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The Final Horizon for Boeing's 747?

The scene: The biennial Asian Aerospace Show in Singapore. On Feb. 26, Boeing Co. introduced a new and improved 747 jumbo jet with great fanfare. Original 747 designer Joe Sutter -- an aerospace business legend -- talked up a bright future for the world's most popular and profitable airplane.

Just one problem: The future of the Queen of the Skies is very much in doubt.

Numbers tell the story. Boeing (BA) hasn't sold a single 747 so far this year, and it sold just 16 in 2001. Of the plane's 61-order backlog, 35 are for the freighter version -- a sign that permanent retirement may lurk around the corner for this showcase Boeing product. Weak sales have forced the company to cut the 747's production rate by 50% -- to two jets a month.

SMALLER POND JUMPERS. "Experience tells us that airplane programs end their lives as freighters," says Richard Aboulafia, aerospace analyst for consultants Teal Group. "That appears to be the way the 747 is going." Adds a senior executive for a large Asian carrier: "If nothing else happens, I don't see very many orders for this airplane."

Even a revamped 747 jetliner will struggle to find a new niche among the larger trends and realities redefining commercial jet travel. The push for deregulated global airways and more frequent nonstop flights is creating demand for smaller airplanes. Nowhere is that more evident than on flights across the North Atlantic, where just 10 years ago, the vast majority of travelers flew 747s. Today, smaller Boeing and Airbus Industrie jets rule flight paths across the pond.

Boeing isn't giving up on its 30-year-old aircraft, however. At the Singapore show, execs touted the 747-400x, a quieter, longer-range version. The plane, which could enter service in early 2004 depending on customer demand, will be outfitted with a stylish and spacious new interior and quieter engines to meet stringent European noise requirement.

"REALISTIC HOPE"? For the second time in less than two years, Boeing is extending the 747's range. One of the keys: trying to keep it competitive as Airbus develops the 555-seat A380, which is expected to enter service in 2006. "The 747 is no longer in a unique market position, but it's a tremendously viable product as a 400-seat passenger airplane," says Jeff Peace, vice-president for Boeing's 747 program. "I see a great long-term future."

Boeing dropped plans to develop a 516-seat version of the 747 last year, focusing instead on a near-supersonic jet, the 250-seat Sonic Cruiser, which it plans to introduce in 2008. However, Peace insists that demand still exists for the 747, too, and the company will continue improving it. For this year, "I would hope to see order numbers in the teens and 20s," he says. "We're trying to make that a realistic hope."

The other big change will be how Boeing builds the world's biggest commercial jet. Mechanics will be putting together 6 million parts on a semi-moving assembly system -- if it works. Such a production system draws from lean-manufacturing techniques that Boeing has been trying to perfect for nearly decade. It's a tall order: The 747 is a very complicated flying machine. But the assembly line could dramatically cut the cost and the time to produce this giant and make it more price-competitive with Airbus. "We're looking at significant reductions," Peace says.

FEWER BIG BIRDS. The major challenge facing Boeing will be figuring out how to fit its biggest jetliner into today's changing market. The company has been one of the primary proponents of direct flights that avoid congested hub airports -- a concept known in the industry as "fragmentation." Execs believe Asian flight paths will soon fragment as they have over the North Atlantic, as more twin-engine aircraft with longer ranges enter service. The nimble Sonic Cruiser, for example, enables passengers to travel nonstop to their desired location in less time.

Boeing's own market outlook predicts that the share of large airplanes in the world's fleet will decline to 5%, from 7%, over the next 20 years. Boeing and Airbus still forecast a market of more than 1,000 jumbo airplanes over the next 20 years, including freighters. But those numbers, too, likely will be revised downward in the future as more direct flights crisscross the Pacific, reducing the demand to fly to such congested hubs as Narita in Tokyo. "We don't see a tremendous push to go to huge airplanes flying hub to hub," Boeing's Peace says. "We're going to see hub traffic patterns change."

It isn't just flight patterns that are fragmenting. The market doesn't appear large enough to support two competing jumbo-size airplanes. Airbus has sold about 100 of its A380s. That's mostly because of steep discounting, easy terms, and the friendly backing of several European governments.

"RECIPE FOR OBSOLESCENCE." But an oversupply of such giants could hurt Boeing. No carrier wants to be stuck flying half-empty behemoths. "You've got the A380 being sold at extremely aggressive prices, and that's a recipe for obsolescence," says Teal's Aboulafia. "If [the A380] arrives as planned, Boeing either loses money on deals, or the 747 fades into the sunset."

The 747 is falling prey to other trends. Boeing's own long-haul 777, a smaller plane, which seats about 360 people and is 18% more cost-effective on transoceanic flights, is cannibalizing 747 sales. Large 747 operators such as British Airways have been replacing their jumbo jets with 777s for some time.

Japan Air Lines, which operates more than 100 of the big birds, has no jumbo jets on order -- just 767s and long-range 777s. And other Asian customers may soon follow suit. "Boeing is pushing the 777 as an all-singing, all-dancing aircraft," Aboulafia says. "The market seems to be favoring the mini-jumbos, which seat between 300 and 350 people."

FUTURE IN FREIGHT. Is the 747 going to survive the toughest test in its storied history? At least Boeing execs have started thinking outside the box. Some want yet another redesign, in which some 747s would carry just 250 business passengers in a roomier and semi-luxurious cabin instead of 416 people. That would certainly take some of the sting out of those grueling 18-hour flights from Los Angeles to Singapore. Peace calls the cabin-makeover blueprint a "high comfort interior." Singapore Airlines, for one, was immediately drawn to the new concept, he says.

For now, legendary designer Sutter thinks cargo will be the 747's near-term salvation. "For the next few years, freighter [orders] are going to support the 747 very strongly," he says, noting that this plane now hauls about half of the world's air freight.

Perhaps. But eventually "you run out of customers who want a freighter," says John Walsh, president of Walsh Aviation consultants. Unless orders start pouring in or Boeing execs can find a new market niche, permanent retirement for the venerable-but-aging jumbo may be just over the horizon. By Stanley Holmes in Seattle

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