No Market for the Jumbos

A scene outside Lockheed Aircraft Corp.'s assembly plant in Palmdale, Calif., symbolizes the condition of the $4.7 billion U.S. commercial aircraft industry today. There, glinting in the desert sun, stand five immense L-1011 TriStar jetliners, each worth $23 million. At first glance, they seem ready for delivery. The lettering on two of them spells out the name of Court Line, a British charter airline. The other three wear the bright symbol of Pacific Southwest Airlines' "grinning birds"--a broad smile painted under their striped cockpits. But Court went bankrupt in 1974, and PSA's business was so bad that ungrinning executives could not take the L-1011s. So Lockheed has been stuck with the five planes, which are parked on a ramp awaiting buyers.

It will probably be a long wait. Not only Lockheed but the entire U.S. commercial aircraft industry is in such a deep slump that there is no market for surplus planes. Worldwide deliveries of U.S.-made jetliners tumbled from 332 planes in 1974 to 282 last year. Jumbo jets, the big-ticket items, led the dive. McDonnell Douglas (revenues through September 1975: $2.6 billion) sold 14 of its DC-10s in 1974, but got orders for only eleven in the first nine months of 1975. Boeing ($2.7 billion through September) watched its sales of 747s drop from 29 in 1974 to 20 last year. And Lockheed ($2.5 billion through September), which won 28 orders for the TriStar in 1974, did not get even one last year. (Military business, which accounts for more than half of each company's revenues, and deliveries of jetliners under old orders muffled the impact on profits.)

More bad news is ahead. The authoritative Aerospace Industries Association predicts that commercial-transport sales this year will not exceed 215 planes. That means still fewer jobs in an industry whose direct employment had already fallen from 973,000 people in 1974 to 921,000 last year. The expected total next December: 903,000. When subcontractors' layoffs and the ripple effect on housing and other industries in plant towns are added in, the sag in the airplane industry might well be a drag on the nation's economic recovery.

As recently as 1972, the industry seemed to be an engine thrusting the economy higher. But then came the wave of increases in oil prices. Aviation fuel, which even at lie per gal. in 1973 represented 20% of an airplane's operating costs, soared to 33-c- in the U.S. (72-c- abroad). The climb at least doubled the fuel portion of each jumbo jet's operating costs. Inflation drove up landing fees, insurance rates, wages. To stay solvent, the airlines had to hike fares.

No Growth. Most of the boosts came in the midst of the recession, and would-be passengers saved money by staying home. Air travel in the U.S. had increased by 14% a year through the late '60s, then flattened out, but jumped 12% in 1972. It rose 6% in 1973, a mere 1% in 1974, and last year showed almost no growth at all. Pan Am, Eastern, American and Trans World Airlines plunged deep into the red. Not surprisingly, airlines ordered few new jets. Even United, the biggest U.S. airline and one that is still flying at a profit, could not justify more planes. Last fall it dropped plans to buy a fleet of 20 "stretched" versions of Boeing's 727.

A resurgence of air travel could reverse the trend, but only if it were of startling--and unlikely--proportions. Says one Wall Street analyst: "The airlines could handle a 10% growth in passengers without buying a single new plane. They have been flying at least that many empty seats for a couple of years." As the aircraft manufacturers see it, new orders will not pick up before mid-1977.

Meanwhile, the planemakers are counting on military orders to speed development of new wing shapes and quieter, more powerful engines, both of which might eventually lead to improvements in commercial planes. An order for cargo transports that has pitted McDonnell Douglas YC-15 against Boeing's YC-14 could have that effect. The manufacturers are also trying to adapt existing jetliners to new uses. Boeing has already developed a smaller version of its original jumbo jet called the 7475P. It will carry 100 fewer passengers (capacity: 280 seats), burn 10% less fuel and fly much faster than its parent. These advantages persuaded Pan Am officials to stretch the airline's thin financial resources to lease five of the planes for the New York-to-Tokyo run. Boeing also plans a brand new 180-to 200-seat medium-range 7X7, which should roll off the production lines in the early 1980s--just in time to compete with McDonnell Douglas DC-X-200 and Lockheed's "mini-trijet" derivative of the L-1011.

Ironically, the slump in the U.S. jetliner business seems to have spurred old competitors to new heights. By far the most noteworthy planes of 1975--the Concorde supersonic transport, the mediumrange, twin-engined Airbus A300B and the short-range Fokker VFW-614--were built by European consortiums. None of these craft pose an immediate threat to U.S. pre-eminence in the world market. But the European planes are of such quality that U.S. manufacturers now must watch not only one another but foreigners determined to open new horizons of excitement and speed in air travel.

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