The Selling of the 707 (Fortune, 1957)

Editor's note: Every week, Fortune.com publishes a favorite story from our magazine archives. This week, we turn to an article from the October, 1957 issue that examines Boeing's bid to rule civilian aviation with something entirely new: a jet.

America's first jet transport—the Boeing 707—will soon roll down the runway. For Boeing, the nation's top producer of bombers, the huge plane marks a new bid for leadership in a field long dominated by Douglas.

FORTUNE -- Undismayed that his company has not made money on a nonmilitary plane in over twenty years, William, M. Allen, president of Seattle's Boeing Airplane Co., is investing about $185 million ($36 million more than Boeing's total net worth in 1956) in America's first all-jet transport--the Boeing 707. "Our great ambition," says Allen, "is to produce the finest commercial transports in the world. We have sufficient facilities. This time we're in the commercial business to stay." Late this year the first Boeing 707 will roll out of the company's final assembly plant at Renton, Washington, thus starting another lap in Boeing's, long-frustrated pursuit of fame and fortune in the commercial field.

The $4,500,000 four-engine plane, capable of carrying 124 first-class passengers over 3,000 miles nonstop at a cruising speed of close to 600 miles per hour, will be put in regular service by Pan American World Airways early in 1959. A bigger intercontinental version with a maximum range of over 4,000 miles will probably go into scheduled operation in the fall of 1959.

Big planes are nothing new for Boeing, of course. The company, since it was founded in 1916, has designed and built more heavy military aircraft than any other U.S. manufacturer, and more multi-engine jet planes than all other airframe makers together. Today Boeing operates three major plants in the Seattle area plus two at Wichita, Kansas, employs more than 80,000 people, over 80 per cent of them on military projects. Boeing's sales last year of $1 billion (second in the airframe industry only to Douglas Aircraft's $1.1 billion) came almost wholly from military production the B-47 and B-52 jet bombers, and a prop-driven transport tanker. Net profits were $32 million, only 3.2 per cent of sales, but a pleasing 21.6 per cent of invested capital. (Like most aircraft companies, Boeing's ratio of sales to invested capital is high, largely because it leases a big proportion of its facilities from the government; the company owns only 30 per cent of its floor space.)

In the first half of 1957 stepped-up deliveries of B-52's and the start of deliveries of a new jet tanker raised Boeing sales to $652 million, profits to $16,500,000. Moreover, Boeing is in an excellent position to weather the present cutbacks in defense spending, which are falling hardest on the fighter-plane contractors. As FORTUNE pointed out last month (see "The Anxious Aircraft 'Primes'"), the company's military backlog ($2.3 billion) consists almost entirely of bombers and tankers plus a production contract for the Bomarc ground-to-air missile. As things stand now, the Air Force's need for all these aircraft is far more likely to increase than to diminish.

Boeing's present position in military-plane making is largely due to the foresight of Bill Allen, who reluctantly abandoned a successful Seattle corporation-law practice in 1945 to take over a company that had just lost the bulk of its military business. By converting his firm's design efforts, from piston planes to the then-new jets, Allen put Boeing out in front of the rest of the industry when jet-bomber production began in 1948. And the invaluable experience gained in building jet bombers and tankers in the past ten years is what he is primarily counting on now to keep his company out front in the commercial jet-transport business.

As in the past, however, Boeing faces severe competition from Douglas Aircraft Co. For Douglas is now starting production of its own jet transport--the DC-8--at Long Beach, California. Unlike Boeing, Douglas has had relatively little experience in building multi-engine jet aircraft: it has built about 275 B-47's from Boeing designs (compared to about 1,400 by Boeing); it also built nearly 750 two-engine jet bombers and fighters for the Navy and Air Force. Douglas executives acknowledge that not much of the company's previous jet experience is directly applicable to the DC-8. And Douglas is at least six months behind Boeing on delivery schedules. But Douglas has one big advantage over Boeing: it has been building planes for the airlines continuously (except during World War II) since 1934, and it has earned an unmatched reputation in the commercial-transport field.

The jinx
Boeing's commercial ventures, by contrast, repeatedly have been plagued with bad luck, pad timing, or plain bad judgment. Just before World War II, for example, Boeing started producing its Clipper flying boats and the 307 Stratoliners. After it had built only twelve Clippers and nine Stratoliners, war broke out in Europe, and Boeing had to switch to B-17 production. Loss on the two commercial planes: $4,200,000. The Stratocruiser, Boeing's most recent commercial offering, brought out in 1947, also came a cropper financially. Although the Stratocruiser still has more passenger appeal than any other plane flying, even Boeing agrees it was less economical to operate than either Douglas' DC-6 or Lockheed's Constellation. Only fifty-six Stratocruisers were sold, and Boeing lost $13,500,000 on the venture (which was more than offset, however, by sales of a military version, the C-97, to the Air Force).

The one financial success Boeing has had in the commercial field was its model 247, which it produced back in 1933. Sixty-five of these planes were built, and the company might have sold many more if it had not made the serious mistake of agreeing to deliver the first sixty to United Air Lines. (At the time, United and Boeing were subsidiaries of United Aircraft & Transport, which was broken up by federal legislation in 1934.) Because the other airlines could not get deliveries of enough 247's to compete with United, most of them in 1934 turned to Douglas, which then built the DC-2, which outmoded the 247, and subsequently the DC-3.

Despite this dreary history, Allen around 1947 began thinking seriously about a commercial jet. Because of high operating costs per mile, a jet transport would have to be big to be economic. But airline executives feared they would not be able to fill planes larger than the DC-6 (about sixty passengers). A Boeing design group concluded operation of jet transports was economically feasible even at that load capacity. In August 1949, attempts were made to sell such a plane to Pan American. "We went with a brochure that showed three different sizes of plane, one six-engine, two four-engine," recalls Maynard Pennell, later chief project engineer for the 707. "We discussed 61 passengers up to 103; it was as daring as we dared to be." Pan Am was interested and Boeing considered taking a contract to build a jet primarily for Pan Am. It decided not to for fear there would be a repetition of its experience with the 247. Instead, Boeing started showing its brochure to other major U.S. airlines. Response was completely unenthusiastic.

Comets and tankers
While Boeing and other U.S. airframe makers were talking about commercial jets, the de Havilland Aircraft Co. in England had gone ahead and built the first all-jet transport, the ill-fated four-engine Comet I, of which BOAC had ordered fourteen. In July 1949, de Havilland flew the Comet for the first time, and several U.S. airlines, including American and Pan Am, sent representatives to England to window-shop. It began to look as though the U.S. manufacturers might well lose out in the jet field. But none of them felt it could risk the $15 million or so it would take to build a prototype plane.

Wellwood Beall, senior vice president of Boeing, and others in the industry wanted the federal government to finance construction of a prototype jet transport. Indeed, a bill to get this done was proposed in Congress; it died quickly. By the fall of 1950, Boeing management was convinced that if it was to get into the jet-transport business it would have to build a prototype itself. But the company's annual earnings in the 1946-49 period had averaged less than $1,400,000, and Allen just didn't have the money to finance a prototype.

Moreover, with the outbreak of war in Korea, Boeing was busy building bombers again and working on the first experimental B-52 for the Air Force. Though the B-52, which was to be the backbone of the Strategic Air Command, was designed to fly over 6,000 miles nonstop, in-flight refueling would be necessary to give it the range SAC required. Existing prop-driven tankers flew too slowly and too low to fuel the B-52 efficiently. Allen, with SAC requirements foremost in his mind, but thinking also of his transport prototype, tried to get the Air Force to authorize construction of a jet tanker for the B􀁽52. Allen argued that such a plane, if slightly modified, could also be used to transport troops and equipment. Finally, in January, 1951, the Air Force asked for proposals on a jet tanker, and Boeing submitted designs for a jet version of its KC-97, which had just gone into production.

The Boeing design had many supporters in the Air Force, but a powerful group of high-ranking officers insisted that the company already had enough military business, and that in any case it would be cheaper to convert B-47's into tankers than to develop a new plane. In August, Boeing's proposal was rejected.

This did not weaken Allen's conviction that a jet tanker would have to be built eventually. The problem, as he saw it, was to demonstrate to the Air Force that a tanker designed as such would be much more effective than a conversion job. This almost required that a prototype plane be built. Fortunately for Allen's dream, Boeing's finances were improving considerably during 1951, as the rearmament program took hold, and Allen saw the attractive possibility of making one prototype that would convince both the Air Force and the airlines. So in April, 1952, assured that he had the necessary engineering talent, manufacturing strength, and plant area, Allen got the Boeing board of directors to authorize $15 million (later amended to $16 million) to build a tanker-transport prototype. It was to be a completely new plane, not just a converted KC-97 or B-47, and on its success or failure would ride a large share of Boeing's fortunes--military and commercial.

A nice contract
Engineering and construction of the prototype began immediately, and Allen made it clear that any necessary design compromises were to be resolved with military usage first in mind. However, in August, 1952, Allen also decided it was time to start sending out sales teams to the airlines to take new soundings on their interest in jet transports. He publicly announced his prototype plans. The news startled the airframe industry; it also forced the major airlines into a realization that they might have to start buying jet transports before they wanted to. Most airline executives felt that some sort of turboprop plane should precede the pure jet; and both Douglas and Lockheed, attuning themselves to this idea, were, in fact, designing turboprops.*

(*In the U.S., two companies are now building turboprop transports. Lockheed's four-engine Electra, designed for medium ranges (500 to 1,500 miles), is scheduled to go into service in the fall of 1958; airlines have ordered 129 of them. Fairchild Engine & Airplane Corp. has airline orders for thirty-seven of its two-engine F-27's. Two British turboprop models are already in operation: the Vickers Viscount, a two-engine plane, and the four-engine Bristol Britannia.)

During the two years it took to build the prototype, Boeing salesmen kept pounding away at the Air Force to place a tanker order. At the same time they tried to stir up the airlines' interest without actually offering them a plane, for Allen did not intend to build a commercial plane unless he got an Air Force tanker order. Government facilities and tools would be used to build the tanker, and Allen reasoned that he could rent some of these same facilities to produce the 707, thus effecting economies in the building of both the military and the civilian models. Unused government-owned floor space was available at Renton, and Allen was sure that much of the tooling needed for a big tanker order could be used to make 707 parts without impeding military production. The difference in original cost to the Air Force between tooling for production of, say, fifteen planes a month and tooling for twenty-five planes would be slight, and this added cost would be more than compensated by the rental that Boeing expected to pay the Air Force for use of the facilities.

In June, 1954, Air Force Secretary Harold Talbott announced a new design competition for a jet tanker. Douglas and Lockheed, though they feared Boeing had the order sewed up because of its prototype and its close relations with SAC, entered against Boeing. In July the Boeing prototype had its first successful flight, and less than a month later, Talbott gave Boeing an interim order for twenty-nine tankers. In addition, Boeing was given reason to expect that the order would be increased to about 100 planes, regardless of the outcome of the competition. When the competition ended in March, 1955, Lockheed did get a development contract (later canceled) for an advanced type of tanker, but, as expected, Boeing walked away with the whole production order, increasing its total order to about 400 planes.

With the firm order for tankers, Boeing was ready to tackle the commercial field. The company's lead seemed impressive. Boeing would deliver at least 200 tankers before any 707's could be delivered, and what it learned during this period could be applied to the 707 and thus make it a better plane. But there was one big snag: the Air Force, fearful that Boeing could not carry on a commercial program without jeopardizing the military program, would not let the company rent the government facilities and tools Allen had counted on.

The Douglas danger
Then another threat arose. In June, 1955, Douglas, with nothing but a preliminary design and without the advantages of military orders, decided to go ahead with a jet transport anyway. Over half the aircraft being flown by major scheduled carriers at that time were Douglas-built; for many airlines it was almost second nature to buy from Douglas. And Douglas' late entry into the jet-transport field gave it an important advantage. It would be easy for Douglas to change its blueprints to conform with airline desires; Boeing would have to stick with many of the features incorporated in its tanker prototype or lose its time advantage.

Finally, in August, 1955, Bill Allen, fearing that his lead was in jeopardy, flew from Seattle to Colorado Springs to appeal personally to Harold Talbott, who was visiting there. He argued that Boeing's rental of the tanker's tools and plant space would "obviously be a substantial benefit to the Air Force and to the country" and he also pointed out that Douglas' decision put Boeing in a tough spot. Talbott finally gave in, and Boeing was free to try to sell its 707.

The jet planes first offered to the airlines by Douglas and Boeing were both designed to be powered by a commercial version of the Pratt & Whitney J -57 engines used on the B-52 and the KC-135 tanker. But these engines, although they had a thrust of over 10,000 pounds, were not powerful enough for economic nonstop intercontinental flights. Another, more powerful engine was being developed, the Pratt & Whitney J-75, but it was anyone's guess when it might become available. Pan American was trying to persuade Pratt & Whitney to hurry the J-75 along; it also tried to get Boeing and Douglas to design planes around the J-75 on the chance it would become available. Boeing refused, but Douglas decided to make its DC-8 adaptable to both engines. Boeing's reasoning was that the bigger engine would require a different and bigger airframe than its 707, and that the company would be better off concentrating on one plane, even if it meant the airlines using it would have to make a stop on practically any intercontinental flight.

During the summer of 1955 both Douglas and Boeing made the rounds of the domestic airlines. They landed no orders. The airlines were still not convinced that the 707 or DC-8 could make money for them, and they wanted to delay as long as possible the huge cash outlays that switching to jets would require. It looked as if the airlines were going to hold to their desire to buy turboprops first; they had already ordered seventy-five Lockheed Electras. Lockheed was convinced that the airlines wouldn't order pure jets for quite a while. In fact, Lockheed President Robert Gross made a speech to that effect in Chicago on the morning of October 13, 1955. Less than two hours later he received a message that Pan American President Juan Trippe had announced he would buy twenty 707's and twenty-five DC-8's.

Trippe's decision to buy from both Boeing and Douglas was based only partly on his well-known penchant for being first with new equipment. The 707, though it didn't have the range Pan Am wanted, was bound to be the first jet flying. But the DC-8, which would be equipped with J-75 engines, was the plane Pan Am needed for its long routes. Bill Allen, recognizing that he might be forced to build an intercontinental version of the 707, informally agreed to let Pan Am change most of its order to such a plane if it were built. On the other hand, Allen knew that Pan Am's order for twenty planes would not in itself be enough to keep Boeing in business, so he made the order contingent on total Boeing sales of at least fifty 707's. This number wouldn't allow Boeing to break even, but Allen figured that if he could sell fifty 707's, more orders were bound to follow.

Pan Am's order broke the ice. Almost overnight the attitude of other airline presidents changed. Many were angry at Pan Am for going ahead so fast, but at the same time they realized that once one airline was flying jets, all others would have to follow. Interest mounted quickly, and Allen, who had not built up a commercial sales staff that could match Douglas', put Boeing's top executives to work selling the 707.

The scramble starts
United Air Lines was the next to choose. United had been studying the two planes at great length, even to the extent of building a $27,000 interior mockup of a jet transport that was half 707, half DC-8; on paper, it had also been running a simulated jet operation for New York-San Francisco flights since 1952. In. April, United's technical-evaluation team told its management that either plane would satisfy United's requirements (in appearance and general performance characteristics, the two planes are almost identical). So it came down broadly to a decision between Boeing's jet experience and early delivery promises and Douglas' reputation in the commercial field. On October 25, 1955, United President William Patterson announced he would buy thirty DC-8's from Douglas.

Patterson said his extreme confidence in Douglas was a principal factor in his decision, but he also pointed out that the DC-8 would be the roomier of the two planes since its fuselage was three inches wider than the 707's. This last caught Boeing by surprise. Although the subject of width had come up in discussions, Allen never thought that cabin width was an important consideration.

The loss of the United sale was a serious blow to Boeing. Early in November, moreover, National Airlines also ordered DC-8's. American Airlines, top-ranking domestic trunk line, was expected to commit itself next; if it followed United's lead, the swing to Douglas might become overwhelming. And American had been studying jets jointly with United.

The crucial order
Boeing salesmen, led by Bill Allen and Wellwood Beall, had been actively working on American since July. But with Boeing on a spot owing to United's order, American's president, C. R. Smith, was in a position to dictate terms. Smith's key stipulation was that the 707 be made roomier. American, says Wellwood Beall, "flatly said they weren't going to buy our plane unless it was wider than the DC-8, so we widened it--by four inches."

But for American, width actually was not the deciding factor. "Our preference for doing business, our history, was all with Douglas," says O. M. Mosier, American's vice president of operations. "But Douglas' plane was only on paper, and the company had no experience designing big jets. It wasn't an easy decision; Boeing had been out of the commercial field for some time. But we saw that here was a manufacturer who not only had built jets but had a prototype we could fly, study, and correct ... And with a company that was already going down the assembly line with the tankers, there was no question it would have earlier deliveries." On November 9, 1955, American announced it would buy thirty 707's.

Pleasing everybody
American's order was a turning point for Boeing, not only because it put the company over the fifty-plane minimum mark, but because it drove home to Boeing management the need to be flexible in dealing with the airlines. The change in cabin size that American demanded involved relatively minor engineering and tooling costs; but without the change there would have been no sale.

Douglas was next to land an order: from Royal Dutch Airlines (KLM). Boeing countered on December 1 with an order from Braniff International Airways—after agreeing to yet another change. Braniff wanted early delivery, but decided that the J-57 engine wasn't powerful enough for operations in the high-altitude South American cities that Braniff serves. So Boeing offered to sell Braniff 707's that incorporated the J-75, but without changing the airframe significantly.

Throughout the rest of 1955, things moved fast. While Allen was maintaining a hectic pace of negotiations with domestic airlines, Beall was leading the company's first major European sales effort. Beall, as vice president of sales and engineering from 1946 until January, 1952, had played a large part in the development of the 707. He headed the European task force almost by accident. He and J. Bruce Connelly, now head of Boeing's Transport Division, were in New York in October, 1955, talking to Pan Am executives when Boeing's European representative told them the jet market there was getting hot and that a top executive had better get over on the next plane. "When Bill Allen came east for the Pan American meeting," Beall reminisces, "We told him this at dinner and tried to get him to go, but he felt he should stay in the U.S., so I was picked, by accident of being in New York at the time."

Building a family
In Europe, Beall found that the foreign carriers, particularly those with long routes, felt that putting a more powerful engine in the existing 707 (as Boeing had done for Braniff) was not satisfactory. If Boeing was to make many foreign sales, Beall realized, it would have to come up with a truly intercontinental model of the 707, i.e., one with n range of over 4,OOO miles. Though the extensive design changes required would be costly, Allen early in December decided to build the bigger plane, which would not only be heavier than the domestic 707 (296,000 pounds vs. 248,000) and have increased fuel capacity, but would be nearly seven feet longer (145 ½ feet) and have a greater wing span as well (142.5 feet vs. 131 feet). Boeing was now in a position to offer a family of two basic models with several variations, each designed to do a specific job. Douglas, by contrast, offered both domestic and intercontinental versions of its DC-8, but the two had essentially the same airframe.

By January 1, 1956, Boeing had landed three more orders, for a total of seventy-two planes. Douglas, however, had built up a substantial lead. By the beginning of 1956 Douglas had eight orders, for 100 planes in all, including a twenty-plane order from Eastern Air Lines.

Boeing and Douglas men were almost tripping over each other. Beall recalls the hectic days when he was trying to land the Belgian airline, Sabena: "It was just before Christmas and both the Douglas and the Boeing teams were in Brussels. We were trying to get them to decide, because that's a Catholic country and once the holidays start there's no telling when you can see them again. We went over to their offices. We didn't know if we were getting the order or not. But we got it, and got them to sign a letter of intent that morning--and got a plane home in plenty of time for Christmas. At the airline terminal we heard the Douglas people being paged for a flight to Stockholm." On December 21, Scandinavian Airlines (SAS) announced it was buying seven DC-8's.

Buy American?
Perhaps the most ticklish negotiations of all for Boeing were with BOAC. When Beall first went to Europe in the fall of 1955, friends in BOAC warned him that a wave of "Buy British" sentiment was running so high in England that the company could not publicly consider an American jet. So Beall and his team stayed out of Britain, though they had informal talks on the Continent with BOAC executives.

Early in 1956, Beall did go to England, but found that considerable antipathy to buying an American plane still existed. To overcome this feeling, the Boeing people conceived the strategy of trying to sell the 707 to the other Commonwealth nations first; if these countries took the lead, they reasoned, a BOAC decision to buy American would be subjected to less censure at home. First target was TransCanada Air Lines. But Douglas was also trying to sell to TCA. Engineers at TCA concluded that the 707 and the DC-8 would probably be equally good aircraft, and that both planes could incorporate the British-made Rolls-Royce Conway mark 505 jet engines that TCA preferred to the Pratt & Whitney engines. Douglas, however, had long-standing connections with TCA, and largely because of these, TCA President G. R. McGregor, in May, 1956, announced he would buy four DC-8's.

McGregor's decision obviously made Boeing's Commonwealth selling job tougher, but at least the decision had been to buy an American plane. Immediately, Boeing's sales team went all out to sell the 707 to Australia and India—and succeeded. In July the team arrived in England with a firm (though not publicly announced) commitment from Air India to buy 707's and with good reason to believe that Australia's Qantas Airways would follow suit. Douglas engineers and salesmen were there, too, seeing the myriad government officials and Cabinet ministers who would have to approve any BOAC purchase. Because they knew these government people well from earlier contacts on propeller-driven planes, the Douglas men set up their own appointments. Boeing, on the other hand, was less sure of itself and put its government appointment schedule in the hands of BOAC. This very likely made it appear to some government officials that BOAC favored Boeing.

Boeing's tactics worked. BOAC on October 24 announced it would buy fifteen 707's, on condition that Boeing build BOAC's planes to use the Rolls-Royce engines specified by TCA. This was partly to conserve dollars, but partly because the British Government, on political grounds, almost certainly would not have authorized purchase of a plane that didn't have some British flavor. The British Comet, though first in the jet field, had fallen behind, in large measure because of the mid-air explosions of the Comet I; another Comet was being designed, but it was too small a plane to compete with the 707 and DC-8.

While the BOAC negotiations were going on in 1956, Boeing, by offering its family of planes, made spectacular gains in its race with Douglas. In February, 1956, Howard Hughes ordered eight 707's for T .W.A.; subsequently; Hughes boosted his order to thirty-three 707's. (Douglas' vice president in charge of sales, Nat Paschall, says he knew from the start that Douglas didn't have a chance for the T.W.A. order because Howard Hughes and Douglas executives have seldom seen eye to eye on anything.) In September, 1956, formal announcement by Qantas of an order for seven 707's finally gave Boeing the sales lead.

Boeing takes over
Since January 1, 1956, Douglas has received down payments for only twenty-three planes, now has total orders for 123 DC-8's. Boeing now has over $100 million of down payments in hand for 141 planes (sixty-nine of them ordered since the beginning of 1956); two airlines have announced their intention to buy a total of ten more. There seems little doubt that Boeing will stay in the lead, since the remaining potential in the first round of airline jet buying is probably not more than thirty to forty planes. Boeing's backlog of commercial orders is now over $700 million, compared to Douglas's $1 billion, about $700 million of which represents jets.

Leadership at this point is doubly important for Boeing because most airlines try to standardize their fleets in order to minimize maintenance costs and spare-parts inventories. Thus, if both the 707 and the DC-8 prove to be acceptable planes, most of the customers, when the next round of buying starts, will probably stick with the manufacturer they chose originally.

A money-maker?
When Pan American takes delivery of the first 707 late next year, Boeing will have invested approximately $185 million on the plane: $16 million in the prototype, $100 million in engineering and tooling, $35 million in plant and equipment, $7 million to develop a thrust reverser (for faster stops) and sound suppressor, probably $4 million to $5 million on advertising and sales, and about $23 million for flight testing, research, and other costs. But this considerable investment has put Boeing back into the commercial field. By1959, when substantial deliveries of jets will begin, Allen expects commercial sales to account for approximately 20 per cent of Boeing's total annual sales, which then will likely be around $1.3 billion.

Allen is confident that his company will make a profit on the 707 but for the present he's not saying how much profit. Early this year he announced that Boeing had passed its breakeven on the 707 (in terms of orders) during 1956. This much is known: Douglas, without any of the cost savings Boeing will realize from the KC-135 tanker program, set essentially the same price on its DC-8 as Boeing did on the 707 (i.e., base price of the intercontinental versions of the 707 and the DC-8 is about $5,250,000). And Douglas has lost money on only one commercial plane (the DC-5, production of which was halted by World War II). Arthur Raymond, Douglas's vice president of engineering, definitely expects the company to make money on the DC-8. And if Douglas makes money it is hard to see how Boeing can fail to do so.

The fact is both companies stand to make more money than they originally anticipated when basic prices were set in October, 1955. The market that has developed is bigger than either firm expected, and in the aircraft industry profit per plane rises quickly once the breakeven is passed. Cancellation of any significant number of existing orders is only a remote possibility; contracts require purchasers to pay about 5 per cent down and about one-third of the total price by at least six months before delivery; the airlines could ill afford to forfeit this money. "Over all," says Allen cautiously, "the prices were all right. If I had to do it over again, I wouldn't change them"

A bunch of "hicks"
In view of its impressive sales record, it would be natural to assume that Boeing has built up an extraordinary sales force. Actually, however, except for its use of top executives as salesmen, Boeing's sales techniques have been commonplace. Several airlines, in fact, imply that Boeing salesmen have been amateurish. One foreign-airline executive who bought 707's says bluntly, "I don't know how Boeing sold anything. They gave us the impression of being hicks. Instead of top-line salesmen like the Douglas people, we met Boeing men who seemed like boys in the selling business."

Robert Six, president of Continental Airlines, agrees that "Douglas' sales force was superior to Boeing's." But, he adds, Boeing was open-minded and "willing to listen to the carriers' ideas on how to take the military look out of it."

But while their sales teams may have lacked commercial sales finesse, Allen and Beall kept them constantly on the move in search of orders. Even Douglas's Nat Paschall admits that "Boeing's done a lot more traveling than we have ... [They] seem to have a lot more people available, particularly engineers, to send around the world."

Problems for the airlines
Airline executives believe that by 1961 jet planes will be standard equipment on nearly all heavily traveled world air routes. But it's much too early, they say, to predict which plane will be the cheaper to operate or even whether air travel will increase to the point where all the jets now on order can be operated economically. FORTUNE'S estimate last year (see "The Airlines' Flight from Reality," February, 1956) was that the domestic trunk lines had overbought planes--jets, turboprops, and propeller-driven--in terms of foreseeable demand for air transport. Since then, these airlines have ordered103 more jets and turboprops (excluding Capital's order for 15 additional Viscounts and 14 Comets, which has been "deferred"). Consequently, although CAA estimates that there will be 36.7 billion domestic revenue passenger miles flown by trunk lines in 1961, (up from an estimated 33.8 billion in 1960), new jet and turboprop capacity for domestic operations added to present fleet capacity will probably total over 78 billion seat miles annually, exclusive of the capacity of prop-driven planes still on order. To be sure, CAA has customarily underestimated seat-mile demand, but even so, the discrepancy is large enough in this case to suggest that something will have to give.

The airlines, once they begin getting delivery of their jet transports, will almost certainly have to sell sizable portions of their prop-driven fleets, possibly even some planes that they haven't taken delivery on yet. But who will buy them? So far the used-plane market has held up; U.S. feeder lines and foreign airlines are now willing to pay more, for instance, for a used DC-6B than for a new one because they can get immediate delivery. But if all the big operators start trying to sell their planes simultaneously, the market is bound to drop--and fast.

Casualties coming?
American Airlines' O. M. Mosier puts it bluntly: "It'd be a miraculous thing if air traffic were to absorb all the seat-mile capacity that will be available when the jets are delivered." Mosier believes some lines may suffer financially; "No form of transportation has ever developed without casualties, and there could well be casualties in the airline business as well."

More planes needed
The problem of filling the jets is the most serious one the airlines have, but there are others. Operating costs of the big jets rise sharply on flights of under 1,000 miles. The airlines realize that to stay competitive they will have to replace their shorter-range planes either with smaller jets or with turboprops. Boeing has designed and is now pushing sales of a lighter (and cheaper) version of its 707 called the 717, for medium ranges (primarily 500 to 1,500 miles), but so far none have been ordered.

Convair Division of General Dynamics, which didn't enter the jet picture until April, 1956, is now building a four-engine jet, the 880, chiefly for the 500-to-1,500-mile ranges, and has orders for forty-eight. Both Boeing and Convair claim these smaller jets will be economically competitive in the medium ranges with any piston or turboprop plane. Douglas is considering building a jet to compete with the 717 and the 880, and has also offered to build a turboprop version of its DC-7; but, unlike Boeing and Convair, Douglas is not really selling either plane vigorously.

Looking even further ahead, Boeing engineers, under Vice President Edward C. Wells, are studying the feasibility of building a small jet transport, the 727, for ranges of 100 to 1,000 miles.

It's not likely that many of these shorter-range planes will be ordered soon. Few major airlines, even though they might like to, could plunge into another buying spree now--most of them have extended their credit about as far as possible. The airframe builders can't afford to give direct financial aid to an airline; but Boeing has now embarked on a campaign to convince banks, insurance companies, and other financial institutions of the soundness of investing even more money than they already have in jet planes, with the obvious hope of keeping Boeing sales rising.

The jets will bring new problems and new procedures all the way through the operations of every airline that uses them. Unless ticketing and baggage handling are somehow modernized, the contrast between flight speed and airport delays will become still more maddening. New maintenance facilities must be built; pilots and maintenance personnel must be trained. American estimates it will spend $9 million to $10 million for such training alone.

Dream of the future
Despite all these problems, the airlines now give the impression of being eager to get on with flying jets. If Boeing management had not decided to risk the money to build the prototype in 1952, the advent of U.S. commercial jet transportation would certainly have been delayed several years. As it is, Boeing, though engrossed in making and selling 707's, is also beginning to look forward with pleasant anticipation to the day, perhaps less than fifteen years off, when it will be taking orders for its first supersonic jet transport, the design for which is already taking shape in the heads of the company's top engineers. And Boeing intends to approach that selling job with an established reputation as a producer of profitable commercial planes.