Boeing Loses Part of Atlas Air 747-8 Order in Jumbo-Jet Freighter Setback

Boeing Co. (BA)’s newest jumbo jet, the 747-8 that had its entry into service delayed this week, encountered another setback when Atlas Air Worldwide Holdings Inc. (AAWW) canceled orders for three of the freighters.

Atlas cited “lengthy delays and performance considerations” in terminating orders yesterday for three of the earliest planes built. Atlas, the world’s largest operator of 747 cargo jets, will now receive nine of the new planes through 2013 instead of 12. The later jets have been improved, Purchase, New York-based Atlas said in a statement.

The move is “absolutely unrelated” to Cargolux Airlines International SA’s Sept. 16 decision to delay taking its first two planes this week as the 747-8’s initial customer, Jim Proulx, a Boeing spokesman, said yesterday in a telephone interview. There are “no new issues” with the aircraft, though the first ones to be delivered won’t meet performance guarantees, he said.

“This is far from being a disaster for Boeing,” said Michel Merluzeau, an aviation consultant with G2 Solutions in Seattle. “What perhaps concerns me more is the clearly inadequate management of customer expectations at such a point in the program.”

The 747-8 is already two years late in entering service, after Chicago-based Boeing diverted some engineers to its other delayed jet, the 787 Dreamliner, and had to redesign the 747’s wing and fix other problems discovered during flight tests. The Dreamliner is set for its first delivery on Sept. 25, three years behind schedule, to Japan’s All Nippon Airways Co.

Events Canceled

Cargolux cited “unresolved contractual issues” for its deferral, which forced Boeing to cancel three days of events to mark the handover of the first two 747-8 freighters to the Luxembourg-based carrier at the planemaker’s wide-body jet plant in Everett, Washington.

Cargolux acted Sept. 16 after its new board met that day for the first time since Qatar Airways Ltd. took a 35 percent stake in the company in June. Qatar has three representatives on the board, including Chief Executive Officer Akbar Al-Baker, who has criticized Boeing for delays on the 787s he has ordered.

Atlas said the three 747-8s it rejected had been set to be the first ones it received, starting next month, before Boeing rescheduled them to early 2012 and pulled forward three others that were in better shape.

‘Slightly Short’

“Though the first airplanes off the line are slightly short of expectations, these early-build models nonetheless will be great airplanes with unparalleled efficiency and low costs,” Boeing’s Proulx said. “We’ll continue to focus on performance improvements that increase the value these airplanes will bring.”

Proulx and Bonnie Rodney, an Atlas spokeswoman, declined to comment on what improvements had been made to the planes built later.

Each 747-8 has “very slight differences,” as occurs with all jets “as airplane production matures,” Proulx said. “That said, we don’t believe there to be significant differences between these aircraft.”

Atlas said it will still receive the other three freighters in October and November. The carrier remains “fully committed to the 747-8F” and is studying options for “additional aircraft in the future,” Rodney said.

“As prudent asset managers, terminating the first three aircraft was the right decision for our fleet, our customers and our stockholders,” Atlas CEO William J. Flynn said in the statement. “We expect the remaining 747-8Fs in our order to be better-performing aircraft than those we have terminated.”

Wing Redesign

Boeing fell $2.54, or 4 percent, to $61.02 yesterday in New York Stock Exchange composite trading. The shares were little changed after Atlas’s 4:01 p.m. announcement. Atlas tumbled $5.79, or 13 percent, to $37.65 yesterday on the Nasdaq Stock Market for the biggest decline since August 2010 after SunTrust Robinson Humphrey Inc. cut its rating to “neutral” from “buy.”

Proulx said earlier this week that the four-engine 747-8 is overweight after Boeing had to redesign the wing, making it “significantly heavier.”

While improved aerodynamic efficiency will cut fuel consumption, helping offset the weight, the initial planes will be “somewhat short of initial specifications for fuel burn,” Proulx said.

Boeing and General Electric Co. (GE), which builds the engines for the 747-8, are working on performance improvement packages and kits that can be retrofitted on any planes delivered in the meantime, he said.

The 747-8 freighter has no competition since Airbus SAS canceled plans to build a cargo version of the A380. It is meant to replace the 747-400, which Boeing stopped producing in 2009. Boeing stretched the wings and the iconic hump on top of the fuselage and put on new engines to improve fuel economy.

Boeing now has orders for 75 of the $319.3 million freighters and for 36 of the 747-8 Intercontinental, the $317.5 million passenger version that’s still being tested and is set for its first delivery by year-end. Airlines typically get discounts off the list prices.

To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.