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SAS Pulls $1.4-Billion Order for McDonnell's MD-11 Jets

December 04, 1987|RALPH VARTABEDIAN | Times Staff Writer

Scandinavian Airlines System has canceled a $1.4-billion conditional order for 12 of McDonnell Douglas's new MD-11 commercial jetliners, a serious but not crippling blow to the development program that the company launched late last year.

The cancellation leaves the firm's Douglas Aircraft subsidiary in Long Beach with orders for 93 of the new wide-body aircraft that is derived from the DC-10, only one more than the number Douglas announced when it began the MD-11 program, according to Douglas spokesman Don Hanson.

The SAS order was the critical order that pushed the MD-11 into a development program that will cost Douglas $500 million, not including various tooling costs. SAS has been among the most loyal and important Douglas customers through the years.

SAS said it was dropping consideration of buying the Airbus A-340, another developmental aircraft that is competing with the MD-11, according to wire reports out of Stockholm. Instead, the airline will buy either new Boeing 767s or used DC-10s.

Aerospace analyst Wolfgang Demisch said the cancellation of the MD-11 order is important because of SAS' prestige in the airline industry. SAS says it would use the twin-engine 767s on transatlantic routes, a significant vote of confidence in the use of twin jets over water routes, Demisch said. The DC-10 and MD-11 both have three jet engines.

Some other observers noted that SAS' reasons for canceling the Douglas order were highly complex and were tied to deregulation of the European airline industry, which is spurring demand for smaller aircraft.

Douglas spokesman Hanson described the cancellation as a "disappointment, in no small terms," but added that the company is moving ahead quickly with the MD-11 program. The new plane's first flight is scheduled for March, 1989, 15 months from now, Hanson noted. Fabrication of parts has begun and major subcontractors have been selected, he added.

The remaining 93 orders for MD-11s leave Douglas with a backlog on the plane of more than $10 billion, including spare parts and support services. In addition, Douglas has firm orders, conditional orders and options for 444 MD-80 class aircraft, worth more than $11.1 billion.

With a total commercial backlog worth more than $21 billion, Douglas has enough orders to keep production lines going into 1992, Hanson said.

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