Thursday, July 28, 2016

Boeing thinking to stop the production of 747



More than four decades after the Boeing 747 entered service, Boeing may be finally getting ready to retire its iconic humpbacked aircraft.
Passenger airlines mostly gave up on the double-decker 747 several years ago, with few ordering the Boeing 747-8, the latest iteration, which debuted with Lufthansa in 2012. Airlines have ordered fewer than 50, with most going to Lufthansa, Korean Air Lines and Air China. The company’s previous model, the 747-400, was more popular, with Boeing delivering 450 to airlines through 2005. In all, Boeing has delivered more than 1,500 747s since Pan American World Airways introduced the first in 1970.
Even as airlines started preferring more efficient two-engine aircraft, such as the Boeing 777 and Boeing 777-300, the manufacturer had been hopeful the newest-generation 747 could continue to sell to cargo operators. The 747-8 has been slightly more popular as a freighter, with Cargolux Airlines, Cathay Pacific Cargo, Korean Air Lines Cargo and Atlas Air all operating it. But this year, Boeing said, it has added only four freighter orders.
“Cargo is a very tough market right now,” CEO Dennis A. Muilenburg told analysts Wednesday during the company’s second quarter earnings call.
In a regulatory filing this week, Boeing said it could be forced to cancel the program if it cannot sell more jets. For the foreseeable future, it plans to build only six 747s per year. It had been building a dozen per year.
Boeing also recently took a special charge of more than $800 million related to the 747 program.

“If we are unable to obtain sufficient orders and/or market, production and other risks cannot be mitigated, we could record additional losses that may be material, and it is reasonably possible that we could decide to end production of the 747,” the company said in its filing.
On Boeing’s earnings call, executives painted a slightly rosier picture. While Muilenburg noted that “air cargo market headwinds” are affecting sales and called the climate “challenging,” he suggested the company will try to save the jet.
“Despite the ongoing challenges of air cargo market, we continue to see the 747 as a unique and significant value creator for our customers over the long-term,” he told analysts.
Boeing does have at least one important 747 customer it must satisfy. The U.S. Air Force is expecting to buy two 747-8s to replace the current Air Force One models the U.S. president flies. Boeing should deliver them in 2023.
On the call, Muilenburg said Boeing is hopeful the market for the 747-8 will improve toward the end of the decade, when more cargo operators may seek to add larger jets.
“We have a number of ongoing customer discussions in the cargo marketplace in addition to the two Air Force One airplanes,” Muilenburg said. “That said, we still have our work cut out for us.”

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