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Douglas Plant's Salvation Tied to Fortunes of 717

Aerospace: Fate of Boeing's Long Beach commercial line may hinge on new 100-seat jets.

June 10, 1998|ELIZABETH DOUGLASS | TIMES STAFF WRITER

With the announced phaseout of the MD-11 jetliner still resonating through Boeing Co.'s Long Beach plant, employees have packed their hopes aboard the new 717, which debuts today as the only remaining passenger plane with a future at the historic facility.

The success of the 100-seat 717 is critical to preventing the collapse of commercial aircraft construction at the sprawling Douglas Products Division facility.

"We have positive thoughts toward the 717, and once customers can feel it and touch it, I think the orders will start coming in," said Kedrick Legg, president of Local 148 of the United Aerospace Workers, the labor union that represents 7,500 Boeing employees in Long Beach.

Seattle-based Boeing bought McDonnell Douglas in August, and has since announced thousands of job cuts as well as plans to discontinue the MD-80, MD-90 and MD-11 jetliners--the last vestiges of a long line of "MD-" and "DC-" designated planes built by McDonnell Douglas Corp. and predecessor Douglas Aircraft Co.

Together, the three programs employ about 6,500 of the 10,000 people working on commercial projects in Long Beach.

"There's some frustration here," said John Thom, a Boeing spokesman based in Long Beach. "Over the last year or so, we've had a lot of bad news."

The final MD-80 and MD-90 jets are scheduled for delivery in January 2000, with the last MD-11 to be delivered a month later.

Boeing still assembles the C-17 military transport, a program that is expanding, in Long Beach. And there is talk of building a new version of the plane--the MD-17--as a commercial cargo jet.

But Boeing hopes today's unveiling of the 717--along with tantalizing hints that it might move some 737 production to Southern California--will help heal the wounds.

Boeing executives have praised the new program as key to tapping into the growing demand for 100-seat aircraft--the 717 will typically seat 106 passengers--a niche market that thus far has no major contenders. Europe's Airbus Industrie, Boeing's chief rival, is also eyeing the market.

"The unfilled market for this is huge, maybe 2,500 to 2,600 units over the next 20 years," Thom said. "We have a plane ready and the other 100-seaters are just on paper."

Five planes are in production in Long Beach, and flight testing will begin this summer. About 1,500 people work on the program now, but the number could grow to 2,500 depending on demand and the production rate, according to Boeing.

"This looks like a good product for them," said Cai von Rumohr, an analyst with Cowen & Co. "Of course, you've got to sell a lot of them to make up for one 777."

In December, the list price for the 717 was set at between $30 million and $34 million, but analysts say Boeing is offering the plane for less than $25 million. The 777, Boeing's newest line of jetliners, lists for between $128 million and $171 million. Boeing announced Tuesday that it would cut back production of the 777 and its 747 as a result of weakened demand linked to the economic problems in Asia.

Boeing has said it will set up the 717 production line to build up to 10 jets a month, although current orders don't support that rate now.

AirTran Airlines (formerly ValuJet), the 717's biggest customer, has ordered 50 planes and has options for 50 more. Deliveries are set to start next year. In May, Bavaria International Aircraft Leasing Co. ordered five planes.

The 717 twinjet was called the MD-95 before Boeing's takeover of McDonnell Douglas, and the plane still has strong McDonnell Douglas roots, despite avionics changes and a new name.

To limit development costs and gain funding for the plane amid its own cash-flow problems, McDonnell Douglas several years ago assembled a worldwide team of suppliers that would share in both the risk and rewards of building the jet.

"They went all over the world, and almost 50% of the plane is built in Europe," said Paul Nisbet, an aerospace analyst with JSA Research.

The result is a plane with its engines built in Germany, the fuselage built in Italy, the wings made in South Korea and the tail built in Taiwan. Final assembly will be in Long Beach.

"That's a significant departure for us," said Pat Coulter, a spokesman at Boeing, which has resisted relying on subcontractors for major plane structures, such as the wings.

But Boeing--which is struggling with production bottlenecks in the Seattle area--could find it hard to adjust to the logistical challenges the 717 adds.

"It's a lot to grasp, and it's unfamiliar territory for many Boeing managers," said Brett Lambert, vice president of DFI International, a Washington, D.C. aerospace consulting firm. "And the company is very distracted right now."

One of those distractions, the production crunch at key Boeing plants in Washington state, has executives weighing the possibility of moving some 737 production to Long Beach to ease the strain.

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