Back in the Fight

Grinning like a baseball pitcher who had just walloped a grand-slam homer, McDonnell Douglas Corp. President David S. Lewis stood up at a Chicago press conference last week and an nounced that "It is official now. We are going to produce the DC-10." Lewis' happy assurance was based on some of the best news his company had heard in months: United Air Lines had decided to buy 30 DC-10s at a total price of $465 million, and had taken options to buy 30 more of the huge three-engine planes. The order put McDonnell Douglas back into the thick of the fight for the international airbus market which is expected to reach at least 1,000 aircraft worth $15 billion in the next decade.

Almost Out. Until last week, McDonnell Douglas was almost out of the running. Last February, the newly merged company got off to a fast start with an order from American Airlines of 50 subsonic DC-10s capable of carrying up to 343 passengers. But after that, competing Lockheed Aircraft got all the business with its L-1011. Lockheed signed up TWA, Eastern, Delta, Northeast, and a British airplane sales company for a total of 172 planes. McDonnell Douglas, which will not break even until it sells around 100 airbuses, grimly admitted that unless other orders came in, the program would be scrapped. Now there is no danger of that.

The two competing airplanes, along with a third, Boeing's 747-300, are almost identical. "On a technical basis, all three aircraft weighed out just about the same," said United President George E. Keck. "All three are excellent products of engineers' genius." What finally decided United on the DC-10 was what Keck called "favorable contractual terms." In other words, to come closer to Lockheed's $15 million offer, McDonnell Douglas had cut down its price per plane by almost $1,000,000--to $155 million, including engines. And the cut now applies to the American order as well. That kind of stiff price competition means bargains for the airlines; it also means that both airframe companies will have to scramble for volume to make money out of their new planes.

Price also seemed to be the key reason behind the choice of engines for United's DC-10s. All the planes to be built by Lockheed will be powered by British Rolls-Royce turbines. United, however, opted for General Electric's CF6/36 turbofan at slightly over $2 million per plane, putting the U.S. enginemaker a bit below Rolls. It is a price that may well move American to choose G.E. engines too.

The Uncommitted. Though no airbus has yet moved much beyond the drafting board, the prospective builders are steadily increasing their sales efforts. "The majority of airlines in the U.S., the Western Hemisphere and overseas requiring planes of this type are still uncommitted," said McDonnell Douglas Chairman James S. McDonnell. Thus even Boeing, which has yet to sell a single airbus, figures that it is still worthwhile to stay in the fight.

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