Jetmakers Curb Creativity To Keep Plane Prices Down

Carriers are placing orders for new versions of old aircraft

AIRLINES are doing better these days, starting to place orders for new aircraft again. But they don't want to pay extra for fancy, newly designed jetliners.

So makers of commercial jets are busier modifying existing models than launching new ones.

Consider the biggest producer, the Boeing Company. The Seattle jetmaker is coming out with a smaller ''B'' version of its wide-body 777 plane next year. Customers also want a larger version of the plane, so a stretch 777 is now on the drawing boards. Boeing is also drawing lots of interest in three new versions of its smaller 737, a workhorse that has been on the market almost 30 years and has outsold all other commercial jets.

In general, airlines ordered more jets in the first half of this year than in all of 1994.

Paul Nisbet, an analyst with JSA Research in Newport, R.I., predicts that a total of 410 orders will be placed for the whole year, rising to about 650 by 1999. Wall Street has turned bullish, pushing Boeing's stock up almost 50 percent this year.

Meanwhile, aircraft that have been talked about for years - a ''superjumbo'' jet seating more than 600 people and an ultrafast passenger plane - are proving too costly for Boeing or its rivals to develop.

Derivatives cheaper

''If you do a derivative [of an existing plane], it's just a lot cheaper,'' says Bill Whitlow, an aerospace analyst at Pacific Crest Securities in Seattle.

''I don't think we're going to see any new plane launches ... in this decade,'' adds Mr. Nisbet. The 777, which went into service earlier this year, was launched prior to the 1990-91 recession and airline industry downturn that followed the Gulf war.

Some airlines, in particular British Airways, have been begging for the superjumbo plane. But it could cost $15 billion to develop.

Similarly, while customers may dream of flying from New York to Tokyo in half a day, complex technology issues need resolution before the ''high-speed civil transport'' could be built. Among the concerns: sonic booms over land and damage to the earth's protective ozone layer.

While working on these issues, the aircraft manufacturers are keenly aware that most airlines are pushing for airplane prices to go down, not up.

The carriers, still with weak balance sheets, have already been paring costs in other areas, including labor costs. Newer aircraft that are more fuel-efficient and have smaller cockpit crews are attractive, but still too pricey for many airlines. So instead of replacing their fleets, some airlines are extending the life of older planes.

''Aircraft are very definitely coming down in price'' as the jetmakers try to cope, Nisbet says. For the moment at least, Boeing and rivals Airbus Industrie and McDonnell Douglas Corp. are competing on the basis of assembly-plant efficiency more than engineering.

The new versions of the 737, for example, ''will not cost more than old ones but will be considerably improved aircraft,'' Nisbet says. Among the changes are improvements in speed, range, and quietness.

If the airlines are pinching pennies, at least they are starting to buy planes again. As the new cycle of orders revs up, analysts see Boeing retaining its edge over Airbus, the European consortium.

Boeing advantage

The environment ''favors the company that has the most airplanes from which to derive,'' Mr. Whitlow says, referring to Boeing. The company is also thought to be the industry's low-cost producer.

Analysts expect Boeing could enlarge the 747 to seat around 550, moving toward the superjumbo market. The plane's small upper deck could be expanded, possibly with a redesigned wing.

Airbus, by comparison, is stuck. Its largest jet, the A-330, can seat 335, which will compete with Boeing's 777. But Airbus could only compete with a stretched 747 by developing an all-new plane.

McDonnell Douglas, meanwhile, has failed in its own efforts to develop a large plane, the MD-12, even though it would be derived somewhat from its MD-11. And its hopes to launch a small jet, the MD-95, hang in the balance.

Having seen Airbus steal much of its market share, St. Louis-based McDonnell has cut its work force drastically in recent years and searched for overseas partners.

''I think they will'' survive, Nisbet says. ''The jury is still out.''

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