Boeing Co. (BA) is slowing the production tempo for its 747-8 jumbo jet, the planemaker’s biggest model ever, for the second time this year as demand continues to dwindle for four-engine aircraft.
The new rate will be 1.5 planes a month, a 14 percent drop from the cut announced in April, a pace that will be maintained through 2015, Chicago-based Boeing said today in a statement.
While Boeing hasn’t yet netted any new sales for the jumbo this year, it’s in “active” discussions with several customers and looking forward to a 2014 rebound in the cargo market, which could spark interest in a freighter version of the 747-8, Doug Alder, a Boeing spokesman, said in an interview.
“It’s not a surprise, in fact it’s smart,” Howard Rubel, a New York-based aerospace analyst with Jefferies Inc., said in a phone interview. “It tightens up the market, doesn’t put airplanes out there that can’t be sold.”
Boeing has parked some new 747-8s in the desert and allowed customers to trade in older jumbos this year in an effort to garner sales for the latest variant of the iconic, humpbacked aircraft family that revolutionized air travel more than 40 years ago with its size and range.
The task is complicated by a shift among airlines away from costlier four-engine aircraft toward fuel-sipping twin-engine jets capable of flying the same long distances. A new Boeing 777X, expected to be unveiled next month, could further cut into sales as the first dual-engine plane to offer the range and payload of a jumbo.
“Long-term the 747-8 platform remains a viable freighter given its favorable economics, but the introduction of the 777X will likely seal the fate of the 747-8 passenger version by the end of this decade,” wrote Peter Arment, a New York-based aerospace analyst with Sterne, Agee & Leach Inc., in a note to clients today.
Arment, who rates Boeing a buy, said he doesn’t expect 2014 earnings to be affected by the rate cut and sees Boeing lowering its 747 output to one per month by mid-decade.
Boeing and Airbus SAS, a rival planemaker based in Toulouse, France, say airlines flying into congested airports like London’s Heathrow will continue to need double-decker jets to keep pace with passenger demand, especially as the global market rebounds.
Boeing pegs demand for the very large aircraft such as the 747-8 reaching 760 planes over the next 20 years valued at $280 billion.
“We have plans to keep that airplane in production for a long time,” Randy Tinseth, a Boeing vice president for marketing, said of the 747 in an Oct. 7 phone interview.
Boeing has booked 107 total orders for the jumbo, its costliest jet with a retail price of $357 million, and had delivered 56 of the planes as of the end of September.
The backlog of 51 aircraft would keep its Everett, Washington, assembly line humming for almost three years at the rate announced today.
Boeing shares were little changed at $122.52 at the close in New York. They have risen 63 percent this year, compared with a 22 percent rise in the Standard & Poor’s 500 Index.
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