Another Chapter in History for Two Giants of Aviation
In the early 1900s, Donald Douglas and William Boeing were pioneers and arch-rivals in America’s budding aviation industry. The companies they founded competed fiercely in building defense and commercial aircraft used around the world. On Sunday the firms made history again. This time, not as competitors but as collaborators.
Pending government approval, the Boeing Co. and McDonnell Douglas Corp. plan to merge in a $13.3-billion deal that would make them the world’s dominant power in the aerospace and defense industry. Boeing’s strength is commercial aircraft; McDonnell Douglas’ is defense. It’s a nice fit, one that would enable Boeing to better compete with Airbus Industrie, the European consortium that has become a formidable rival since selling its first jet 22 years ago.
Closer to home, the merger could bring a measure of economic stability to a recovering Southern California economy, battered in part by defense downsizing. Boeing would take over the McDonnell Douglas aircraft complex in Long Beach, which was the world’s biggest supplier of commercial planes until it was surpassed by Boeing in the 1950s and also by Airbus in the 1980s. Boeing would absorb 27,420 McDonnell Douglas workers in California, but it did not rule out layoffs as a result of the consolidation. Boeing hopes to squeeze out $1 billion in savings annually.
McDonnell Douglas is not new to the merger experience. The original Douglas company, founded behind a Los Angeles barber shop in 1920, was taken over by McDonnell Aircraft of St. Louis in 1967 because it was beset with financial difficulty. This time the company is unable to pay for modernizing its facilities and has been losing market share annually. It now has less than 10% of the world market for big jetliners, though it has a backlog of 206 aircraft orders. Last month, McDonnell Douglas, whose still active DC-3 is the most legendary passenger liner and freight hauler in airline history, lost out in the competition to build a new combat aircraft for all branches of the U.S. military.
Overseas commercial orders are the fastest-growing segment of the aircraft business. This year, Boeing has won 60% of new commercial orders, McDonnell Douglas only 5%. Combined, the two would become the only U.S. commercial aircraft manufacturer and the second-largest defense contractor, after Lockheed Martin Corp. Airbus Industrie has reason to worry.
