Boeing cuts 747 rate on weak demand

Boeing 747-8 production rate: To the surprise of absolutely no one, Boeing today announced it will trim the production rate of the 747-8 from 1.75 per month to 1.5/mo through 2015. the only surprise is that it wasn’t reduced to 1/mo.

Boeing cited lower demand for Very Large Aircraft, both in passenger and freighter models. Boeing stood by the airplane, however, predicting a cargo market recovering next year.

“This production adjustment better aligns us with near-term demand while stabilizing our production flow, and better positions the program to offer the 747-8’s compelling economics and performance when the market recovers,” said Eric Lindblad, vice president and general manager, 747 Program, Boeing Commercial Airplanes, in a statement. “Although we are making a small adjustment to our production rate, it doesn’t change our confidence in the 747-8 or our commitment to the program.”

There is a backlog of only 51 aircraft.

The USAF wants to replace its two Air Force One 747-200s in 2021. We think Boeing will be hard-pressed to keep the line alive until then. The official launch of the Boeing 777X, and the widely expected order for the larger 9X version at the Dubai Air Show next month, will make it that much more difficult for Boeing to sell the airplane.

59 comments on “Boeing cuts 747 rate on weak demand

  1. It seems hard to sell a Big Airplane now. With that cut, the backlog is still less than 2 years. So, it seems hard that this meassure could alter the final 747 being delivered in 2015!

  2. Is there a point at which existing 747-8i customers cancel their orders because the type is not economically viable? Not because of its performance, but because of the small size of the fleet. For example, it’s possible that engines won’t receive PIPs, there won’t be MRO competition, and in later years there won’t be the ability to source second-hand spares.

    Or are the existing 8i customers already committed and have to make the best of a bad situation?

    • LH wants the plane for niche markets and hot-and-high like MEX.

      Some cargo orders may be cancelled.

      Boeing is doing PIPs on the airframe and GE on the engines right now.

  3. IMHO Boeing (and GE) were dumb to lose the BA competition. From my resources, I heard basically the same thing – that going into the last 7-14 days of the BA campaign, the B748i had the inside edge. While I heard Boeing were willing to drop prices, GE wasn’t. With the excellent profit margins GE was getting on the B77W (amongst other sales, etc.), there was no reason why they shouldn’t have gone “all in”.

    …….Airbus & RR get a “congrats” for that one.

    • No offense, but this sounds a bit like clutching at straws (or crying over spilled milk), to be honest. Slightly revisionist, too.
      I’m just trying to imagine what you’d say if anybody suggested that the A380 lost a particular RFP – at the very last minute, too – just because neither of the engine makers was willing to drop the price while Airbus was…

      In any case, what you fail to mention is that it’s not just the BA RFP that the 747-8i lost. That could be considered unlucky, just like that one match your favourite team should have really one because they were well ahead until 10 minutes before the end. However, if your team keeps losing games, that one unlucky game doesn’t matter, and neither does whether your team keeps losing in the last 10 minutes.
      In terms of the 747-8i, it lost almost all other RFPs as well – it only gained two exclusive customers – Arik Air (2) and Air China (5), while the other two airline customers, Korean and Lufthansa, also ordered the A380.

      Granted, there is some debate about whether there is much future for (four-engined) VLAs to begin with. Sales in that category haven’t been exactly stellar off late.
      But you seem to still believe – contrary to all evidence out there – that in this difficult niche, it’s actually the wrong plane has the upper hand in terms of sales (by 86.6% – 259 vs. 40, of which 9 are for VIP customers).
      Boeing themselves don’t seem to expect many more 747-8i orders, either, as their press release regarding 747 production rates cites specifically the cargo market as likely to recover next year (implying this will help the order book),
      http://boeing.mediaroom.com/2013-10-18-Boeing-Adjusts-747-8-Production-Rate

      • The 747 won all cargo orders without competition, like during the old 747 days. Airbus withdrew the 380F a long time ago. That seems a painfull but good decision based on market developments. The 747-8i was launched anyway.

        • The A-380F was a box carrier, nothing more. It could not take long or oversized cargo like the B-747F can. During the time period it was offered it was out sold by the B-747-400F/ERF.

      • keesje,
        You make it sound like Airbus was assessed the market foresaw the market downturn and was prescient and proactive. They were reactive.

        The reason the A380F was shelved, was because ALL of the customers cancelled their orders. Tough reality.

      • The reason the A380F was shelved, was because ALL of the customers cancelled their orders. Tough reality.

        Not quite.
        The A380F was shelved because Airbus screwed up the A380 production (all that cabling hassle) so badly that they focused on the pax variant, indefinitely delayed the freighter variant – and consequently had all customers cancel their orders.

        Embarrassing, sure, but the shelving came before the cancellations, not after.

        From Wikipedia (with plenty of sources referenced):

        As Airbus prioritised the work on the A380-800 over the A380F,[60] freighter orders were cancelled by FedEx[61][62] and UPS,[63] or converted to A380-800 by Emirates and ILFC.[64] Airbus suspended work on the freighter version, but said it remained on offer,[65] albeit without a service entry date.[66]

        • LH seems to love their configuration in their B-748s. About 367 pax means no 11 across seating in Y. LH made some showcase videos for Boeing about the B-748., coming from THE premier European (sorry BA & AF, but you are not it) airline should say something.

      • “The A-380F was a box carrier, nothing more.”

        The max floor loading of the A380 maindeck was less then the 747s. With the crowd enthousiaticall concluding it could carry no heavy loads. In reality the max floor loading was only marginally less & and its total payload-range way higher. Some folks needed only half a word to jump to conclusions though.

        The reason Airbus cancelled the A380 is because the customers cancelled them..
        Not a Tough reality, Toms reality. Or a sad rewriting of history. Its a bit like the 787-3, Boeing concluded they needed resources for the other versions and the market didn’t look so hot anyway.

        The A380 gave the 747-8F a tick of the tail. A380 customers everywhere are pushing good 747-400s into the desert in good numbers, available for cargo conversion. Not as efficient as the 8F, but costing $80 mil after the D-check/ conversion, ruining the -8F market/ margins.

      • No “crying over spilled milk” mate.

        1)I stated Boeing/GE didn’t have their pencils sharpened as much as Airbus/RR and they did the better job to get the order.
        2)I actually discussed this particular order with a very senior BA manager during a meeting a number of years ago. It wasn’t a (5-minute meeting either). We dicussed a numer of items-including where the 1st A380’s were going (which turned out to be completely accurate since BA received the A380’s 4 years later).
        3)I only stated the BA situation-nothing more nothing else.
        4)I never once anywhere stated that the deal wasn’t profitable for Airbus/RR.

  4. The 747-8i nearly won the BA VLA competition..
    I don’t believe it for a second.

    IMO an totally unsupported feel good story.
    B lost, but is was somehow unfair so.. a moral victory afterall!

    The BA A380 selection wasn’t a surprise at all.
    All their competitors reached the same conclusion.

    Boeing PR tries to drag the A380 down with the 747-8 by suggesting they have equal market appeal.

    Maybe 15 additional A380s are ordered this year (ANA, CX..?) bringing the total at 35. Better then the 747-8i in the previous 10 years. Tough reality.

    • keesje, I hate to break it to you my friend, but there are not 20 firm orders for the A-380 this year. In fact the total net orders (currently) for 2013 is -3 with the cancelation of 3 from LH.

      I do not see NH as ordering any 4 engine VLAs again.

      CX already flies the B-747-8F, have about 10 in their fleet and exercised 3 of their 4 options. The B-747-8F replaced their B-747-400BCFs, which Boeing took in trade. CX is replacing their B-747-400 pax jets with B-777-300ERs and A-350-1000s. CX is also replacing the A-343s and B-772s with A-359s, and their B-773s with A-3510s. CX’s orders for the B-77W is 50 airplanes (about 35 delivered to date) and 26 A-3510s. All four engine pax jets will be gone from the fleet by 2018, and of course the A-346 is already gone.

      IMO you have a totally unsupported feel good story, too.

      • That may happen next month, but as of now the Doric order is not even listed by Airbus. Airbus shows total firm orders for the A-380 at 259 airplanes, as of 30 Sept. 2013.

        When and if the Doric Leasing order is converted to a firm order, Airbus and JL will be yelling about it to the world, and we will see a cleverly worded press release.

      • That may happen next month, but as of now the Doric order is not even listed by Airbus. Airbus shows total firm orders for the A-380 at 259 airplanes, as of 30 Sept. 2013.

        Correct.
        I was also surprised that, when asked on Australian TV about the lack of A380 orders this year, Enders said this was incorrect and that they had already sold 20 to Doric. I thought “hang on – that’s not firm yet”.

        I’m curious to see what the total firm tally for the A380 is going to look like as of 31-12-2013, in any case.

        Just like I’m curious to see how many of the rumoured orders (A380 and 777X) are actually going to happen in Dubai.
        The thing about rumours is that they tend to set you up for disappointment – if they turn out to be true, there’s no surprise in the announcement. If nothing happens, it’s also disappointing… it’s only really exciting if the rumour says “airline Y is going to order 30 D500 and 20 R245″ and instead they go for 21 D350 and 50 R456. A bit like the LH widebody order, really, which many expected to be an all-out Airbus affair.

      • “31-12-2013″

        You will have to wait a bit longer, Airbus usually publish their final numbers on January 17.

        Yup, I know they usually publish them half-way into January (just like the 30-09-2013 stats were not published until early the 2nd week of October). I just meant the order book as it is going to stand as of 31-12-2013. Even if we have to wait a few days more to actually see that then.

  5. Thinking about the choice to launch the 777x and eat into 747-8 sales, how much does a 777 burn in fuel per year? 20 million dollars maybe. So potentially the 777x could save 2 million per year. So Boeing can probably sell them at a 20 million premium over a 777-300ER. If it is a 5 billion program, they could break even at 250. I guess with the cost of fuel so high, it makes sense to invest billions in new technology.

  6. The 407 seats for the 777-9X.. let it go. Two rows on top of your 9-10 abreast 777–300ER. That’s what it is. E.g. ANA has ~220 seats on those so..

    On the 777-9x engines. I think the installed 100klbs thrust on the bigger 777x design is amazing low. Folks told me I just don’t understand. Then EK started talking water injection and the engine is said to drive the time line. Is Boeing pushing the GE9X towards GE90-1xx levels? That would not be a surprise.

    What is a surprise is people saying 4 engined VLA won’t be ordered. All VLA’s are 4 engined because no engines exist or are planned to power twin VLA’s. Saying the 777-9X is a VLA because an engineer drew in 407 miniseats is for unconditional believers only IMO.

    If you order a 777x iso of a 747-8i you are surrendering a lot of payload-range. Helping on the cost site, biting you on the revenue site.

  7. Does anyone know if the production backlog is the same as the delivery backlog?
    Boeing have been delivering 747-8s straight into storage. Do these planes count as delivered or is the production backlog even lower than 51? Anyone know the real number?

      • Thanks, that makes sense. So there are only two stored 747s assigned to customers but not delivered (one for Nippon Air Cargo and one for Air Bridge Cargo).
        So a production backlog of 49

      • So the customers own the others that are in storage … does anyone know which customers, and how many frames?

        A brand new 748F that’s been paid for, but is sitting in storage, is a very bad sign. Why would you fly a 744F (for example) rather than a 748F if you have already paid for both of them?

    • The information provided by kc135topboom is incorrect.

      The ones stored in the desert do not count as delivery because they are still Boeing property, they all flew to Pinal Airpark with a Boeing registration. Last month, Boeing delivered two freighters which were flow to the dessert in the beginning of the year (ABC and Cargolux). A third one (for NCA) also came back from the dessert in August, and will be delivered next month.

      There are also a few stored at PAE. Korean Air Cargo for example deferred delivery until April 2014 but the birds were already produced. Others like Cathay rolled out a few months ago but are waiting until the engine PIP is ready.

      There are currently 13 produced and undelivered 747-8F aircraft in inventory:

      > 2 in Pinal Airpark
      > 11 in PAE

      Which means the production backlog holds 38 units.

      http://747-8.blogspot.com

      http://www.flickr.com/photos/microvolt/10163817104/
      http://www.flickr.com/photos/microvolt/10032605503/

  8. Dave O’Flynn may be right, and that fact may explain LH’s unusual, lauditory testimonial on B’s web sight, to drum up more business. I was particularly interested that LH pointed out that one reason they like the -8i is that with 4 burning it has no ETOPS issues.

    Sad to see 748 go, if that in fact happens. It’s wing is a work of art, just so slim and beautiful, whether seen from a cabin window or front on. Every time I look at a good photo of it I think of leonardo daVinci. It also looks thin like the composite wing on 787s. B said that attaining that thinness was one of the reasons they wanted to use composites for the 787’s wing, but they appear to have done something very similar on the 748 with metal.

    I think it is pointless to debate whether the -9X is or is not a VLA. It does not matter whether it is or is not. IMHO, what does matter is that the industry, both OEM and airlines, is trying to figure out what is the largest size twin aisle that the long haul mkt wants that can be produced in profitable numbers. I think we will get an idea of what that is at the Dubai air show, but it is going to be very variable for a few years because of how the customer mkt is evolving. The key from B’s view point is that there be a big enough mkt at 407 seats to profitable build the plane, but don’t have the pure monopoly they had with the -300ER. We whall see.

    • Where did you find that Lufthansa quote about ETOPS?
      If I’m not mistaken, Lufthansa doesn’t fly any particularly ETOPS-restrictive routes that any contemporary twin wouldn’t be able to serve.

      • Where did you find that Lufthansa quote about ETOPS?
        If I’m not mistaken, Lufthansa doesn’t fly any particularly ETOPS-restrictive routes that any contemporary twin wouldn’t be able to serve.

        LH’s VP of fleet operations, Uwe Strohdeicher, talks about ETOPS in the testimonial video here:
        http://www.newairplane.com/747/customerHighlights/lufthansa-2/
        He basically says that with a four-engine plane, you don’t have to worry about ETOPS regulations.

      • Thanks. What they mean is probably that you don’t have to go through the hassle of airline ETOPS certification with a 747-8, which is certainly correct. On the other hand, that shouldn’t be much of an issue for such an experienced airline any more.
        A bit of marketing ballyhoo, if you’re asking me.

  9. There are still open delivery slots in 2014, the first two (LN 1504 and LN 1505) are only 9-10 months away. Perhaps Boeing can convince Lufthansa to bring a few 2015 slots forward.

  10. “There are currently 13 produced and undelivered 747-8F aircraft in inventory:”

    Wow. The guy that decided to delay the A380F for a decade gets a medal.

    • keesje, have you noticed Airbus isn’t even talking about an A-380F anymore? The guy who ‘delayed’ the A-380F needed the engineers to work on the pax version in a deeply troubled program then. Even then they didn’t get it right. The wiring harnesses didn’t fit properly forcing many early build airplanes to be rewired before delivery, which was delayed by two years.
      The first A-380 wasn’t delivered until Oct. 2007, then a huge gap between that delivery and the second airplane delivery in Feb. 2008. Even now, six years after the first delivery, only about 112 airplanes have been delivered. Airbus has only hit their promised delivery schedule of 30 per year once, in 2012. They will not hit that in 2013. Airbus has only delivered 14 or 15 A-380s so far this year, and they don’t have 15 airplanes nearing delivery for the remainder of 2013. With the on-going work to be done for airplanes in-service on replacing the wing rib-feet, and the need to also add the new rib feet to new builds, it doesn’t look like they will hit the 30 airplane delivery mark in 2014, either.
      Maybe by 2015 Airbus will be back on track.
      So, should his medal be made from melted down removed rib feet?

      • @kc135topboom

        I think you’re missing keesje’s point. If the A380F had been on track and UPS and FedEx had not canceled their orders, we would now have a situation where Airbus had to store some freighters in the dessert. Such a large inventory is a big financial drag.

        As for future deliveries, 10 more will be delivered before the end of the year (of which 7 are for EK). The current plan is:

        > 25 in 2013
        > 28 in 2014
        > 28 in 2015

    • Just thinking if you have a backlog of hundred something, half delivered and 13 parked before delivery (for whatever reasons..) well that makes “weak demand” a serious understatement. A number you want to keep away from the media/ stockholders.

      From the start I opinioned the narrow 10 abreast noise cabin of the -8i posed a disadvantage and the upper deck / nose section offers limited flexibility for customer configurations (first hand experience). I hoped e.g. ANA, SQ, LH would go 9 abreast and install bars etc. to upgrade it to A380 levels but that never happened..

      • keesje, all 747 economy-class seats have been ten-abreast since around 1980. Typical dimensions are 60-inch L&R triples with an 81-inch quad in the middle. Aisle are approx 19 inches wide. .Wikipedia lists seat width = 17.2 inches

        At 10-abr, Wikipedia says the A380’s seats are about an inch wider than a 747. The A380’s main deck is 19 inches wider than a 747. However, the A380’s sidewall slopes outward whereas the 747’s sidewall is vertical. Does anyone know how wide the A380 is at the window belt? That’s where the seat and aisle width comparisons vs a 747 would be made.

  11. @leehamnet
    ‘Yes, we do get amused by how many times Airbus finds ways to announce a deal…..’

    mmmmmYes, except the best example of an order announcement came from Boeing, who managed to re-announce a Chinese firm order from a year before because their Premier was visiting the factory. The press went potty until they realised there was actually nothing new in it… anti climax…

  12. Pingback: Airbus’ McArtor on VLA, 777X, 757 replacement and Airbus future products | Leeham News and Comment

  13. Boeing could keep the 747-8 line open and even make them a loss leader just to keep line going until the freight business picks up. Every 747-8I sale is one less for the A380 and it seems a few sales for the 747-8I come through now and then.
    If Boeing can improve the 747-8 with PIP’s and keep interest among the airlines, it can keep the line open even with small numbers and retain customers in the Boeing family of airliners.

  14. Any chance that the 747-8 had was already killed by the 777-9X, which makes me wonder why Boeing even bothered to begin with, unless they felt the A350-1000 wasn’t going to be a competitor and they wouldn’t need to launch the -9X so fast.

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