Trade-Ins for Jets

When its shiny new DC-8 takes off on its maiden test flight this week, Douglas will launch a major challenger to Boeing's already-tested 707 in the jet airliner race. To sell such new airliners, U.S. aircraft manufacturers are adopting an old-fashioned marketing technique: the trade-in allowance. Boeing has agreed to take back 14 propeller-driven Stratocruisers when it delivers its 707s to British Overseas Airways Corp., has offered to give trade-in allowances on nine more 707s to Northwest Airlines. Douglas is negotiating with United Air Lines to take in some DC-7s as a down payment on 30 DC-8s; Lockheed is dickering in the same way to sell its turboprop Electras. All told, U.S. airlines have ordered 257 jets and 172 turboprops. When these come into service, their extra speed and capacity will send about 700 piston aircraft onto the used-plane market.

No jetmaker is happy about getting into the secondhand plane business, because that market is already poor. As recently as 18 months ago, demand was so strong that fully depreciated planes could often be sold for more than they cost; ancient DC-3s were bringing $140,000 v. an original cost of $85,000. But with turboprops and jets on the way, airlines lost interest in slower aircraft, and prices tumbled 40% to 60%. American Airlines, which has four DC-7s currently for sale and may have up to 25 more by July 1959, is asking $1,200,000 for an aircraft that cost $2,000,000 new. A DC-6B that cost $1,300,000 might have a trade-in value of $750,000, but would fetch far less in the open market.

At the moment, none of the planemakers is sure of customers for the piston aircraft, though there are 1,100 DC-3s and DC-4s around the world that will soon have to be replaced. Even without the assurance of a market, the planemakers will take trade-ins because, according to one. "a trade-in may be just enough to tip a deal your way."

One possibility considered by planemakers: subsidiaries that would sell, lease and re-equip the planes. Some foreign lines that have ordered jets as a matter of prestige may find themselves too short of dollars, may have to settle for DC-7s and Constellations.

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