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McDonnell Douglas Corporation (MDC) Civil Aviation

At the end of World War II, Douglas could claim to be the largest aircraft manufacturer in the United States. But soon after, the company had to fight hard to remain competitive. Its major competitor and rival was Lockheed, which came out with its four-engine Constellation airliner series to challenge Douglas's primacy in the commercial market. Douglas had the four-engine DC-4, but it did not have a pressurized cabin, was slower, and could carry fewer people. Douglas had more success meeting the Lockheed Constellation competition with its DC-6, which was first delivered to United and American airlines in November 1946 and which entered service on April 27, 1947 with United Airlines. Following two accidents in November, all DC-6s were withdrawn from service but they returned to the skies in March 1948 after the cause of the accidents was corrected. The plane was very successful and around 700 were built. It emerged as the most economical of the piston-powered airliners of the period.

Continued interest from American Airlines led to development of the DC-7, followed by the DC-7B and -7C models. The DC-7 began service with American in November 1953, and Pan Am began flying the 7C in April 1956. By late 1958, Douglas had produced more than 1,000 DC-6 and DC-7 aircraft, including two military transport versions. Lockheed had produced around 900 Constellations, making Douglas the winner in the competition for four-engine transports.

The years 1959 and 1960 resulted in heavy losses and though the company became profitable again in 1961, many fewer DC-8s had been sold than Boeing planes. To counter Boeing, Douglas signed an agreement with Sud Aviation of France to manufacture Caravelle twinjet transports in America. However, in June 1962, TWA canceled its option for 40 Caravelles and ordered Boeing planes instead. Douglas' arrangement with Sud Aviation fell apart.

Douglas, instead, began working on a new, smaller, short-range plane-the twinjet DC-9. Delta Air Lines ordered 15 DC-9s in May 1962 but only 58 had been sold by the time the airliner debuted on February 25, 1965. Despite this poor start, the DC-9 became the most successful of Douglas' commercial jet transports, with more than 800 sold to airlines and almost 50 built for the military. It would be the last type of aircraft developed solely by Douglas. Douglas lost the contract for the huge C-5A cargo aircraft to Lockheed. And finally, in the commercial sector, Douglas' 650-seat airliner lost out to Boeing's 747.

By the end of 1966, it had become obvious that Douglas needed both new capital and, in the opinion of the Wall Street firm Lazard Frères that was helping Douglas with its problems, new managemen. On January 13, 1967, Douglas accepted an offer from McDonnell Aircraft Corporation, headed by James S. McDonnell, to buy a large amount of Douglas stock, providing Douglas with the cash it needed, and to merge. Government approval followed quickly, and the Douglas Aircraft Company gave way to the McDonnell Douglas Corporation. McDonnell Douglas Corporation (MDC) was one among the dominant aerospace companies in the world. It began operations on April 28, 1967, when Douglas Aircraft Company merged with the McDonnell Company. The merger was essentially a takeover by McDonnell of the financially troubled Douglas, with James McDonnell as chairman. The merged company's products included military and commercial aircraft, spacecraft and boosters, missiles, data processing services, and electronics products. At the time of the merger, it had over 140,000 employees. The company existed until another aerospace giant, Boeing, acquired it in 1996.

MDC became the fourth largest U.S. planebuilder, after Boeing, North American, and Lockheed. It had two main components: Douglas Aircraft Company in California included the Aircraft and the Missiles and Space groups and the McDonnell Company based in St. Louis, Missouri. After the merger, MDC's first major project was its DC-10 wide-body airliner. American, United Air Lines, and Northwest ordered the aircraft, which was competing with Lockheed's L-1011 TriStar. The first DC-10 rolled out on July 23, 1970, and the first flight took place on August 29. Although the plane outsold the TriStar, with a total of 446 built during the program's lifetime, it split the market with the Lockheed plane and lost money.

In the meantime, production of the DC-9 airliner, which had rolled out in the early 1960s, continued with more than 300 delivered by mid-1968, including the military C-9A Nightingale. The DC-9 was one of the first airliners to share production internationally on a large scale-Canada and Italy both produced major components that were assembled in California. It evolved into a stretch version-the MD-80, which entered airliner service in late 1980. Another early 1960's airliner, the DC-8, ended production in May 1972, with 556 planes completed.

High costs and losses continued to plague commercial airliner production in the 1980s, and international collaboration became essential. MDC offered buyers of the MD-11 tri-jet a choice of American or British engines, and parts of the plane were built in Italy, Spain, Japan, Brazil, Britain, and Canada.

The aerospace industry had managed a broad recovery during the 1980s, principally due to the Reagan defense buildup. But that expansion leveled off, and the industry again began to contract. Further, the commercial-aircraft sector suffered declining orders, and the space program became a victim of budget cutting. For MDC, airliner losses persisted and many military programs experienced delays and cost overruns. Employment, which peaked at more than 132,000 in 1990, began declining sharply.

By 1991, MDC was experiencing a cash flow crisis. Air travel fell off, and U.S. airline losses in 1990-1992 on the order of $10 billion rippled through the industry. Orders were canceled and deliveries delayed, and MDC was forced to slow MD-11 production, with substantial layoffs. MDC, the largest defense contractor at the beginning of the 1990s, needed major restructuring. It sold its information systems subsidiary, but the company's commercial sector, which represented about one-third of its business, remained troubled.

Restructuring paid off, and by 1993, the company's finances turned around and the outlook seemed brighter. Revenues in 1993 came to $14.5 billion. Its C-17 transport began to reach squadrons and looked like it would show a profit. Douglas also continued its successful practice of recycling used commercial planes with smaller, emerging airlines worldwide. Its MD-90 twinjet also entered service in 1995. And with the launch of a new, economical 100-seat MD-95 in 1995 (which was redesignated the 717 after MDC's merger with Boeing), MDC seemed likely to remain in the industry.

But to many observers' surprise, on December 15, 1996, Boeing announced a bid for outright acquisition of MDC for $13 billion in stock. The main incentive for MDC was its troubled airliner operation, which seemed to be losing out to Boeing and Europe's Airbus. In addition, it had an uncertain military future after completion of its current programs. McDonnell Douglas agreed to the merger, and the aerospace industry was reduced to three major participants: Boeing, Lockheed, and Europe's Airbus.

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Page last modified: 07-07-2011 02:29:14 ZULU