Huge Order Paves Way For 777 -- $11 Billion Deal With United Is Largest In Boeing History

The Boeing Co. today bagged a record $11 billion aircraft order from United Airlines and, because of it, will launch its long-proposed, new-model 777 jetliner.

United placed firm orders for 34 of the 350-seat twin-engine 777 and 34 options.

Today's United order, valued at a potential $22 billion counting options, also included 30 firm orders and 30 options for Boeing's popular 747-400 jumbo jet, assuring steady production of that plane into the late 1990s.

United's total order today for 777s and 747-400s - $11 billion firm and another $11 billion in options - is the largest order ever for Boeing and the largest single order ever placed by a commercial airline.

Deliveries of both the 777s and 747s are scheduled through the decade.

The launch of the 777 - Boeing's first since the 757 and 767 were launched in 1978 - means Boeing may be committing itself to $2 billion to $3 billion in

development costs for the plane it plans to first fly in 1994 and deliver the following year.

But Paul Nisbet, stock analyst with Prudential-Bache Securities in New York, said Boeing's commitment may be less than that, depending on how much development costs it will pass on to suppliers of such things as engines, landing gear and avionics.

There was no word today on what participation Japanese manufacturers - Mitsubishi Heavy Industries, Kawasaki Heavy Industries and Fuji Heavy Industries - might have in the new plane. Earlier this year, Boeing announced that the Japanese would not be equity participants but would be suppliers. They already build parts for the Boeing 767.

Boeing Chairman Frank Shrontz said today the expected ratification of the 777 launch will come Oct. 29 by Boeing's board of directors.

``The importance of today's commitment for Boeing cannot be overstated - it will set a new standard for very large twin-engine operations around the world,'' Shrontz said.

Bill Whitlow, analyst at Gallagher Capital Corp. in Portland, said Boeing is likely to augment the United 777 order with others from at least a couple of foreign carriers known to be interested in the plane.

Boeing has been marketing the 777 to British Airways, Japan Airlines, Lufthansa, All Nippon Airways and Qantas, as well as American and Delta in the U.S.

``The assumption is they've got the foreign participation and that the last piece of the puzzle was a large domestic carrier,'' Whitlow said.

Nisbet said he expects other orders to follow soon and that they will help push Boeing's order book for the year to near or equal last year's 887 jets worth $46.7 billion.

Today's order boosted Boeing's total for the year to 399 planes worth $40.4 billion. More orders for the 777 will push that total closer to the 1989 figure. Some analysts had thought orders were drying up, predicting a shortfall from Boeing's record last year.

Tom Lloyd-Butler, San Francisco analyst for Montgomery Securities, called United's 34-plane firm commitment to the new jetliner ``skimpy,'' but said Boeing probably wouldn't agree to launch the plane without backup orders.

The possibility that Boeing might help United finance today's deal was downplayed by Nisbet, even though it has been a growing factor in international competition for orders and its participation was mentioned as part of financing of a recent Continental Airlines jet order worth $1.2 billion.

``United has lots of money and doesn't need Boeing's help on this one,'' he said. In an unusual move, Boeing lent United $700 million in 1987 in exchange for an order. That loan was repaid in less than a year.

Boeing's stock today, in response to the announcement, gained more than $1.50 in early trading, to more than $46 a share.

Shrontz said United's 777s will be configured for 363 passengers, with 38 in first-class seating. They will be powered with a new engine developed by Pratt & Whitney. The Hartford, Conn.-based engine manufacturer also will supply power plants for the 747s that United ordered today.

The new plane, with optional folding wings so it will fit into DC-10 airport gates, is expected to be produced at Boeing's Everett plant where the 747 and 767 are assembled. Earlier this year, Boeing filed a request for permits to add 5 million square feet to its Everett plant, a 58 percent expansion, including construction of a fifth giant hangar to house the 777 production line.

If an environmental impact statement goes unchallenged, construction could begin next March, said William Shineman, Everett division vice president.

Boeing has notified Everett officials that employment at its Everett plant, now at 23,000, should peak at 30,000 in 1995, when deliveries of the 777 are projected to begin.

Before today, the previous record aircraft order was valued at $9.4 billion, placed last year by GPA. Ltd, a Shannon, Ireland-based leasing company. That same order was worth $17 billion with options, and a share of that went to McDonnell Douglas and Airbus Industrie.

Some analysts had expected the new United order to be split between the three manufacturers, but Boeing captured the entire order.

Today's order was United's second major billion-dollar order with Boeing in 18 months. In April 1989, it placed an order for 180 narrow-bodied 737s and 757s valued at $7.1 billion and, with options, valued at a potential $15.74 billion. At that time, Stephen Wolf, United chairman, said the Chicago-based carrier would be following with an order for wide-body planes.

Wolf said the purchase will allow United to replace older jets and expand both domestic and international routes to position the company to ``compete aggressively around the world.'' The chairman said the 777s would be delivered between 1995 and 1998, and the optioned planes between 1998 and 2000.

-----------------------------------------------------------

Today's United order at a glance

-----------------------------------------------------------

-- Firm orders worth $11 billion, figured in inflated delivery-year dollars, stretching to the year 2004:

X 34 777s at an estimated $100 million each, totaling $3.4 billion.

X 30 747s at $130 million each, totaling $3.9 billion.

X Remainder, an estimated 15 percent, for spare parts and training.

-- Options, also worth $11 billion:

X 34 777s worth $3.4 billion.

X 30 747s worth $3.94 billion.

X Remaining for spare parts and training.