The jumbo jet, for many years the workhorse of modern air travel, could be close to running out of runway.
Last year, there were zero orders placed by commercial airlines for new Boeing 747s or Airbus A380s, reflecting a fundamental shift in the industry toward smaller, twin-engine planes. Smaller planes cost less to fly than the stately, four-engine jumbos, which can carry as many as 525 passengers.
The slump in sales of the jets has raised questions over how long manufacturers can sustain production. It has also fueled internal debate in both companies over the future of the planes, sources said.
Photo: Reuters
The outcome of those discussions will affect the value of existing fleets and thousands of production jobs at the plane makers and their many parts suppliers.
Sales forces at Airbus Group NV and Boeing Co are fighting for potential orders plane by plane as they seek to keep production going beyond the end of the decade, other aviation market sources said.
The aircraft makers are offering discounts of at least 50 percent from catalog prices of about US$400 million for a jumbo jet, those sources said. Airbus has said it is also considering a revamp to make its “superjumbo” more attractive to buyers.
Boeing in September plans to slow the pace of production of its latest 747-8 model to an average of 1.3 planes a month from 1.5 currently. At that rate the orders it already has in hand will only keep the production line going for two-and-a-half years.
The crunch, though, will come earlier because it can take up to two years from ordering the first part to finishing a jet, and no one wants to start the process if it is unclear whether the plane will be completed and delivered to a customer.
“I can see demand for the 747-8 in small numbers, but you have got to ask if they can keep the production line open if they don’t get some new orders,” said Tony Whitty, chief executive of UK-based aircraft re-marketing firm Cabot Aviation, which trades, manages and leases jets. “You also wonder at what price they are selling.”
LONG DESCENT
Use of the 747 has dropped steadily over the past two decades, reflecting the rise of two-engine jets that have come close to matching its range. Over the same period production of large twin-engined jets like the Boeing 777 has risen seven-fold. Last year, Boeing booked 283 new orders for the 777 and now has a backlog of 547 orders.
Airbus is more upbeat than Boeing about the prospects for jumbo jets, but both now agree it has become a niche category. Airlines still need jumbo jets, but only for certain polar flights — where a two-engine jet may be less safe than a four-engine jumbo because of the lack of places for an emergency landing — and busy routes where landing slots are scarce.
The risk is most visible for Boeing, where investors could face a US$1 billion accounting charge if 747 production is shut down, according to company disclosures.
Boeing recently received a high-profile boost with a provisional order for two new jets to serve as Air Force One for the US president, but the 747’s future depends a lot more on sales of the much-less glamorous windowless freight model. That has a unique hinged nose and can carry very large equipment, such as oil drilling rigs.
So far this year, Boeing has sold three. Atlas Air Worldwide recently said it plans to order more for its cargo fleet, but would not say when or how many. The world’s biggest 747 freight customer, Cargolux, also says it likes the plane, but has a pending order for only three.
A sustained upturn in air freight traffic could secure the 747 a longer future. International freight traffic rose 4.8 percent last year, but volume has only just recovered from a collapse in 2009 during the financial crisis.
Boeing estimates that 143 older freighters will need to be replaced, stretching demand for the 747 through the 2020s, program vice president Bruce Dickinson said in an interview.
“We know there is a long-term market for this airplane and some of the unique things it can do,” Dickinson said from his office overlooking the 747 production line at the giant Everett plant near Seattle.
However, Boeing’s effort to sell new 747s is overshadowed by the many older 747s available for lease, which have suddenly been made more attractive because of a big slide in fuel prices since the middle of last year. Leasing companies say there is scant interest in new 747-8s when 82 freighters are baking in desert parking lots.
LEASING COSTS
The older planes can be leased for as little as US$400,000 a month, compared with up to US$1.4 million in monthly lease payments for a new 747-8 freighter, experts say.
“That’s a pretty big difference,” said Gueric Dechavanne, vice president at Collateral Verifications, a Connecticut-based aircraft appraisal firm.
Some companies have extended 747 leases for three to four years, said Aengus Kelly, chief executive of leasing company AerCap.
“It’s a challenge to lease a freighter,” Kelly said. “It’s definitely a challenge to sell them.”
Airbus’s A380 is a newer plane — its first flight was almost exactly 10 years ago — and has become a mainstay of Middle East carriers that offer opulent suites to first class passengers. However, the drop in demand is prompting Airbus to weigh whether to revamp the plane with new engines, or carry on with the existing model.
Airbus has 161 orders for the planes in hand, or more than five years of production. However, it acknowledges that not all of those jets will be delivered, leaving it with barely three years of guaranteed output. Given the long lead times, Airbus must bring in more orders soon to avoid having to taper production.
“We are always looking at product improvements, but there is so much untapped potential in the existing aircraft,” Airbus marketing head Chris Emerson said.
Airbus could announce an A380 revamp as early as the Dubai Airshow in November, but must first find a way to assure investors it can recover several billion dollars of development costs, sources said. Analysts say on option could be to apply for more European government loans, though that risks exacerbating trade tensions with the US.
Top customer Emirates is offering to double its planned purchase of 140 A380s if Airbus carries out the improvements, which the Dubai carrier’s CEO Tim Clark says will be “extremely good for the [airline’s] bottom line.”
However, Airbus’ board is unlikely to back a new A380 model for just one customer.
Cairo’s new monorail slices across the city skyline, running above the familiar chaos of blaring horns and aging buses’ exhaust fumes that mark rush hour below. The US$4.5 billion monorail, opened this month, is among Egypt’s most prominent new transport projects, part of a debt-funded infrastructure drive criticized for sapping state finances while bringing limited benefits to most of the country’s 109 million people. “It feels like you’re in a different country,” said Ramy Sayed, a restaurant manager, aboard a driverless Innovia 300 train. “No noise, no traffic, we’re not used to this.” The eastern line runs 56km from the bustling middle-class
Taiwanese firms have increased investment in the Philippines in recent years as Manila’s ties with Washington deepen and global supply chains continue to shift away from China, an expert at the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The Philippines had not been among Taiwanese investors’ top choices in Southeast Asia, CIER Taiwan ASEAN Studies Center director Kristy Hsu (徐遵慈) said at a seminar in Taipei. However, Taiwan’s investment in the country has grown significantly since the COVID-19 pandemic, reaching US $257 million last year, a high in recent years, she said. Although Taiwan’s total investment in the Philippines still lags
Intel Corp regards Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) as a longstanding partner, as the US chipmaker would continue outsourcing production of advanced chips to TSMC, Intel chief executive officer Lip-Bu Tan (陳立武) said yesterday. “I don’t look at people as competitors. I look at the collaboration... Nvidia is also, you know, a good friend,” Tan told a news conference following his keynote speech at the Computex trade show in Taipei. “It’s a very trusted partnership for us... We are a big, top customer for them, and we’re going to continue doing that,” he said, referring to TSMC, the world’s largest foundry
Artificial intelligence (AI) agents would supplant smartphones as the center of people’s digital lives, fundamentally reshaping personal devices and driving a major computing upgrade cycle, Qualcomm Inc CEO Cristiano Amon said yesterday. In his keynote speech for this year’s Computex trade show in Taipei, Amon said that the rise of "agentic AI" — AI systems capable of reasoning, planning and carrying out tasks autonomously — would transform how people interact with technology across phones, PCs, vehicles and wearable devices. Describing the technology as the next major evolution in computing, Amon said that "2026 is the year of agents.” For decades, smartphones have sat
RSS