The signing last week of the first major airline customer for Boeing Co.’s 717 short-hop jet Trans World Airlines Inc., which placed 50 orders for the new plane has buoyed hopes at the aerospace giant that other buyers will now follow suit.
But will they?
Analysts and other industry observers note that the market for an airplane the size of the 717, which seats about 100 passengers, is small, especially in the United States. Aside from TWA, only one major U.S. airline, Northwest Airlines Inc., maintains a large fleet of jetliners of a similar size and it is unclear if and when Northwest, which has seen its earnings plunge, will choose to replace them with 717s.
Aside from Northwest and TWA, no major U.S. airlines have a large fleet of DC-9s the predecessor to the 717, which Boeing inherited from McDonnell Douglas Corp. when it bought the company last year. Owners of DC-9s are considered likely customers for 717s, given their similar size and the fact that many DC-9s are more than 20 years old.
The 717’s future is critical for L.A.’s aerospace industry. While four commercial jetliners the MD-11, the MD-80, the MD-90 and the 717 are all assembled at the former Douglas Aircraft facility in Long Beach, only the 717 will remain after 2000, because Boeing is phasing out the other three jets.
About 6,400 employees at the Long Beach plant work on the MD-11, MD-80 and MD-90 programs. While the 717 program, which employs about 1,800 workers, is not expected to fully replace those jobs, it could offset some losses particularly if there is a large demand for the new plane.
But it’s questionable whether that demand will emerge. Many airlines including UAL Corp.’s United Airlines and AMR Corp.’s American Airlines, the two largest airlines in the United States have chosen to limit the types of planes they use to larger jets and smaller, 50- or 70-seat planes.
“My feeling is that a regional jet at 70 seats is a more effective way for an airline to go, as far as serving short-haul markets,” said Stephen Klein, an analyst for S & P; Equity Group. “So it remains to be seen whether this (the 717) makes any sense.”
Indeed, several carriers seem to prefer using planes smaller than the 717 for regional service.
“Right now (the 717) is not really something we’re looking at,” said UAL spokesman Matt Triaca, whose company mostly uses Boeing’s larger 737s and Bombardier’s 50-seaters. “We don’t really see a fit for the 717 right now.”
“The progression of our fleet size is pretty well filled in at this point,” said spokesman Tim Smith of American Airlines, whose American Eagle Airlines regional affiliate is awaiting delivery on 50- and 70-seat planes from Bombardier and the Brazilian manufacturer Embraer. “We don’t have any immediate plans for or eye on the 717 at this stage.”
Marta Laughlin, a spokeswoman for Northwest Airlines, considered one of the more likely 717 customers, said the airline was refurbishing its existing DC-9s rather than purchasing new aircraft. The refurbished planes will serve Northwest’s small-plane needs for the next several years, she said.
“We’ve made a very strong commitment to that airplane,” she said.
Boeing officials say they remain committed to the 717, and that they expect more customers to emerge as the hundreds of DC-9s still being flown need to be replaced.
“Airplanes will be going out of service either because of age or regulatory requirements because of noise, and that’s going to drive (the airlines’) decisions,” said Jerry T. Callaghan, director of the 717 program.
Callaghan said some airlines may choose, as Northwest did, to retrofit its DC-9s, but he added that the decision does not make sense in the long run.
“Overall the cost to those airplanes as they age is going to be a greater and greater part of their operating costs. While it may be a patchwork solution, it will not be the ultimate solution,” he said.
Besides demand, Boeing faces another challenge: competition. The European consortium Airbus Industrie is developing a 100-seater, the A318. TWA also placed an order last week for 50 of the single-aisle planes, should Airbus decide to manufacture the jetliner.
Outside the United States, two of the largest markets for the 717 and the A318 are Europe and Asia. But no A318s have yet been requested by a European airline or airplane lessor, and Bavaria International Aircraft Leasing Co., the 717’s only European customer, ordered only five planes.
As for Asia, the ongoing economic crisis there has forced many airlines to cancel or delay their orders to Boeing and other manufacturers.
“Events have really conspired both against the 717 and, frankly, the A318,” said Brett Lambert, vice president of DFI International, a Washington-based aerospace-consulting firm. “I think if a market starts to emerge, it will favor the 717. But the question is, will it start to emerge in time?”
