Final boarding call nears for Boeing's ageing 747s as orders dwindle away

Inside Boeing headquarters still

The demise of the jumbo jet has come a little closer after the US manufacturer Boeing announced it would scale back production of its famous 747 to just one plane every two months, with orders having all but disappeared.

The distinctive four-engine plane has fallen from favour since more efficient twin-engined models were developed that could operate on long-haul routes – particularly lucrative transatlantic flights – on a fraction of the fuel.

Boeing had prolonged the life of the 45-year-old design with its latest, more fuel-efficient iteration, the 747-8, whose freight version looked to have particular potential with early sales. But the manufacturer said a stalling air cargo market was killing off demand for the plane.

Ray Conner, chief executive of Boeing Commercial Airplanes, said: “The air cargo market recovery that began in late 2013 has stalled in recent months and slowed demand for the 747-8 freighter.”

He added that Boeing remained confident that an “upcoming replacement cycle” for older 747 freighters meant there would still be a need to build more. But for now, he added: “We’re taking the prudent step to further align production with current market requirements.”

Air freight traffic has shrunk slightly, with volumes down 1.2% from a year ago, according to figures from the International Air Transport Association. But soaring passenger numbers – up another 6% in the last year – have not come to the 747’s aid.

Competing visions of the future of aviation saw Boeing’s great rival, Airbus, launch an even bigger plane, the A380 superjumbo, a fully double-decker design. While the A380 has also struggled to sell in the last two years, it has won most of the recent trade in the 747’s patch, the market for giant passenger planes – once seen as essential for major international hubs like Heathrow, where landing slots are at a premium.

Boeing has found more success of late in its midsize long-haul planes, such as the 787 Dreamliner, where it is planning to ramp up production.

The cost of producing the 747 has for some time exceeded the revenue it has brought in, and the manufacturer said it would report an accounting charge of $569m in its forthcoming quarterly results to reflect the new reality. It had already warned that production would slow from 1.3 planes per month to a single unit from March, but now will be halving that rate again from September.

One significant customer remains in the offing: the 747-8 has been designated the preferred choice for the forthcoming upgrade of the US Air Force One presidential fleet. But that is likely to be two or three planes, and although Boeing executives have hinted at other imminent sales opportunities, only around 20 are on order.

More than 1,500 747s have been sold over four and a half decades and the plane was once known as the queen of the skies by pilots and spotters. But its popularity among airline accountants has plunged in the last 10 years as higher fuel costs and narrower profit margins made it economically unviable on many routes.

Older 747s have become unwelcome at major airports such as Heathrow, where they are now subject to higher landing charges to compensate for the amount of noise and pollution they create compared with more modern aircraft.

One glimmer of hope for the 747 had come from Moscow, with the Russian airline Transaero having placed an order for four jumbos. However, Boeing’s order book was further thinned when Transaero filed for bankruptcy in November.

Even that most prestigious of buyers, the president of the United States, may yet have to think twice if battles in Congress about the potential cost resume. With the second presidential plane now slated for 2020, his or her new 747s could be the last Boeing will build.

Powered by article was written by Gwyn Topham Transport correspondent, for The Guardian on Saturday 23rd January 2016 08.00 Europe/London © Guardian News and Media Limited 2010


JefferiesAnd the Best Place to Work in the global financial markets 2017 is...

Register for Financial Markets News Alerts