Northwest Airlines Inc. yesterday launched the newest jumbo jet model when it purchased 10 Boeing 747-400s as part of a huge $2 billion airplane order.
The deal, announced in New York, means Northwest will be the first customer to have the long-range 450-seat 747-400 at a time when it appears Northwest will be pressed by United Airlines for U.S. supremacy across the Pacific. Transportation Secretary Elizabeth Hanford Dole has tentatively approved United's plans to acquire Pan American World Airways' Pacific routes and will reach a final decision this month.
Steven G. Rothmeier, Northwest's president and chief executive officer, said in a telephone interview that "the 747-400 is really the next logical step in the progression of aircraft for the Pacific. . . . It's our belief that this plane will set the economic structure of the Pacific to the end of the century."
The 747-400 will be 22 percent more fuel efficient than current 747s operated by Northwest. It will look much like today's 747s, but will have wings that are six feet longer and are tipped with "winglets," which bend upward and forward to improve aerodynamic efficiency.
Digital instrument displays and computers will permit the 747-400 to be built with a two-pilot cockpit instead of the three-person flight crew required for current-model 747s. The new plane will have a range of 8,000 statute miles, the longest of any commercial jet, permitting it to fly nonstop from New York to such Asian cities as Tokyo, Seoul and Shanghai, or from Los Angeles nonstop to Sydney.
In addition to the 747-400s, Northwest purchased 10 more Boeing 757-200s, the high-technology twin-engine standard-body aircraft that is becoming a familiar visitor to Washington National Airport flying the colors of Northwest, Eastern and Delta.
The big winner in addition to Boeing is the Pratt & Whitney Aircraft Group of United Technologies Corp., which won the $360 million engine contract for all the new airplanes at Northwest.
Pratt & Whitney was competing with engines from General Electric Co. and Rolls Royce, but Northwest remained true to its history in choosing Pratt. Northwest once refused to buy McDonnell Douglas DC10s -- then powered exclusively by General Electric -- unless they could be fitted with Pratt engines. McDonnell Douglas found a way.
Northwest also has a long tradition of keeping its fleet young, buying new technology and squeezing the dollar. A reduction in cockpit crew size from three to two is a major cost savings over the years. Last year, the parent NWA Inc. reported net earnings of $55.9 million ($2.44 a share). For the first half of this year, NWA's net profit was $35.3 million ($1.52).
Northwest has argued in the United-Pan Am case that, if United is permitted to acquire Pan Am's Pacific routes and combine them with its giant domestic network and pervasive computer reservation system, "This would further increase concentration, which means United would not have to compete on price . . . which can adversely impact the incumbent carriers. You either have to retrench, withdraw, grow internally or merge to acquire that same mass."
When asked which he was choosing, Rothmeier said, "Obviously, this mass suggests that we're already on the road to growth by internal means. We are looking to at least 10 percent annual growth in the Pacific for Northwest."
When asked if a merger with another carrier is possible, he said, "We simply won't comment on any merger or acquisition."
The sale is obviously important to Boeing, which has been seeking a launch customer for its 747-400. No other customers have been signed up, but "two or three other customers are interested," a Boeing spokesman said yesterday. He said that the 10 orders "plus the kind of customers we're looking at make us pretty confident."
The airplane, with high-tech control systems and special alloys to reduce weight, costs about $150 million a copy. The industry generally agrees with Rothmeier that it will be the standard over the Pacific for years to come, and it was the daunting cost of building a new 747 fleet that was part of Pan Am's decision to sell its Pacific routes.
Rothmeier said that the $2 billion deal would be financed "through internally generated funds and substantial debt. What kind of debt and how we finance will be a function of the market conditions . . ."
The 747s will be delivered between December 1988 and 1990; the 757s, from 1987 through 1989. The order brings total sales of the 747 to 664, and of the 757 to 163. Boeing has announced orders for 224 jetliners so far this year, compared with 169 for all of 1984.