Douglas soars on spate of new plane orders.

Increase in business means new jobs on the horizon

After years of massive layoffs, investigations, criticism and failed deals, McDonnell Douglas Corp.'s Long Beach operation has take off.

Last month, the company received two big orders worth $3 billion to build commercial airliners. On top of that, the company last week was waiting word from the Pentagon on a potential multibillion order for more C-17 military cargo aircraft that are also built in Long Beach.

Aviation industry experts said the orders represent a big turnaround for the Long Beach operation that in 1990 employed 50,000 people and today has fewer than 20,000 workers. But they warned the operation, particularly on the commercial side, is not out of the woods yet.

"The next 12 months will be key," said Jon Kutler, president of Quarterdeck Investment Partners in Century City. "Obviously, the business is picking up but it remains to be seen if the airlines are going to get giddy and start ordering aircraft like they once did."

Quarterdeck is an investment firm that specializes in the aerospace/defense industries.

The new signed and sealed orders are expected to boost employment at Douglas Aircraft Co., the Long Beach unit of St. Louis-based McDonnell Douglas that makes commercial aircraft. But the increase will not come anywhere near matching Douglas Aircraft's employment in the spring of 1990 when 40,000 workers were making at least one commercial airliner a week.

New jobs seen

Don Hanson, a Douglas spokesman, said the two new orders are expected to create at least 1,900 new jobs, including 400 engineering positions.

Last month Douglas Aircraft first received a $1 billion order from ValuJet Airlines for 50 MD-95 aircraft, a 100-seat, twin-jet plane. The order inlcuded an option for Atlanta-based ValuJet to buy another 50 MD-95.

A week later, the long-anticipated deal for Douglas to sell four MD-11s and 29 MD-90s to the national airline of Saudi Arabia was completed. The deal with Saudia, the national airline, is worth about $2 billion.

Industry analysts said by far the most important of the two deals is the one with ValuJet because it allows Douglas to begin production on the long-planned MD-95.

"The ValuJet deal is valuable to Douglas because it is a kick-off order. It jump-starts the program and gives Douglas a new product to compete with against the other manufacturers," said George Podrasky, an aviation industry analyst with Duff & Phelps Investment Research in Chicago.

The MD-95 is a small, short-range commercial jet that has been on the drawing boards at Douglas for several years. The MD-11 is a three-engine jumbo jet that has been in production for about four years and can carry up to 300 passengers. The MD-90 is a twin-jet. medium-range aircraft that can carry 150 passengers.

Douglas also makes the MD-80, an aircraft similar in size and capacity to the MD-90.

Surprise on C-17 front

The most surprising turn of events at McDonnell Douglas' Long Beach operation is the situation with the C-17. The military side of the Long Beach operation is not part of Douglas Aircraft Co., even though it shares facilities.

Last week, word was expected anytime from the Pentagon that it would order up to 80 C-17s, a deal that could be worth up to $16 billion in new business for McDonnell Douglas Corp. The C-17 is a big, four-engine cargo plane used by the United States military to transport troops and equipment.

As recently as two years ago the C-17 program was almost terminated because of huge cost over-runs and delays in delivering the plane to the U.S. Air Force. At one point, the entire C-17 program was put on probation until McDonnell Douglas made improvements.

"There were problems connected with the program. Some of those problems were exaggerated but we have made a lot of improvements and all of the issue have been resolved." said Jim Ramsey, a spokesman for the program in Long Beach.

Last week, there were published reports that the Pentagon was about to formally announce the order for a full complement of 80 C-17s rather than other options that included buying 747s from Boeing Co. for military use.

Delivery slated soon

McDonnell Douglas is currently working on an order for 40 C-17s. The 24th C-17 in that order is expected to be delivered to the Air Force this month.

Ramsey said if the Pentagon indeed orders another 80 C-17s it would depend on the delivery schedule whether additional workers would be hired. Currently, about 10,000 McDonnell Douglas workers are employed on the C-17 in Southern California. About 8,500 of those are in Long Beach.

About eight C-17s are now delivered every year and if the production rate were to go up to between 12 and 15, additional workers would likely be hired, said Ramsey.

Another question concerning the possible C-17 order is that it would be subject to yearly spending approval by Congress. In other words, the Pentagon may order 80 C-17 but Congress may not be willing to pay for all of them.

In general, industry analysts said the turn-around at Douglas is the result of two factors:

* A recovering airline industry that has started to order new planes again.

* McDonnell Douglas management that has cut costs and made improvements to existing aircraft.