Boeing Not Interested In Selling Douglas Unit

Boeing Co. has no interest in trying to sell McDonnell Douglas Corps commercial aviation business to win European Union support for the planned merger of the two aerospace giants, a Boeing official said on Thursday.

In response to press reports, Boeing spokeswoman Sherry Nebel reiterated that the companys main interest is in McDonnell Douglas defence and space operations.

But she said that did not mean Boeing would want to try to sell the Douglas Aircraft commercial aviation business.

We believe this would be a futile gesture with profound, long-lasting and damaging consequences for Douglas Aircraft, its employees, suppliers and customers, she said. Theres no economically plausible strategy that Douglas could follow to make it competitive again either as a stand-alone concern or as part of another concern.

 

Boeing and McDonnell Douglas executives have been holding ongoing discussions with European Commission staff members in Brussels since EU competition experts recommended last Friday that the $14 billion merger be blocked in its current form.

Talks are likely to intensify now that a top Justice Department antitrust official has announced plans to go to Brussels ahead of a July 23 final decision.

The EUs stubborn opposition to the merger has heightened speculation over what changes Boeing will offer to make beyond the unspecified remedies it already has proposed.

Most analysts say that at a minimum, the worlds biggest commercial airplane manufacturer will agree to modify exclusive sales deals it has negotiated with three of the biggest US airlines.

Some published reports have speculated Boeing could go as far as trying to sell Douglas Aircraft, which accounted for 24 percent of McDonnell Douglas $13.8 billion in revenues last year.

McDonnell Douglas has tried without success in the past to generate investor interest in the commercial aircraft unit, which makes the narrow-body MD-80 and MD-90 models and the MD-11 trijet.The Federal Trade Commission conducted a final search for potential investors before deciding to approve the Boeing acquisition last week, said Bill Baer, head of the agencys competition bureau.

We actually talked to the people we thought might be potential investors in Douglas or purchasers of it, and we didnt find anybody out there who saw value added in Douglas Aircraft, he said.

Industry analysts say Boeings European rival Airbus Industrie is the only candidate remotely likely to be interested in Douglas, and they say it is far from certain the consortium would be able or willing to pull off such a deal.

Jon Kutler, president of Quarterdeck Investment Partners, an investment bank devoted to the aerospace industry, said Boeing likely would put a high price on Douglas if it were to agree to offer it for sale.

If they were forced to divest it and Airbus couldnt come up with a deal it might backfire on them, he said. It would turn from an interesting opportunity to a political embarrassment.

Other analysts called such a scenario unlikely.

A lot of those discussions have more or less come and gone, said Barbara Beyer, president of Avmark Inc. aviation consultants. She said it was highly unlikely the European Union would be able to block the deal in the face of expected increasing political pressure from the United States.