It appears that the fate of the iconic Boeing 747 could be in the hands of the Russians. The famous airplane has fallen out of favor, as carriers are looking for newer planes that can fly further distances while using less fuel. Sales for Boeing 747 aircrafts have been declining for years, and an eight year slump in global air shipping hasn’t helped matters. Now, the future of the aircraft could depend on one Russian freight company that has pledged to purchase 18 of the 747s.
However, if this deal falls through, Boeing will be forced to either cease production of the 747 or try and wait until a rebound of the air shipping industry produces more sales. At the present time, Boeing only has plans to continue to build the 747 partway through 2017. If Boeing does decide to cut off the 747, it would take a heavy financial hit in the process.
Industry expert George Dimitroff said, “The question is, can they get enough orders in the next five years to keep the production line open? If they close it, there is nothing to replace it.”
In recent years, Boeing has been cutting its output, and this might soon include the 747. However, this aircraft is about one-third larger than its closest rival, and it has an unparalleled ability to hold massive amounts of cargo through a hinged nose. These features make it appealing to many global shippers. Additionally, putting an end to the 747 would create an accounting loss of nearly $1.9 billion due to deferred costs.
Boeing vice president for marketing Randy Tinseth said, “I don’t want to sugarcoat this: It has been a tough market. It continues to be a tough market. We have some near-term opportunities. We also have airplanes we need to sell.”
This year, the company has only managed to achieve the sale of two 747s. This is the same number of 747s that were sold last year. In fact, the “customer” this year was Boeing itself, as the finance division of the airplane manufacturer purchased two 747 freighters so that it could lease them to airliners. The 747-8 model has a list price of about $380 million.
Recently, Russian airline AirBridgeCargo has promised to buy 18 747 jets. This would almost double the unfilled orders of Boeing. But it might be too good to be true for Boeing, as the economic downturn in Russia might prevent this sale from becoming a reality. The company says that it will acquire three 747-8s in 2016 and then acquire two or three additional planes annually until the year 2022.
Meanwhile, Boeing is desperately trying to sell its planes. The company currently has six unclaimed jumbo jets worth a total of more than $2.2 billion. Two of the jets were built for Transaero Airlines of Russia, a carrier that is currently being liquidated. Boeing believes that it could sell the planes if the air shipping industry picks back up. Historically, the industry had an annual growth rate of 4% to 5%.
For now, Boeing says that it will keep producing the planes as long as there is a demand. But that demand could be running out.
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