A Gamble at Douglas

Despite the rapid conquest of the air by jets, the world's airlines still need a small jetliner that can fly short hops profitably and operate from relatively short runways. To fill this need, British Aircraft Corp. developed the sleek BAC One-Eleven. Last week, after a year of indecision about its plans, Douglas Aircraft--whose DC-3 was the classic pre-jet short-range plane--announced that it will challenge the BAC ship with a new jetliner called the DC-9.

The DC-9 and the BAC One-Eleven are remarkably similar. Roughly one-half as big as a Boeing 707, both planes have two fanjet engines mounted on the sides of the rear fuselage, cruise at about 550 m.p.h. and accommodate up to 83 passengers. Price: in the $2,500,000 to $3,000,000 bracket. The big difference is that the BAC One-Eleven will make its maiden flight in June; the DC-9 will not be ready to fly before 1965. And the British have already sold 41 One-Elevens, including twelve to Braniff, while Douglas does not yet have a single order for the DC-9.

President Donald Douglas Jr. is clearly gambling that the DC-9 will help reverse his company's decline. The loss of the Skybolt contract last January cut Douglas' orders backlog to $806 million (v. $2.2 billion in 1956). Sales during the past six years have slipped 30%, to $750 million in 1962, and the work force is only half what it was six years ago. Canny James McDonnell, chairman of St. Louis' thriving McDonnell Aircraft, has bought an estimated 200,000 Douglas shares and wants to take over. Though Douglas directors rebuffed his bid last month, they know that he could still launch a proxy fight, and they may want a bright new project with which to woo shareholders.

Douglas believes that there is a world market for 400 to 500 short-range jetliners in the next five years. But it will have to move with jet speed to overtake the British. Otherwise, the high cost of developing a jetliner may force Douglas into an even deeper decline.

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