Boeing's New Jet

AVIATION Boeing's New Jet United Air Lines, the nation's second-largest carrier (first: American Airlines), took another step into the jet age. Last week it ordered ten Douglas DC-8 long-range and eleven new-type, Boeing 720 medium-range jet aircraft to be delivered in 1960. Total cost: $100 million, to be added to the $175 million worth of DC-8s ordered for delivery in 1959. To finance the new jet order, United got an additional $100 million in credit from a syndicate of 36 banks headed by Manhattan's First National City Bank.

The order ended a heated race among the nation's major planemakers to bring forth a suitable medium-range jet for United. Boeing nabbed the contract by carefully studying requirements of United and other air carriers, and by revamping its unpopular 717 medium-range jet into an improved, 600-m.p.h. model. The four-engine 720, whose existence was revealed only a few days before United announced its order, puts Boeing on the inside track in the brisk competition for further medium-range jet orders. It will carry 100 to 125 passengers (v. 120 to 150 for the larger DC-8) plus substantial cargo, will be used by United on runs ranging from 400 miles or less to the Chicago-West Coast hop.

To pay for the $2 billion in new jets now on order, the domestic airlines last week pleaded with CAB for a fare boost. Since the airlines' request for a temporary 6% rise in fares was turned down earlier this year, several things have happened to help CAB see things more the airlines' way, including a further drop in carrier profits and the shock of Capital Airlines' recent request for a $20 million federal subsidy.

American Airlines President C. R. Smith led off the week's witnesses, declared flatly that American needs a 15% increase in fares in order to finance its new jets. He got statistical backing from Edwin H. Herzog, general partner of Wall Street's Lazard Freres & Co., who said that American's earnings, running at a rate of $18 million to $20 million in 1955-56, will have to increase to $25 million to $26 million annually to support the necessary financing.

One of the airlines' biggest problems is the virtual impossibility of getting equity capital when profits are falling. Warned Benjamin Clark, general partner of Manhattan's White, Weld & Co.: Unless the air-transport industry can earn the favorable opinion of investors, and in particular of the professional investor, "either the industry's progress will stop or the taxpayers will have to subsidize it again." So far are investors from that state of mind right now, said Clark, that "we can visualize the industry, even with reasonably good luck, being able to generate only $227 million of the $610 million still needed to pay for its new equipment." In Chicago, Eastern Air Lines Chairman Eddie Rickenbacker told a press conference that Eastern will "definitely have to defer" its big jet procurement program if CAB does not grant a fare increase.

This file is automatically generated by a robot program, so reader's discretion is required.