The Boeing-McDonnell Douglas Merger

The consolidation of the aerospace industry reached a climax on December 15, 1996 when BOEING CEO Phil Condit and McDONNELL DOUGLAS CEO Harry Stonecipher announced the two aerospace giants would merge in a $13.3 billion stoc-for-stock tranaction. The new company, still named Boeing, will surpass LOCKHEED MARTIN as the nation's largest defense contractor with estimated annual revenues of $48 billion and a combined backlog of $120 billion. The merger, while dramatic, was not a complete surprise. The two companies had been engaged in on-again-off-again merger discussions for several years. However, several events in the fourth quarter of 1996 prompted the two parties to restart and complete merger discussions.

On October 25,1996 McDonnell Douglas announced it would not pursue development of the MD-XX super jumbo program. The announcement signaled the end of the company's position as a first tier commercial aircraft producer. The most serious setback for the company occurred on November 16, 1996 when then-Secretary of Defense William Perry announced that Boeing and Lockheed Martin had been selected to compete in the 51-month concept demonstration phase of the JOINT STRIKE FIGHTER competition. The evetual winner of this "only game in town" program will eventually produce at Last 3,000 aircraft for the AIR FORCE, NAVY, MARINE CORPS, and the United Kingdom's ROYAL NAVY.

The merger was approved in the United States by the THE FEDERAL TRADE COMMISSION on July 1, 1997.

On the international front, the European Commision is reviewing the merger to determine what effect it will have on competitiveness in the commercial aircraft maket. Within the past year Boeing has signed exclusive 20-year deals with AMERICAN AIRLINES, DELTA AIRLINES, and CONTINENTAL AIRLINES. The EC is concerned the exclusive deals threaten the business of AIRBUS INDUSTRIES, a consortium of four European firms that is Boeing's only remaining competitior.

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