward putting to rest the concerns about Douglas’ future. “We have been steadfast in our determination to launch” the MD-95, he said.

The award “improves the overall viability of Douglas,” said C. Donald Scales, head of the aerospace practice at Electronic Data Systems’ A.T. Kearney consulting arm. “They’re now able to get a very cost-effective aircraft out in the field.”

One factor in Douglas’ favor was that 2-year-old ValuJet already has a 35-plane fleet of Douglas’ older DC-9s twin jets. Jordan said the carrier chose the MD-95 because it “continues the tradition” of the DC-9 as “a sturdy workhorse that is reliable, dependable, economical and customer friendly.”

But Douglas also had to compete on price, and a key reason it was able to keep the price at roughly $20 million per plane is because Douglas’ labor union, along with state and local government officials, helped lower Douglas’ operating costs in Long Beach.

Citing high business costs in Southern California, Douglas had planned to build the airplane in Dallas. But in February, Douglas changed its mind because the Texas deal fell apart and because of cost savings it got from government and the United Aerospace Workers Local 148 in Lakewood.

As part of a new contract, the union agreed to limit its wage and cost-of-living pay increases to 4% a year for the next five years. The pact also called for commitments from local government and area utilities that would provide Douglas with cost savings.

Stonecipher said some of those proposals still need to be worked out, but that the savings are “pretty much in place.”

The MD-95 order also comes at a crucial time for Douglas financially. Douglas had remained profitable in recent years, despite its weak orders, by laying off workers and otherwise slashing costs, but the company lost $7 million in the three-month period that ended Sept. 30.

Merrill Lynch’s Callan said Douglas will continue struggling in the market for wide-body jets unless MD-11 orders pick up soon. But he said “the most important thing” about the MD-95 contract is that Douglas’ “Long Beach plant isn’t going to be a golf course in 1999” even if the MD-11’s fortunes don’t improve.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Big Order Lands

McDonnell Douglas Corp.’s Douglas Aircraft division in Long Beach will start production of a new airplane, the MD-95, after an order from ValuJet Airlines. Here’s some facts about the deal:

Specifics

The order: $1-billion for 50 planes and options for 50 more.

The builder: Douglas Aircraft will do final assembly starting in 1998.

The impact: Douglas, which now employs 9,500 commercial workers in Long Beach, plans to hire 1,900 more.

The customer: Atlanta-based ValuJet is a young airline operating east of the Rocky Mountains.

Aerospace Jobs

The Southland lost about 14,000 aerospace jobs from mid-1994 to mid-1995:

August, 1995: 131,200

Note: Aerospace employment in Los Angeles, Orange, and San Diego counties during that period.

Market Share

Boeing had the most commercial jets on order at the end of 1994:

Boeing Co.: 55.1%

Airbus Industrie: 35.3%

McDonnell Douglas Corp.: 9.6%

Source: McDonnell Douglas Corp., ValuJet Airlines, Aerospace Industries Assn.; California Employment Development Department. Researched by JENNIFER OLDHAM / Los Angeles Times