Boeing says it could end 747 production
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Boeing says it could end 747 production
Good Evening All:
Just read this on CBC web site which is sad news for such an iconic aircraft.
Boeing says it could end 747 production - Business - CBC News
Thomson Reuters Posted: Jul 28, 2016 11:05 AM ET Last Updated: Jul 28, 2016 11:05 AM ET
Boeing Co could end production of its iconic 747 aircraft, as the world's biggest plane maker faces falling orders and pricing pressure, according to a regulatory filing.
"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," Boeing said on Wednesday.
Boeing said it had canceled plans to increase production of the 747 to one plane per month from 2019, and stuck to its plan of halving the production rate in September.
"On the 747 program, we decided to reduce future production expectations and revenue assumptions to account for current and anticipated weakness in the air cargo market," Chief Executive Dennis Muilenburg said on a post-earnings call with analysts.
"Despite the ongoing challenges of the air cargo market, we continue to see the 747 as a unique and significant value creator for our customers over the long term," Muilenburg said.
Boeing declined to elaborate on the filing or the comments on Thursday.
The production rate of the 747, which was 1.5 per month in June 2015, dropped to one per month in this month.
The latest version of the 747 is used by Cathay Pacific, Lufthansa and Air China, among others.
Boeing is not alone in facing problems with sales of the biggest passenger jets - Europe's Airbus has also been hit by weak demand.
Airbus confirmed this week that it plans to roughly halve production of its A380 superjumbo as airlines shun large four-engined jets in favor of smaller two-engined models.
The planemaker said earlier this month that it would cut the A380 delivery target to 12 a year from 2018, from 27 in 2015, to prevent a glut of unsold planes.
The move raises the possibility that Airbus could revert to losses on the double-decker jet after breaking even for the first time last year, but averts the need to start ordering parts for unsold planes - something it has pledged not to do.
Parts for A380s must be ordered up to two years in advance.
Boeing reported a smaller-than-expected second-quarter loss on Wednesday, helped by strong performances in its passenger jet and defense businesses.
Just read this on CBC web site which is sad news for such an iconic aircraft.
Boeing says it could end 747 production - Business - CBC News
Thomson Reuters Posted: Jul 28, 2016 11:05 AM ET Last Updated: Jul 28, 2016 11:05 AM ET
Boeing Co could end production of its iconic 747 aircraft, as the world's biggest plane maker faces falling orders and pricing pressure, according to a regulatory filing.
"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," Boeing said on Wednesday.
Boeing said it had canceled plans to increase production of the 747 to one plane per month from 2019, and stuck to its plan of halving the production rate in September.
"On the 747 program, we decided to reduce future production expectations and revenue assumptions to account for current and anticipated weakness in the air cargo market," Chief Executive Dennis Muilenburg said on a post-earnings call with analysts.
"Despite the ongoing challenges of the air cargo market, we continue to see the 747 as a unique and significant value creator for our customers over the long term," Muilenburg said.
Boeing declined to elaborate on the filing or the comments on Thursday.
The production rate of the 747, which was 1.5 per month in June 2015, dropped to one per month in this month.
The latest version of the 747 is used by Cathay Pacific, Lufthansa and Air China, among others.
Boeing is not alone in facing problems with sales of the biggest passenger jets - Europe's Airbus has also been hit by weak demand.
Airbus confirmed this week that it plans to roughly halve production of its A380 superjumbo as airlines shun large four-engined jets in favor of smaller two-engined models.
The planemaker said earlier this month that it would cut the A380 delivery target to 12 a year from 2018, from 27 in 2015, to prevent a glut of unsold planes.
The move raises the possibility that Airbus could revert to losses on the double-decker jet after breaking even for the first time last year, but averts the need to start ordering parts for unsold planes - something it has pledged not to do.
Parts for A380s must be ordered up to two years in advance.
Boeing reported a smaller-than-expected second-quarter loss on Wednesday, helped by strong performances in its passenger jet and defense businesses.
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This from only six months ago.
"Muilenburg's jumbo jet plan was specific and he argued that 240 large airborne freighters now flying will be over 20 years old by 2019 and ready for replacement.
Several things are in Boeing’s favor for this long wait.
One is that Boeing has nothing else it needs to make room for in the western end of the Boeing Everett factory where workers put together 747s. This means that the financial cost is relatively low compared to a situation where the space could be used for some other production.
In addition, the 747-8F has unique qualities that Airbus can’t match. The Boeing plane can carry 138 tons of cargo, and it can load large objects, such as vehicles, through the nose door. Airbus’ comparable A380, with its two decks, is so ill-suited to cargo that the company doesn’t even offer a cargo option.
“The 747 is a niche market but an important niche market, and one that we think that is sustainable,” Muilenburg said. “This is a great airplane in a tough cargo market. We expect that to recover and we have a perfect asset to align to that recovery.”
"Muilenburg's jumbo jet plan was specific and he argued that 240 large airborne freighters now flying will be over 20 years old by 2019 and ready for replacement.
Several things are in Boeing’s favor for this long wait.
One is that Boeing has nothing else it needs to make room for in the western end of the Boeing Everett factory where workers put together 747s. This means that the financial cost is relatively low compared to a situation where the space could be used for some other production.
In addition, the 747-8F has unique qualities that Airbus can’t match. The Boeing plane can carry 138 tons of cargo, and it can load large objects, such as vehicles, through the nose door. Airbus’ comparable A380, with its two decks, is so ill-suited to cargo that the company doesn’t even offer a cargo option.
“The 747 is a niche market but an important niche market, and one that we think that is sustainable,” Muilenburg said. “This is a great airplane in a tough cargo market. We expect that to recover and we have a perfect asset to align to that recovery.”
Steve Wilhelm covers manufacturing, aerospace and trade for the Puget Sound Business Journal.
So, is there a B747F continuation or replacement needed for cargo or not?
meadowrun
I'm pretty close to the action, having worked the 747 in general off and on for 30 years, and the -8 variant when it was still called the '747 Advanced'. I find the timing of this announcement quite interesting and more than a little curious.
Boeing has committed to producing only 6/year - which will stretch the current order book for about 4 more years. But it's not that simple - long lead parts need to be ordered 18-24 months in advance, so a decision to shutdown the line could come as soon as early 2019. Also, producing 747s at 6/year is not profitable - they need to get up to at least 1/month to make money on the deal.
OTOH, as you noted, the 747 Freighter provides capability that's not available elsewhere - if you want more than the ~100 tons of a 777F, the 747 is the only option. And 747-400s are getting pretty long in the tooth - 100k+ hour airframes are becoming the norm. Moreover, passenger operators haven't been parking their 747-400s until they've rung all the life out of them, so it's not very cost effective to convert them to freighters (and of course the conversions lack the nose loading door).
I wonder if Boeing isn't sending a signal to the freight operators - speak (order) soon or you'll lose the chance. When Boeing decided to launch the 747-8, they were very worried about the many open -400 production slots before we started building -8s. So Boeing offered the spots - at a good price - noting they would be the last 747-400s built. Scuttlebutt is that we had more interest than we had positions - we could have easily sold many more.
I'm pretty close to the action, having worked the 747 in general off and on for 30 years, and the -8 variant when it was still called the '747 Advanced'. I find the timing of this announcement quite interesting and more than a little curious.
Boeing has committed to producing only 6/year - which will stretch the current order book for about 4 more years. But it's not that simple - long lead parts need to be ordered 18-24 months in advance, so a decision to shutdown the line could come as soon as early 2019. Also, producing 747s at 6/year is not profitable - they need to get up to at least 1/month to make money on the deal.
OTOH, as you noted, the 747 Freighter provides capability that's not available elsewhere - if you want more than the ~100 tons of a 777F, the 747 is the only option. And 747-400s are getting pretty long in the tooth - 100k+ hour airframes are becoming the norm. Moreover, passenger operators haven't been parking their 747-400s until they've rung all the life out of them, so it's not very cost effective to convert them to freighters (and of course the conversions lack the nose loading door).
I wonder if Boeing isn't sending a signal to the freight operators - speak (order) soon or you'll lose the chance. When Boeing decided to launch the 747-8, they were very worried about the many open -400 production slots before we started building -8s. So Boeing offered the spots - at a good price - noting they would be the last 747-400s built. Scuttlebutt is that we had more interest than we had positions - we could have easily sold many more.
But the question is whether enough people will want a > 100-tonne freighter with a nose loading capability, and be able to fill it, in order to sustain a profitable production rate.
A lot of the cargo carried by air is time sensitive and valuable. It's not commonly large, heavy or bulky. Which means you may just as well pack the boxes on a pallet to lower-deck height, and load it onboard the ever expanding fleet of massive twin-engine aircraft, each easily capable of hauling 25 tons or more along with passengers and their bags.
Couple that with a seriously depressed general cargo market, which has been diminishing under the pressure above from integrators, and below from improved logistics planning allowing for slower modes of transport, e.g. road, rail or sea.
The result is rates dropping through the floor for general cargo, with plenty of evidence the general cargo market is hurting badly.
It might very well be, that in 5 or 10 years time the 744Fs are getting too long in the tooth and there's no viable replacement on the market. Trouble is, the carriers cannot fund today a need which may materialise sometime in the future.
Couple that with a seriously depressed general cargo market, which has been diminishing under the pressure above from integrators, and below from improved logistics planning allowing for slower modes of transport, e.g. road, rail or sea.
The result is rates dropping through the floor for general cargo, with plenty of evidence the general cargo market is hurting badly.
It might very well be, that in 5 or 10 years time the 744Fs are getting too long in the tooth and there's no viable replacement on the market. Trouble is, the carriers cannot fund today a need which may materialise sometime in the future.
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Boeing's problem isn't just aviation or even airline driven. As a former US President once said, 'it's the economy stupid'.
Eight years ago the world economy slumped. This should have been the time airlines would have been ordering airframes to replace the 747-400 on a like for like basis.
There are very cogent reasons why they didn't. The trend to twins was, and still is, in full swing. Apart from fuel, spares and maintenance economies the downward pressures on air fares militated for big twins. With stormy economic conditions airlines looked to minimise the cost of fleet replacement. The same economic conditions cut the amount of freight being carried, and freight carried in passenger aircraft holds was, and still is, often the difference between a profitable flight and a loss.
Given a reduced economy, a reduced amount of freight, a reduced overall cost of passenger tickets and the ability of large twins to carry freight and at the same time reduce overall costs, it was a no brainer that the 747 replacement would not be on a like for like basis.
As for pure freighters, they are a niche market and, specialist carriers apart, with reduced levels of freight compared to previous years the major carriers found no need to buy.
Economists are good at telling us that the world economy is, in general, cyclical. What they are not good at, be they employed by governments, banks, companies or airlines, is forward thinking and planning for the cycle. Knee jerk reaction to economic change is the norm, with little forward projection.
What is unusual in the economic conditions experienced since 2008 is the sustained and growing numbers of passengers carried. This shows no signs of slowing and this brings its own problems.
VLAs will be required in the future both to carry ever growing numbers of passengers, large freight and to deal with slot restrictions. Whilst Boeing may well run down and eventually close 747 production, someone, somewhere will have to produce an equivalent.
Eight years ago the world economy slumped. This should have been the time airlines would have been ordering airframes to replace the 747-400 on a like for like basis.
There are very cogent reasons why they didn't. The trend to twins was, and still is, in full swing. Apart from fuel, spares and maintenance economies the downward pressures on air fares militated for big twins. With stormy economic conditions airlines looked to minimise the cost of fleet replacement. The same economic conditions cut the amount of freight being carried, and freight carried in passenger aircraft holds was, and still is, often the difference between a profitable flight and a loss.
Given a reduced economy, a reduced amount of freight, a reduced overall cost of passenger tickets and the ability of large twins to carry freight and at the same time reduce overall costs, it was a no brainer that the 747 replacement would not be on a like for like basis.
As for pure freighters, they are a niche market and, specialist carriers apart, with reduced levels of freight compared to previous years the major carriers found no need to buy.
Economists are good at telling us that the world economy is, in general, cyclical. What they are not good at, be they employed by governments, banks, companies or airlines, is forward thinking and planning for the cycle. Knee jerk reaction to economic change is the norm, with little forward projection.
What is unusual in the economic conditions experienced since 2008 is the sustained and growing numbers of passengers carried. This shows no signs of slowing and this brings its own problems.
VLAs will be required in the future both to carry ever growing numbers of passengers, large freight and to deal with slot restrictions. Whilst Boeing may well run down and eventually close 747 production, someone, somewhere will have to produce an equivalent.
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Am I mistaken but I definitely see in media last month, that at Farnborough Volga-Dnepr aka AirBridgeCargo aka Air Cargo Transportation signs contract which will save Boeing and it's 747 production program?
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Boeing's problem isn't just aviation or even airline driven. As a former US President once said, 'it's the economy stupid'.
Eight years ago the world economy slumped. This should have been the time airlines would have been ordering airframes to replace the 747-400 on a like for like basis.
There are very cogent reasons why they didn't. The trend to twins was, and still is, in full swing. Apart from fuel, spares and maintenance economies the downward pressures on air fares militated for big twins. With stormy economic conditions airlines looked to minimise the cost of fleet replacement. The same economic conditions cut the amount of freight being carried, and freight carried in passenger aircraft holds was, and still is, often the difference between a profitable flight and a loss.
Given a reduced economy, a reduced amount of freight, a reduced overall cost of passenger tickets and the ability of large twins to carry freight and at the same time reduce overall costs, it was a no brainer that the 747 replacement would not be on a like for like basis.
As for pure freighters, they are a niche market and, specialist carriers apart, with reduced levels of freight compared to previous years the major carriers found no need to buy.
Economists are good at telling us that the world economy is, in general, cyclical. What they are not good at, be they employed by governments, banks, companies or airlines, is forward thinking and planning for the cycle. Knee jerk reaction to economic change is the norm, with little forward projection.
What is unusual in the economic conditions experienced since 2008 is the sustained and growing numbers of passengers carried. This shows no signs of slowing and this brings its own problems.
VLAs will be required in the future both to carry ever growing numbers of passengers, large freight and to deal with slot restrictions. Whilst Boeing may well run down and eventually close 747 production, someone, somewhere will have to produce an equivalent.
Eight years ago the world economy slumped. This should have been the time airlines would have been ordering airframes to replace the 747-400 on a like for like basis.
There are very cogent reasons why they didn't. The trend to twins was, and still is, in full swing. Apart from fuel, spares and maintenance economies the downward pressures on air fares militated for big twins. With stormy economic conditions airlines looked to minimise the cost of fleet replacement. The same economic conditions cut the amount of freight being carried, and freight carried in passenger aircraft holds was, and still is, often the difference between a profitable flight and a loss.
Given a reduced economy, a reduced amount of freight, a reduced overall cost of passenger tickets and the ability of large twins to carry freight and at the same time reduce overall costs, it was a no brainer that the 747 replacement would not be on a like for like basis.
As for pure freighters, they are a niche market and, specialist carriers apart, with reduced levels of freight compared to previous years the major carriers found no need to buy.
Economists are good at telling us that the world economy is, in general, cyclical. What they are not good at, be they employed by governments, banks, companies or airlines, is forward thinking and planning for the cycle. Knee jerk reaction to economic change is the norm, with little forward projection.
What is unusual in the economic conditions experienced since 2008 is the sustained and growing numbers of passengers carried. This shows no signs of slowing and this brings its own problems.
VLAs will be required in the future both to carry ever growing numbers of passengers, large freight and to deal with slot restrictions. Whilst Boeing may well run down and eventually close 747 production, someone, somewhere will have to produce an equivalent.
Of course the stock markets are up thanks to the cheap money that's sloshing around in the financial system, but everyday people have gained little if anything at all.
As philbky suggested, the trend is clearly towards slightly smaller but extremely fuel efficient twin-engined aircraft, flying more point to point instead of through big hub and spoke systems, throwing a lot of extra belly capacity on an already tight cargo market.
I guess there will always be a market for specialized oversized loads requiring large aircraft like the 747-8 or AN124, but the bulk of the cargo requirements (consumer electronics, mail, horses, luxury cars, aircraft engines, chemicals, oil drilling equipment etc) will either find it's way into the bellies of passenger aircraft, or onboard smaller full cargo aircraft like (converted) 767'Fs, 777F's, A330F's and the existing fleet of 747's (-400F, BCF, -8F). Any possible future cargo derivatives of the 777X and A350 will only accelerate the 747-8's demise IMHO.
As for the US Presidential aircraft, I can honestly not see them buying a foreign made A380, and since apparently there's a requirement for 4 engines (4 long haul?
) there is not a lot of competition for the 747-8.
Was the VDA deal not just a rehash of a previously announced deal? Seem to remember even Boeing stating that of the 20 aircraft, four had already been delivered.
Other possibility is Iran Air, for pax versions? Was their order confirmed?
Other possibility is Iran Air, for pax versions? Was their order confirmed?
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"The Air Force on Tuesday gave Boeing the green light to start submitting design proposals for the new presidential aircraft that, by 2024, will shuttle a future president around the world."
A new Air Force One is on the way
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there is a market for very large cargo to be loaded without breaking it down but it certainly isn't big enough to allow development of an all new freighter - unless it's the military . But no-one is planning a successor to the C-17, C-5 or the An-124 so you're left with the odd A-400, the remains of the 747 fleet (maybe a few more modded to pure freight) and the possibility of a "Beluga" type mod to the A.380 or the B.777
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Maybe 25 years from now when A380 and 748 production has long ended and most examples are retired and a VLA is once again needed, China will be the only one able to field such a plane.
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As I have said before, long experience teaches us that, when Boeing make this sort of announcement, they are not simply reporting a news item.
They are carefully adjusting the expectations of their customers, who are almost always also Airbus's customers, towards some end that is deemed desirable in Seattle.
They are carefully adjusting the expectations of their customers, who are almost always also Airbus's customers, towards some end that is deemed desirable in Seattle.
I think Europe and the USA will still know how to design and build large multi engine aircraft 25 years from now....
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The know how will still be in Europe and the USA, but the 50 billion dollars (or maybe 150 billion by that time) will be a lump they won't swallow. And the American and European firms would rather be supplying components for the Chinese to put together a VLA.
Comac anyone?
Comac anyone?
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747: "Rumors of My Death are Exaggerated!"
Some interesting ideas. We'll have to revisit this thread in 2020~25 and see who is / was right.
My own guess is that we will see the 747F being built for quite a few years yet. If Boeing squeal long and loud enough, it wouldn't surprise me that some military assistance comes along: in much the same way that the KC-10 and KC-767 kept the those production line humming far longer than would otherwise have been the case.
And I suspect that the big bird will still be flying around longer than most of us here. It is an overused term but the 747 was, in every sense of the word, a GAME-CHANGER
My own guess is that we will see the 747F being built for quite a few years yet. If Boeing squeal long and loud enough, it wouldn't surprise me that some military assistance comes along: in much the same way that the KC-10 and KC-767 kept the those production line humming far longer than would otherwise have been the case.
And I suspect that the big bird will still be flying around longer than most of us here. It is an overused term but the 747 was, in every sense of the word, a GAME-CHANGER