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PRC APPROVES TRUNK AIRLINER AGREEMENT WITH MCDONNELL DOUGLAS

 PRC APPROVES TRUNK AIRLINER AGREEMENT WITH MCDONNELL DOUGLAS
 BEIJING, China, June 29 /PRNewswire/ -- An agreement to co-produce 40 more McDonnell Douglas (NYSE: MD) commercial jetliners in the People's Republic of China has received final government approval, it was announced here today. The value of the order exceeds $1 billion.
 The agreement is for 20 147-seat MD-80 and 20 158-seat MD-90 twin- jets.
 The agreement between China National Aero-Technology Import and Export Corporation (CATIC) and McDonnell Douglas provides for Chinese- assembled aircraft, with many parts manufactured in the PRC, to meet the growing demand for service on the nation's trunk and regional airline routes.
 John F. McDonnell, chairman and chief executive officer of McDonnell Douglas, said the agreement was a significant milestone in the relationship between the PRC and McDonnell Douglas. "We have built a solid relationship with China over more than 10 years, and the strength of that bond led to ratification of this agreement," he said.
 The new contract is the largest co-production agreement between the PRC and a U.S. corporation. The previous record-holder was another McDonnell Douglas agreement signed in 1985, which provided for the purchase of 26 MD-80 twin-jets with 25 to be produced in Shanghai. With subsequent orders, the Shanghai plant has delivered 28 MD-80s to airlines in the PRC, who also fly another five MD-80s built in the United States.
 Shanghai Aviation Industrial Corporation (SAIC) will continue to assemble the MDC jets as before, with increasing support from other aircraft factories in China. Chengdu Aircraft Corporation, which is currently making nose sections for both Chinese and U.S. built twin- jets, will produce these sections for the new aircraft, and participation by factories in other parts of China is anticipated.
 Certification and quality assurance, including systems and procedures, will continue to be undertaken by Douglas Aircraft Company, headquartered in Long Beach, Calif.
 "Approval by the PRC government is a logical step in the evolution of commercial aviation in China," said Gareth C.C. Chang, president of McDonnell Douglas Pacific & Asia, Ltd., who has guided the McDonnell Douglas PRC campaign and who negotiated the final agreement.
 "Based on successful co-production and delivery of 28 MD-82s and 2,000 aircraft components in 11 different categories including horizontal stabilizers and nose structures, China and McDonnell Douglas are well-prepared to move ahead. This next phase will not only satisfy China's needs, but will enable us to join forces to compete in the global marketplace," Chang stated.
 "China will need many more aircraft in later years to satisfy their transportation requirements," said Chang, "and the agreement calls for discussion by 1995 that could lead to orders for up to 130 additional MD-90Ts."
 "We worked hard to win this contest against very tough competition," said Robert H. Hood, president of the Douglas Aircraft Company. "In addition to increasing our market share in Asia, the new agreement gives an important boost to our twin-jet programs, with resultant benefits to our employees and suppliers. It helps us preserve jobs that could have been lost in today's 'soft' market."
 The MD-80 is McDonnell Douglas' current mid-size, medium range twin engine jetliners, with 147 seats as operated by airlines in China. The MD-80 is powered by Pratt and Whitney JT8D-200 series engines.
 The MD-90 is an advanced model twin-jet, with the first prototype now in final assembly at the Douglas factory in Long Beach, Calif. It will begin flight tests early next year and be ready for airline service in 1994. The MD-90 is powered by International Aero Engines IAE V2500 series engines.
 The first three MD-80s in the new agreement will be similar to those already produced in Shanghai. The next 17 MD-80s and all of the MD-90s will be "T" models, which will incorporated a new main landing gear that will allow these so-called "Trunkliners" to operate at many of China's airports not now served by aircraft of such size without exceeding the lead-bearing strength of some runways and taxiways.
 The new design has four wheels on each main landing gear instead of the usual two-wheel arrangement. The resulting larger "footprint" spreads the weight of the aircraft on touchdown and also spreads the load while the aircraft taxis or is parked. Called a "dual tandem landing gear," the new design will allow Trunkliners to operate with full loads of passengers and baggage at all of the intended cities. Similar-sized aircraft without the new gear would have to serve those airports with reduced payloads to protect the pavements.
 A team of engineers from Shanghai Aircraft Research Institute and Douglas Aircraft has been designing the new landing gear under a separate agreement signed last year.
 The schedule calls for the first MD-80 to be delivered in 1995, the first MD-80T in 1996 and the first MD-90T in 1997.
 CATIC, SAIC and McDonnell Douglas have been working together since 1979, when SAIC began supplying landing gear doors to the MD-80 assembly line in Long Beach.
 The following was issued to McDonnell Douglas Corporation employees:
 Winning the Big One in the PRC
 To All Teammates:
 I have some exciting news to tell you. The two-year-long battle between Boeing and McDonnell Douglas for the so-called "Trunkliner" contract in the People's Republic of China is over. We won.
 Under a co-production agreement which was finalized late last week, the People's Republic of China will purchase 40 MD-80s, MD-80Ts (equipped with a new main landing gear) and MD-90Ts to provide regional and trunk service between now and the end of the decade. Final assembly of these aircraft will take place inside the PRC with many parts and subassemblies provided by our facilities in Long Beach. The value of this order exceeds $1 billion.
 This agreement is the culmination not just of a lengthy competition but of more than a dozen years of building close working relationships with customers and suppliers in the PRC. The significance of the Trunkliner agreement is threefold.
 First, it represents a large new order at a time when we and our competitors are suffering through the worst new order drought of the past several decades.
 Second, it underscores our position as a major presence in the largest country in the fastest-growing region in the world.
 Third, it will help to maintain work on our twin-jet product line, which has had layoffs over the past six months due to a large reduction in the size of our order book. Even with final assembly and a large part of the production occurring in the PRC, the 40 planes ordered by the PRC will provide hundreds of jobs for McDonnell Douglas and our suppliers for many years.
 The Trunkliner aircraft will provide regional services to nearby countries and domestic trunk services between cities. Dual tandem landing gears will better distribute the weight of our twin jets and allow them to land at many more airports in the PRC. Chinese engineers joined with our own engineers in designing the new landing gear. Later discussions could extend the agreement to an additional 130 MD-90 aircraft.
 We submitted our first proposal to the PRC government for a twin-jet aircraft co-production arrangement back in 1975. A Letter of Intent was signed in 1979 and, in the same year, we contracted with the Chinese to supply landing gear doors for our twin jets. In 1985, we entered into a full licensing and co-production agreement for final assembly of MD-80s in Shanghai. Under that earlier agreement, 28 MD-80 models have been assembled in the PRC, and seven more are in production. Two airlines in the PRC have purchased our MD-11 trijet. Both the MDC and PRC teams who have worked hard to complete this agreement deserve our thanks and appreciation. Both sides are deriving major benefits from a mutually beneficial relationship. It's a true "win-win situation."
 John F. McDonnell, chairman and chief executive officer
 -0- 6/28/92 R
 /CONTACT: David Brown, 310-593-6061, or at home, 714-854-3789, or Don Hanson, 310-593-4710, or at home, 818-966-3162, both of Douglas Aircraft Company/
 (MD) CO: McDonnell Douglas Corporation; China National Aero-Technology
 Import and Export Corporation ST: California IN: AIR SU:


GK -- NYSU005R -- 4721 06/29/92 12:33 EDT
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