Bloomberg News

Boeing Cuts 747 Production Again as Demand Wanes for Biggest Jet

October 18, 2013

A Boeing Co. 747-8 Jumbo Jet

Boeing’s pullback is the second one this year for the 747-8, the latest variant of the iconic, humpbacked aircraft family that revolutionized air travel more than 40 years ago with its size and range. Photographer: Kevin P. Casey/Bloomberg

Boeing Co. (BA:US) is slowing production of its 747-8 jumbo jet, the planemaker’s biggest model ever, for the second time this year as demand continues to dwindle for four-engine aircraft.

The new rate will be 1.5 planes a month, a pace that will be maintained through 2015, Chicago-based Boeing said yesterday in a statement. That’s a 14 percent drop from the 1.75 rate announced in April and a 25 percent decline from production at the start of 2013.

While Boeing hasn’t yet netted any new sales for the jumbo this year, it’s in “active” discussions with several customers and looking forward to a 2014 rebound in the cargo market, which could spark interest in a freighter version of the 747-8, Doug Alder, a Boeing spokesman, said in an interview. Korean Air Lines Co. agreed to buy five of the passenger version in June, though it never completed its order.

“It’s not a surprise, in fact it’s smart,” Howard Rubel, a New York-based aerospace analyst with Jefferies Inc., said in a phone interview. “It tightens up the market, doesn’t put airplanes out there that can’t be sold.”

Boeing has parked some new 747-8s in the desert and allowed customers to trade in older jumbos this year in an effort to garner sales for the latest variant of the iconic, humpbacked aircraft family that revolutionized air travel more than 40 years ago with its size and range.

The task is complicated by a shift among airlines away from costlier four-engine aircraft toward fuel-sipping twin-engine jets capable of flying the same long distances. A new Boeing 777X, expected to be unveiled next month, could further cut into sales as the first dual-engine plane designed to seat more than 400 passengers.

Cannibalizing Sales

By rolling out an aircraft that will eliminate the need for a jumbo at many airlines, Boeing may cannibalize sales of its 747-8, which seats 467 people in a typical three-class cabin. At a list price of $356.9 million, it’s the planemaker’s most expensive passenger model, the latest version of an aircraft family that has amassed more than 1,500 orders.

“Long-term the 747-8 platform remains a viable freighter given its favorable economics, but the introduction of the 777X will likely seal the fate of the 747-8 passenger version by the end of this decade,” wrote Peter Arment, a New York-based aerospace analyst with Sterne, Agee & Leach Inc., in a note to clients yesterday.

Arment, who rates Boeing a buy, said he doesn’t expect 2014 earnings to be affected by the rate cut and sees Boeing lowering its 747 output to one per month by mid-decade.

Crowded Airports

Boeing and Airbus SAS, a planemaker based in Toulouse, France, that makes the competing A380 super-jumbo, say airlines flying into slot-constrained airports like London’s Heathrow will continue to need double-decker jets to keep pace with passenger demand as the global economy strengthens.

Boeing predicts demand for very large aircraft, such as the 747-8 and A380, will reach 760 planes valued at $280 billion over the next 20 years.

“We have plans to keep that airplane in production for a long time,” Randy Tinseth, a Boeing vice president for marketing, said of the 747 in an Oct. 7 phone interview.

Boeing has booked 107 total orders for the jumbo and had delivered 56 of the planes by the end of September. The backlog of 51 aircraft would keep its Everett, Washington, assembly line humming for almost three years at the rate announced yesterday.

Boeing shares were little changed yesterday at $122.52 at the New York close. They have risen 63 percent this year, compared with a 22 percent gain in the Standard & Poor’s 500 Index.

To contact the reporter on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

Boeing’s pullback is the second one this year for the 747-8, the latest variant of the iconic, humpbacked aircraft family that revolutionized air travel more than 40 years ago with its size and range. Photographer: Kevin P. Casey/Bloomberg

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