A Needed Lift for Lockheed

OFFICIALS of troubled Lockheed Aircraft Corp. seemed to be living through a good news-bad news joke last week. The good news: the company got a much-needed lift when British European Airways ordered six of its wide-bodied airbuses, L-1011 TriStars, and took options on six more. The bad news: a few days later the Army canceled Lockheed's contract for developing the Cheyenne attack helicopter, which had been on the drawing boards for seven years but never got into production because of technical bugs and mounting cost estimates.

The quick counterpoint neatly symbolized Lockheed's so-so progress in the year since Congress saved the company from bankruptcy. On balance, the good news clearly outweighed the bad. Selling the TriStar is absolutely vital to Lockheed's future, and the BEA order --the first for the TriStar in almost two years--was a welcome indication that Lockheed can keep itself going. Development and eventual production of the Cheyenne helicopter would have helped Lockheed, but cancellation will cause little if any out-of-pocket loss: the company has already written off $132 million of development losses on the helicopter. Yet the shooting down of the Cheyenne was a reminder that Lockheed still has a long, long way to travel.

Not that such a reminder was needed. A year ago Lockheed was headed for collapse, its TriStar project in shambles; the aircraft's engine supplier, Britain's Rolls-Royce, had gone bankrupt. Congress came to the rescue by authorizing a $250 million federal loan guarantee and the British government assured delivery of the engines by assuming ownership of Rolls-Royce.

Understandably, then, the BEA deal was signed in London amid an almost cloying exchange of mutually admiring remarks between BEA Chairman Henry Marking and Lockheed Chairman Daniel Haughton. BEA will pay $147 million for delivery of the six planes starting in the fall of 1974. Marking denied that his nationalized line was prodded into the deal by the British government in order to expand the market for engines made by the government-owned Rolls-Royce. Even so, BEA is not likely for many years to phase out its fleet of British-made Trident jets and switch wholesale to the TriStar.

Money Needed. Moreover, the BEA options to buy six more planes are less than they seem. Marking noted that his airline would exercise its option only for a "variant" of the present version, very possibly a longer-range plane with a more powerful Rolls-Royce engine. If Lockheed can produce the new model, the British government has promised to provide 75% of the $76 million that Rolls-Royce would need to develop the engines. But Lockheed will have to put up an estimated $80 million to $100 million to develop the modified plane, and it does not now have the money. It has already used up $150 million of its Government-guaranteed loan, and will need the rest merely to continue pro duction of the conventional TriStar. Haughton says he is planning to raise the needed cash by floating a new bond issue, but how well it would sell is in some doubt.

Lockheed did post in the second quarter its sixth successive profit, of $4.2 million. But the company is deeply in debt, its operations are closely watched by its bankers, and it cannot count on its non-TriStar operations to pull it through. It still has a healthy share of space and defense work; the U.S. Trident missile program alone will bring the company $300 million in fiscal 1973. Yet the recent loss of the National Aeronautics and Space Administration's $2.6 billion space-shuttle program to North American Rockwell was a keen disappointment. With orders for the jumbo C-5A military transport scheduled to end by spring 1973, the company may be forced to shut down its huge Marietta, Ga., plant.

Lockheed's main chance to survive in its present size lies with its major commercial venture, the 275-to-400 passenger, $17 million TriStar, which went into service in April. But that plane runs into muscular competition from McDonnell Douglas's strikingly similar DC-10, which has been in service for a year and already comes in a long-range version. So far, McDonnell Douglas has picked up 168 firm orders for the DC-10 family; 43 have been delivered.

Lockheed, bedeviled by delays, has so far delivered only seven TriStars and has orders for 110. The company claims it can get back its development costs and start making a profit by selling 275 TriStars; industry sources put the figure at 370. The next big buyer of tri-jets will probably be All Nippon Airways. McDonnell Douglas, Lockheed and Boeing, maker of the 747, are competing furiously for its business. After that, however, new orders are expected to drop to a trickle for some time. Thus Lockheed will have to run even faster just to stand still. If nothing else, the plight of the weakened aerospace giant proves one thing: the Government can save a favored company from extinction, but in the harsh interplay of a competitive market such aid can rarely restore a company to robust health.

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