End of her majesty: is this the end of the Boeing 747 production?
This article was originally published on AeroTime News on April 15, 2020.
Ever since the dawn of the jet age within aviation, arguably, Boeing was ahead of the curve. While the early jetliners had their time in the limelight, the Boeing 707 was THE jetliner at the early stages of jet travel. Following up a successful product is no easy feat, but Boeing managed to do so: 12 years after the 707 gave birth to the saying “if it ain’t Boeing, I ain’t going,” in 1969, a true Queen claimed her throne.
The Boeing 747 made its debut in 1969, bursting onto the aviation market with unprecedented specs for an aircraft and an iconic look that no one could mistake her for anything else. The double-deck hump, coupled with the unprecedented luxury onboard the aircraft, made the 747 a poster child of the company throughout its 51-year history.
However, the Queen’s reign is coming to an end in 2020, after royally serving airlines throughout the world for more than half the decade. The outbreak of COVID-19 forced airlines to take a very close and scrutinizing look at their costs and ways to save money. At the queue behind the chopping block, old and inefficient aircraft were at the forefront. Even the Airbus A380, which has no models older than 15 years old, is looking at the reduction in its fleet size, as airlines are looking to hasten the retirements of aircraft that are more expensive to run.
And the Boeing 747 is no exception to the rule.
The end of Boeing 747 era
Operators of older Queen’s, such airlines as British Airways, Lufthansa (LHAB) (LHA) , KLM, Qantas and others, have already sent their aircraft to retirement to various locations around the world. While a sliver of hope could be seen, as KLM re-activated some of its 747, for example, the fate of the aircraft is sealed and the skies are going to see much less royalty post the coronacrisis.
Prior to the outbreak, the only still operational production line of the Boeing 747 was in Everett, Washington, United States, where the -8 series, the 747 Intercontinental and the 747-8 Freighter were built. But Boeing’s facilities in the Washington area have been suspended since March 25, 2020. While the measures are temporary and some work has since resumed, the employees that came back were deployed to the Boeing 737 MAX, KC-46 Tanker and the P-8 Poseidon, reported the Seattle Times.
Even prior to the outbreak of coronavirus, the 747 final assembly lines were already working under a reduced workload. In 2016, Boeing cut the production rate in half to half an aircraft per month due to the dwindling demand. During that time, a regulatory filing indicated a $1 billion imbalance between costs and sales, reported Reuters. A $569 million charge was already taken in Q4 2015.
Since 2016, Boeing booked 42 orders for the 747. Out of the 42, three were in a passenger configuration: one was ordered by an undisclosed customer, while the two were picked to be the next Air Force One aircraft by the United States government. Subsequently, since the corresponding period, 36 deliveries were made to customers. Out of the 36, eight were in the passenger configuration with six going to Korean Air, while two were allocated to serve the United States’ president.
Boeing, as of March 31, 2020, is left with a backlog of 13 orders for the 747-8 after an unidentified customer decided not to take up four 747-8F aircraft, as indicated in the manufacturer’s latest Order and Deliveries update for Q1 2020. A prior version of the data showcases that two customers were still lined up for the 747: UPS and Volga-Dnepr Group, with 13 and four unfilled aircraft deliveries, respectively. The data could potentially indicate that Volga-Dnepr Group canceled their order, leaving UPS the only customer remaining for the Boeing 747.
A troubling sign is the fact that the manufacturer did not deliver a single 747 during Q1, even if the factories were temporarily closed only since March 25, 2020. Furthermore, UPS, despite an increase in revenues and operating margin, saw its net income drop by 7.3% to $4.4 billion in 2019. The company still had a fairly comfortable cash position, with $5.7 billion of cash and marketable securities as of December 31, 2019. The annual report also indicated that the remaining 13 Boeing 747-8F aircraft are set to be delivered between 2020 and 2022.
This could mean that if the last delivery would come through in 2022, the 747 would outlast its European Jumbo competitor, the Airbus A380, as the European manufacturer is set to end the production in 2021.
However, another sign that the end is eventually coming, is the fact that Triumph, who is the largest supplier for the 747-8 program, is already closing down shop on the program, reported Bloomberg in November 2019. Triumph indicated that the supplier is working ahead to provide parts for Boeing. But the planemaker will have a decision to make: whether to continue the production of the 747-8 by itself or to cancel it outright. With 13 orders left and seven delivered Queens in 2019, the backlog could take the production until late-2021, if it is still produced.
Adding to the pain is the fact that the air cargo sector has only seen dwindling demand during normal times, with 2019 being the worst year for air freight since 2009, as indicated by International Air Transport Association (IATA). And the pain is yet to stop: year-on-year cargo demand, measured by Cargo Tonne Kilometers (CTK), fell by 1.4% compared to February 2020. While March is set to bring an escalation in cargo demand and subsequently, capacity, due to the demand of medical supplies, the surge of the air freight sector once the crisis is over could be questioned. With a financial crisis on the horizon due to the coronavirus outbreak, the resulting drop in consumption could spiral into a decision to cancel the production of the Boeing 747-8, marking the end of the Queen’s reign.
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