Boeing may end 747 production

by Steve Creedy - Editor
1652
July 28, 2016

BOEING has hinted that the Queen of the Skies may be forced to abdicate if it fails to receive more orders for its lagging Boeing 747 program.

The US aerospace giant attempted to breathe new life into the iconic airliner with a redesign but a filing with its second quarter financial figures suggests the 747-8 may become a victim  of its makers predictions of a dwindling market for very large aircraft.

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The plane-maker noted that lower-than-expected demand for large commercial passenger and freighter aircraft and slower-than-expected growth of global freight traffic had  continued to drive market uncertainties and  pricing pressures while resulting in “fewer orders than anticipated’’. It took a $US1.19 billion pre-tax charge on the program for the quarter.

“We continue to have a number of completed aircraft in inventory as well as unsold production positions and we remain focused on obtaining additional orders and implementing cost-reduction efforts,’’ it said.

“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.’’

The 747, affectionately known as the jumbo jet, played a key role in allowing passengers worldwide to travel more cheaply by lowering the cost per seat.

But even equipped with more efficient engines, the four-engine Boeing has struggled against increasingly efficient twin-engine aircraft and tendency for travellers to want to fly point-to-point.

Video: First flight of the latest model of the 747 the -8.

The weakness in the global economy and air freight markets has also reduced demand for 747-8 freighters.

Boeing is currently making a 747 every month but had previously announced plans to reduce the rate to one every two months from September. It said in its filing it had also shelved plans to return to a production rate of one aircraft per month from 2019.

The announcement came as Boeing reported its first quarterly loss in seven years due to the 747 write-down and charges of $US1.23 billion on the 787 program and $US354 million on KC-46 tanker program.

The second quarter net loss of $US234 million came despite a 1 per cent rise in revenue to $US24.8 billion.

Chief executive Dennis Muilenburg said the underlying performance of Boeing remained “solid’’ and its commercial and defence teams had again delivered strong revenues and operating cash flow.

“As we look forward to the second half of the year, we anticipate continued strong operating performance across our production and services programs on generally healthy demand for our broad portfolio of market-leading offerings,’’ he said.

“Our commercial airplane development programs remain on track and we have successfully completed the flight testing required for customer approval of key KC-46 production milestones.”

Meanwhile, Airbus Group reported a 15 percent increase in the first- half net profit to 1.76 billion euros but also took charges of more than 1.7  billion euros, including in its A350 and troubled A400M programs.

The profit was boosted by gains of 868 million euro from the sale of shares in Dassault Aviation and $1.14 billion euros from the creation of a rocket launching joint venture with Safran.

Revenue remained flat at 28.8 billion euros and orders fell by 27 per cent  to 39 billion euros, although group chief executive Tom Enders pointed to the “brisk order intake’’ at the recent Farnborough Airshow.

Mr  Enders said the first-half underlying performance reflected the manufacturer’s back-loaded delivery schedule and good demand for its products.

“Our operational focus remains squarely on the A320 and A350 ramp-ups and transition to the new engine version of the A320,’’ he said.
Airbus expects to deliver more than 650 aircraft this year after delivering 298 in the first half.

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