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June 25, 1983
Some passenger seats were missing. A rack jammed with electronic equipment was strapped to the floor in the first-class section. Technicians and engineers swarmed over the airplane, inside and out.
Seats were pushed forward on their tracks, with carpets rolled back and mechanics climbing in and out of floor recesses. Six technicians were crammed into a cockpit meant for two pilots.
A team of mechanics worked on a recurring problem with the right-wing forward flaps. A heavy-set man looked up at the tail, eyeing the airplane's rudder alignment. A pair of workers used an array of photo-electric cells to aim the airplane's landing lights.
It was Friday, Dec. 17, 1982, and Boeing was late delivering its first 757 to Eastern Airlines. Not contractually late, because the manufacturer had given itself a cushion of extra time. Such buffers, both in projected dates of completion and projected airplane performance, let Boeing almost always point to "better than anticipated" results.
Nevertheless, it already was two weeks past the date Eastern had been told it would receive the first of this silver-and-blue 757 twinjets.
The airline, which had launched the 757 project, was getting impatient. It had announced plans to begin 757 service Jan. 1 and had purchased television advertising to herald the new jetliner during Rose Bowl and other New Year's Day football games. Even more important, millions of dollars in safe-harbor leasing tax benefits to Eastern were riding on getting delivery before the end of 1982.
On that overcast day a week before Christmas, while technicians scurried and chiefs paced impatiently, Boeing had yet even to acquire Federal Aviation Administration certification which would allow the 757 to be operated commercially.
An engine-icing problem on a test flight a month earlier had sidetracked certification. The engine had been modified, but was yet to be proved in icing conditions.
Deadlines and timetables were being revised continuously. The target had been certification by Nov. 23, but the days and numbers kept changing. Hundreds of Boeing employees were destined to keep working on the program during the traditional long Boeing holiday recess. There was even talk of working Christmas Day.
Things were, in short, a mess.
"Every time you set a number, it slips. I don't even want to set another one," lamented a bill Robison, director of manufacturing on the 757 project.
Robison was standing with Paul Johnstone, then senior vice president of operations for Eastern, since retired. Johnstone is an amiable man, but he was growing perturbed by the delays in delivery of the jetliner.
Johnstone was head of a delegation that had come to Seattle from Eastern' Miami headquarters to look over the new Boeing jet before accepting it. Every Boeing airplane is subjected to such inspections when it is delivered to an airline. Just as a careful car buyer scrutinizes a new automobile carefully before driving it off the lot, an airline examines a $30 million airplane before flying it home.
EASTERN'S inspection of the 757 program really had begun in 1979, when the airline sent an ex-Boeing engineer, Ben Gay, back to Seattle to be Eastern's on-site representative. Gay had an impossible job, keeping track of an enormous program, but he was assisted by Boeing employees whose sole job is to help represent the interests of airlines.
Gay's mission was to make sure the airplane would meet Eastern's needs--that every light bulb could be replaced easily, that the cockpit would please Eastern's pilots, that the carpets were the right colors.
"You can't see it all," Gay said. "I can go out quite a bit, but I can't cover all of it. Too much for one man."
But one man is enough when Boeing's high level of quality control is considered, Gay said. "If we had doubts about Boeing's ability to build a decent airplane, not only design-wise but quality and workmanship-wise, we'd have people up here. But they've proven to us in the past that they can build a good airplane with good workmanship, and if it isn't right they fix it."
Gay's activities were reaching a high pitch in the closing days of December as the first 757s were being readied.
The particular airplane under inspection on Dec. 17 was No.NA007, the newest of the new 757s. It had flown for the first time only two days earlier.
On that shakedown flight, 39 problems had been detected--not big problems, but typical little first-flight problems: an annoying sound of hissing air around a seat in row 20, an electrical-access panel that fell off the first time the airplane ever landed.
Now Johnston, Gay and other Eastern personnel waited for a planned 1 p.m. demonstration flight of the airplane which, in just two weeks, was supposed to carry the first paying Eastern Airlines 757 customers.
Hours ticked by. Mid-day came and went and still the airplane sat outside Plant 2 at Boeing Field. Technical problems kept cropping up. Even the modest 1 p.m. timetable could not be met.
Johnstone recognized the possibility Eastern might not get its first two 757s certified and in service by the end of the month. Every minute seemed precious. "We're down to moving hours out of the schedule, not days or weeks," he said.
Many of Johnstone's thoughts that Friday afternoon were 900 miles south at Edwards Air Force Base near Los Angeles, where another 757 was facing obstacles of a more substantial nature.
It was Boeing 757 No. 3, a flight-test airplane flown by pilot Kenny Higgins. The pilot and his crew were almost desperately trying to build up ice on the airplane's engines to prove that the icing problem had been remedied.
On a routine flight test Nov. 16, both Rolls Royce engines on 757 No. 3 had been damaged when ice built up on their spinner cones, hubs for the forward set of fan blades. The ice had broken off in chunks large enough to bend blades and cause dangerous engine vibration.
After a sometimes heated debate with Boeing over the cause of the problem, Rolls responded by installing heated spinner cones to prevent ice build-up, and it was presumed the problem was solved. But presumption alone would not win an FAA airworthiness certificate. The "fix" had to be proven.
Boeing and Rolls worked out a strategy in which they would take FAA personnel on a flight through the same sort of supercooled weather conditions that caused the engine damage on Nov. 16. The jetliner would use one engine with a heated spinner and one without - as a control--for the test. The idea was to damage the unmodified engine as before, while demonstrating the safety of the engine with the heated spinner.
But proof was elusive. Day after day, 757 No.3 flew across the western United States seeking appropriate weather conditions, and day after day it had no luck.
"We had a week of totally dry weather in this half of the whole United States," said John Hodson, a Rolls Royce vice president.
Finally, Boeing asked the Air Force to help it make ice. At Edwards, a KC0135 tanker was loaded with water. The tanker, a derivative of the Boeing 707, normally is used to refuel another airplane in flight with an arm-like boom. This time, however, the tanker dispensed water into the freezing air.
The 757 flew about 70 feet behind and the water had turned to ice by the time it hit the airplane and its engines. It was a last-ditch attempt to create icing conditions, prove the engine modification, win certification and get the first two airplanes to Eastern by the end of the year.
DECEMBER'S ill winds weren't the first turbulence the 757 program weathered during its five-year flight.
By 1981 the health of the airline industry was fading, and Boeing faced the prospect of canceled orders for the new airliner. Some airlines, such as American, eventually withdrew plans to buy the new and expensive 757. They couldn't afford it.
Eastern President Frank Borman went before Congress in 1981 and 1982 to plead for tax breaks to that his company's "launch" order for the 757 could proceed.
"The performance of the (airline) industry in 1980 and 1981 jeopardized not only Eastern's participation in that (757) program, but the entire Boeing program," Borman told Senate Finance Committee on March 18, 1982.
Borman told the senators he had been in Seattle in July 1981 attempting to cancel or delay a third of Eastern's order for 757s. Then Congress passed safe-harbor leasing, which improved the situation.
"We went back and did our numbers and found that with the provisions of safe-harbor leasing we could indeed continue the $909 million capital (757) order," Borman testified. "And we went to Boeing and said, ë With the new tax law, it's go,' and Boeing is in fact producing our airplanes. And they are coming down the assembly line, ready or not."
Safe-harbor leasing was an ingenious, controversial mechanism which allowed unprofitable companies to sell unusable tax breaks to profitable companies. Fortune magazine called it "an obscure form of tax-avoidance boogie-woogie." Here's how it worked:
With or without safe-harbor leasing, a company acquiring capital assets (in this case, airplanes) is entitled to tax breaks such as depreciation. But tax breaks are little good to an unprofitable company which pay no tax anyway. In fact, they can even hurt a money-losing airline.
That's because a profitable airline might get a $10 million tax break on a $30 million Boeing jetliner, making its true cost only $20 million, while an unprofitable airline would have to pay the full $30 million for the same airplane.
Under safe-harbor leasing, an unprofitable company could sell its tax breaks to a profitable company for cash. In the hypothetical case of the $30 million jetliner, ABC Airline could sell its $10 million tax break to XYZ Oil Co. for, say, $8 million.
The $8 million in cash for ABC Airline would reduce the true out-of-pocket expense for a $30 million jetliner to $22 million. XYZ Oil, meanwhile, would et a $10 million tax reduction for the $8 million it paid--a quick $2 million profit.
Technically, ABC would temporarily sell the jetliner to XYZ, then lease it back. It is a complicated shuffle of paperwork in which nothing really is exchanged except tax breaks and cash. Both the profitable and unprofitable company are sheltered from taxes in a "safe harbor."
No one loses - except the federal treasury, which, in this hypothetical example, would be out the $8 million.
Safe-harbor leasing was pushed through Congress in 1981 by Borman and others, who argued that unprofitable companies like Eastern were suffering and could not afford to buy needed equipment, such as Boeing 757s.
By early 1982, however, it was clear that Uncle Sam was being taken to the cleaners.
Alan Greenspan, a conservative economist, labeled safe-harbor leasing "food stamps for American business." Profitable companies were gobbling up available tax credits from unprofitable companies, and some big profitable companies--including General Electric - used the loophole to pay no taxes at all for 1981.
In February 1982 the mood in Congress was turning against safe-harbor leasing. Senate Finance Committee Chairman Robert Dole called for repeal of the tax loophole.
Borman and leaders of other unprofitable companies returned to Congress. Borman's argument was compelling: Eastern had proceeded with the 757 order only on the promise of safe-harbor leasing, and revoking that promise would be unjust and disastrous.
Congress chose a middle course, eliminating much of safe-harbor leasing but allowing a timed phase-out for several key and depressed industries, including airlines.
The 757 seemed safe again, although as Eastern's financial picture continued to deteriorate there were other doubts whether it would be able to complete the purchase of 757s.
By Dec. 17, when Johnstone was examining the first of the new jetliners, financial packages involving safe-harbor leasing had been assembled. Once the jetliner was ready, Eastern would have money available for transfer to Boeing, Johnstone said.
The actual purchase of a completed Boeing jetliner is conducted in a variety of ways.
Typically about a third of the price has been prepaid to Boeing during the course of manufacture. But increasingly, as airlines have fallen on hard times (or developed shrewdness in such dealings), Boeing itself has provided financing for part of the purchase price and the whole deal has grown more complicated.
In the case of the sale to Eastern, final funds were to be transferred by wire, with telephone conference calls between several cities confirming the movement of funds from one New York bank account to another. The moment the money changed accounts, the airplane changed hands.
For competitive reasons, Boeing and the airline tend to obscure the details of such financial transactions. But Eastern's 1982 annual report provides some details.
For instance, the report reveals that the British government provided roughly $10 million financing per 757 "at an attractive interest rate" because of the purchase by the airline of Rolls Royce engines. More to the point, the report said Eastern made $12.8 million on the sale of the tax benefits associated with the first two 757s.
The report says Eastern will raise another estimated $130 million through the sale of the tax benefits associated with 13 additional 757s and four Airbus A300s due for delivery this year.
"We would have had to cancel the (757) program had we not had safe-harbor leasing," Borman said in an interview last month. "There's no question. It's a fact."
EASTERN Airlines is looking to the 757 as part of the solution to its financial woes. The 757 is the world's most efficient jetliner, on a per-seat basis, and the airline hopes that its position as the only U.S. operator of the airplane for two years will give it some competitive advantage on costs.
"Frank Borman sees it as a vehicle to thwack his competition with," said Alan Smith, a Rolls Royce official.
Boeing has faced lean years recently, too. And also is looking to the 757 to help restore the strong profitability of the past. Announced total orders for the 757 actually have fallen rather than risen during the past two years, but Boeing claims the airplane eventually will be the world's all-time best-seller.
This is a point of speculation and dispute. While Boeing contends the 757 is about the right size to capture a large share of future sales, other aviation-industry forces - notably Europe's Airbus Industrie--believe the still-to-be-built 150-seat airplane will be far more attractive than the 185-seat 757.
The Airbus view, shared by many others, is that the 757 is a technological success but is likely to be a financial failure--the same bittersweet combination that characterizes the European Concorde SST.
"The 757 would sell beautifully if it had 150 seats," said Reinhardt Abraham, chief technical executive of Lufthansa German Airlines. "My personal opinion always was that the 757 was too close to the 767 and A-310, and it is meeting its own (Boeing) competition. Only huge airlines will be able to fly both the 757 and 767."
But M.J. Lapensky, president of Northwest Airlines, offered a sharply contrasting view. "I don't know what's magic about 150 seats," he said, adding that the 757 is size perfectly at 185 seats to fill the gap in capacity between the 140-seat 727s and 290-seat DC-10s.
However, Lapensky added that Northwest order any 757s until it becomes apparent which of the three available engines (two made by Rolls Royce, one by Pratt & Whitney) offers the best economy.
Wolfgang Demisch, an aerospace analyst for the Wall Street firm of First Boston, takes a middle view.
Demisch suggests that the 757 will be money-losing burden for Boeing in the short run because the company will sell relatively few in each of the first few years of production
But he believes that the long run will show Boeing has sized the airplane correctly--that the 185-seat airplane will prove more valuable than the 150-seat airplane, because the shortage of air-traffic controllers and growing congestion in air space will force airlines to fly fewer flights with larger-capacity airplanes.
And although it is costing Boeing a bundle to build an airplane which isn't yet selling well, it could have cost Boeing much more not to build the 757, Demisch contends.
Airbus elected to build its second jetliner, the A-310, at the same 210-passenger size as the 767--a size where there is a known strong market and where appropriate new-technology engines already were under development.
In Demisch's view, Airbus probably would have sized its airplane smaller, at about 160 seats, if the 757 hadn't already been under development to fill that need.
"I think in essence that the 757 has... rattled Airbus sufficiently by its presence that they didn't launch a competitive entry," Demisch said.
"There was a time when Airbus was feeling pretty buoyant a couple of years back, and if there hadn't been a 757 at that point there would have been a large, gaping hole between 140 seats for the 727 and 210 seats for the 767," he said. The temptation to build an airplane in the middle "would, I think, have been irresistible."
"As it is, that opportunity was preempted, and as it stands now I think Airbus is probably regretting that they didn't go ahead and do it anyhow," Demisch said. "Basically, I think it means Boeing is going to be gaining market share, courtesy of the 757, which protected them at the short-to-medium-haul length."
Successful jetliner models seem to stay in production about 20 years. When a jetliner is retired it generally is because its technology was outmoded, because it is physically worn out.
By incorporating state-of-the-art technology in the 757, Boeing attempted to create an airplane that would be flying well into next century. In fact, the 757 and 767 share a cockpit design which Boeing calls, ambitiously, the "Century 21 flight deck."
The cockpit can be updated readily by replacing computer software (programs), eliminating the need for challenging or impossible hardware changes. This simplicity and flexibility should add to the longevity of the 757.
But a Boeing airplane design is not static. As long as the 757 is in production it likely will be refined. Derivative versions of the airplane are under study, so one day soon men and women may be creating 757 freighters, or stretched or shortened passenger models.
IN RENTON and around the world, people continue laboring to make the 757--and make it a success.
The range of human endeavor on any given day is impressive.
On Wednesday, April 20, 1983, a day picked at random, Barry Buckworth was running a 90-foot-long milling machine at the Hawker de Havilland plant in Bankstown, Australia.
The machine, first of its kind in Australia, was automatically shaping three 757 wing-shear ribs simultaneously. The ribs were destined for the 40th Boeing 757, and Buckworth's job was to monitor a video screen and blow away metal shavings with an air hose.
That same day, in Burbank, Calif., Ken Tuttle was running a similar milling machine, although he was sweeping away the metal shaving rather than blowing them off. Tuttle is an employee at Menasco, another Boeing subcontractor, and his milling machine was simultaneously shaping the outer housings of the left-hand main landing gears of the 757s.
In Derby, England, 20-year-old Martin Spooner squirted lubricating oil onto carbon-hardened steel he was milling for Rolls Royce. Working in oil-laden air, Spooner was creating tooling for the manufacturer of the 757 engines.
In Minneapolis, Richard Butler, a group leader at Honeywell factory, was looking after a high-technology machine which used ultrasound energy to drill and mill dense glass. The glass would become the heart of a laser-gyro inertial navigation system used on the 757.
At the Boeing plant in Wichita, Kan., Sharon Baily drilled holes and mounted part of ribs in the nose section of 757 No. 33, while Jessie Bishop Jr. cut out wheel-well door panels of graphite, using a concentrated spray of water at 50,000 pounds of cutting pressure per square inch.
At Boeing's Vertol Division in Philadelphia, which mostly makes helicopters, Larry Troutman supervised assembly of the fixed leading-edge structure is a 2,100-pound device, 64 feet long and containing 700 parts.
On that day, Art Flock of Delta Airlines was in Everett pondering how his airline wanted its 60 757s painted. And near Boeing Field in Seattle, Rob Wood, chief pilot of Britain's Monarch Airlines, was giving a test to two of his pilots in a 757 full-flight simulator.
At Renton Municipal Airport, Eastern's Ben Gay told Boeing to send 757 No. 6, destined for his airline, back into the paint hangar for more polishing.
"My main effort since those early deliveries has been to look for early in-service problems," Gay said. "There's a lot of little things. But overall, you'd give the airplane an excellent grade."
Nearby, top officials of Rolls Royce and Pratt and Whitney laid out for Boeing executives the first glimpse of the "I-2500," a collaborative engine proposed to power a 150-seat airplane Boeing and other manufacturers are considering building.
And on that day, April 20, Tom White finished two sketches of a proposed control box that airline personnel could use to load the 757's cargo hold automatically. Late in the day, he and his coworkers began a new project, a theoretical redesign of airplane passenger cabins in which convention is tossed aside and new ideas are given free reign.
In the Renton plant, Ken Baesler climbed from the inside of a 757 wing which he had been checking for leaks with a mixture of pressurized air and ammonia. In another building, Paul Duxbury was helping assemble the wings, driving titanium fasteners with a rivet gun.
In the final-assembly hangar at Renton, Bill English installed a wing part, tightening 3/4-inch nut to 100 foot-pounds of pressure. A Boeing inspector, J.J. Johnson, witnessed the operation and then stamped a seal of approval. The pressure on the nut cannot be altered without breaking his personalized seal.
On the underside of the same 757, Dennis Kitchen spend an hour installing a nose landing gear, pushing the 3,000-pound installation dolly away like Superman when he was finished (the dolly was riding on a cushion of air).
And inside yet another 757 that day, Tanjer Gillard filled a Dixie cup with shiny white acrylic enamel and began to paint the heads of screws in a doorjamb. A finishing touch.
All these men and women, and thousands more, were contributing to the 757 program, and industrial venture of massive proportions--whether measured by the yardstick of economics, technology, politics, utility, or even romance.
All these men and women, and tens of thousands more, were helping to make it fly.
7?7: What will Boeing gamble on next?
WHAT'S NEXT after the 757?
Like a card shark pondering the next play, Boeing's gaze is shifting back and forth between its hand and the faces of its opponents.
The ante is a billion dollars or more. But the stakes are even higher.
In Boeing's hand are several cards. Perhaps those figuring most prominently are plans for 150-seat jetliners of a modern, fuel-efficient design. Consensus seems to be that the next major project will be in this class.
Airline leaders are calling for such an airplane, although many acknowledge they couldn't afford to buy one even if it were available. The airline business is in recession, and airlines are notorious for second-guessing their purchase decisions.
"Boeing may have a problem in the fact that there's a terrible amount of uncertainty across the whole spectrum of airline customers as to what the hell they really want," said M.J. Lapensky, president of Northwest Airlines. "I guess if I were making airplanes I'd really love it if people knew what they wanted, in a very clear fashion."
One voice calling consistently for a 150-seat airplane has been that of David C. Garrett Jr., president of Delta, the major U.S. airline that is, perhaps, in the best shape financially.
"The development of a short-range, advanced-technology airplane is imperative if we are to fly into the 21st century prepared to remain a viable enterprise, provide the level of transportation convenient and necessary to the public, and operate effectively within the framework of the free-enterprise system created by airline deregulation," Garrett said in a recent speech.
The problem with an all-new airplane of this size is that it would be terribly expensive to produce, said Joseph Sutter, executive vice president of the Boeing Commercial Airplane Co.
Airlines may want the plane, "but they want it at a helluva low price," he said.
Boeing and the airlines may find that derivative versions of existing airplane models are more economical than all new airplanes, when the high capital costs of new airplanes are taken into account, Sutter said.
Airbus Industrie, a consortium of plane-makers backed by European governments, already has announced its 150-seater, called the A-320. But the announcement was made at the Paris Air Show two years ago, and though the announcement has been periodically and dramatically renewed, the engineering and construction program still hasn't been launched.
Airbus hasn't been able to line up sufficient orders from airlines to commit to the program. Meanwhile, Airbus, Boeing and McDonnell Douglas all are courting Japan's industrial capacity and money as a potential partner on a 150-seat airliner project.
Boeing is said to be a frontrunner, though skeptics wonder whether Boeing wouldn't just be providing Japan with the technology it needs to become a threatening new manufacturing competitor.
Boeing's major choices for the 150-seat market are a longer stretched version of the 737, called the 737-400 or 737-500, and an all-new 150-seat airplane called, for now, the 7-7.
The 7-7, which presumably could be named the 777, probably would retain the "Century 21 flight deck" used on the 757 and 767. Common instrumentation and layout potentially could yield common pilot training and certification, making all three Boeing models that much more attractive to airlines through increased flexibility and lower training costs.
A new 737 would retain a cockpit largely consistent with existing 737 cockpits, providing commonality advantages of a different kind.
Sutter said Boeing could produce a 737-400 or 737-500 before Airbus could build the A-320 is launched before starting work on the 7-7, and use the extra time to advance the technology of the new Boeing airplane. It might even use some sort of turboprop engine, he said.
Meanwhile, Boeing recently introduced a larger version of its 747 jumbo, is readying a larger 737 and is prepared to build a stretched version of the 767, increasing capacity from about 210 seats to about 250.
This larger 767 is being eyed by airline executives. It would be a highly attractive replacement for DC-10s and L-1011 widebodies if and when two-engine jetliners are approved for transoceanic flights.
Other airplanes, such as the new four-engine airplane to take the role once filled by the 707, may be in the company's cards, too.
But if Boeing has firm ideas about its plans, it isn't sharing them.
"Anything is possible," said Carl Munson, vice president for strategic planning. "I refuse to be categorical in the long term about anything being either inevitable or impossible, because I don't believe anybody can look into a crystal ball and be categorical.
"The industry's changing dramatically right now."
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