360° Coverage : Boeing's 747s Are Failing To Take Off As Demand For Large...

2 Updates

Boeing's 747s Are Failing To Take Off As Demand For Large Commercial Jets Remains Depressed

May 14 2014, 12:52pm CDT | by

Sustained weakness in global cargo markets and lower than anticipated demand for large commercial airplanes is weighing on sales of Boeing‘s largest commercial airplane – the 747-8. The passenger...

Filed under: news


15 weeks ago

Boeing's 747s Are Failing To Take Off As Demand For Large Commercial Jets Remains Depressed

May 14 2014, 12:52pm CDT | by

Sustained weakness in global cargo markets and lower than anticipated demand for large commercial airplanes is weighing on sales of Boeing‘s largest commercial airplane – the 747-8. The passenger version of this airplane, 747-8 Intercontinental, which seats 467 passengers in a three-class seating configuration, has received no orders from airlines so far this year. While its freighter version, 747-8F, has received order for just one airplane this year through the first week of May.

In our view, the depressed order volume for 747′s passenger version is reflective of the fact that currently there isn’t healthy growth in the number of routes worldwide where such large aircraft can be deployed by airlines. These airplanes were initially conceived with the anticipation that sustained growth in demand for air travel and constraints in airport infrastructure will compel airlines to increasingly adopt larger airplanes. That anticipation hasn’t been realized uptill now as airlines see few routes globally where they can fill over 450 seats on every departure. At the same time, sustained weakness in global air cargo markets has weighed on orders for 747′s freighter version. We figure these low order volumes for Boeing’s 747s will in the near term weigh on its growth from its better performing airplane models like the 737 and 787 Dreamliner.

We currently have a stock price estimate of $142 for Boeing, around 5% ahead of its current market price.

See our complete analysis of Boeing here

Boeing Lowered Its 747 Production Rate Due To Weak Order Volumes

Since their launch, Boeing has received orders for 120, 747-8s. 69 of these have been for its freighter version while the remaining 51 have been for its passenger version. The company has delivered 69 747-8s against these orders through April, so it currently has a backlog of around 51 747-8s. Additionally, many airlines which ordered these airplanes do not have their deliveries scheduled in the near future. As a result, Boeing has many unsold 747 production positions on its hands. Faced with manufacturing and stocking unsold airplanes, the company in February, lowered its 747 production rate to 1.5 airplanes per month from 2 airplanes per month.Additionally, it plans to maintain these lowered production rates through 2015 and has indicated that it is working to get additional orders for the 747. However, we figure the pressure to generate higher order volumes for the 747 will likely create pricing pressure which will weigh on the company’s margins under the 747 program. In addition, priced at approximately $355 million a piece, the cost impact from manufacturing and stocking an unsold 747 will be significant.

In comparison, Boeing has received strong orders for its relatively smaller airplane models such as the narrow body 737, which seats 110-180 passengers in a two-class cabin configuration, and 787 Dreamliner, which seats around 240-320 passengers in a three-class seating arrangement. Driven by strong order volumes for these two airplanes, the company has over the last few years posted strong growth in its results. Looking ahead, for the foreseeable future we figure Boeing’s 747 program will temper its growth from the 737 and 787 programs.

777X Could Impact A Portion Of 747′s Demand

Another factor we figure is likely weighing on demand for the 747 is Boeing’s 777X airplane which is scheduled to enter service with airlines around the end of this decade. The larger version of the 777X – 777-9X – is being designed to seat around 410 passengers in a three-class seating arrangement. We figure in a two-class seating arrangement this plane could like the current generation 777-300ER seat up to 450 passengers. It will thus seat nearly as many passengers as the 747 seats in a three-class seating arrangement. Coupled with much higher fuel efficiency and a similar range, it is possible that the larger 777X is cannibalizing a portion of 747 sales. Having said this we figure demand for the 747 freighter version will remain due to its distinctive cargo loading and unloading through the airplane nose door, which allows for transport of oddly-shaped, large-sized items.

Orders For Airbus A380 Have Also Remained Below Expectations

The weak global demand for large commercial airplanes has also weighed on sales of Airbus A380, which is the largest commercial airplane in the world. This airplane, which seats around 550 passengers in a three-class seating arrangement, has received orders for 20 airplanes through April this year. It has done better than Boeing’s 747 in terms of orders, but even its order volumes are below expectations. However, despite the weak order volumes for these large commercial airplanes we do not write-off the Boeing 747-8 and Airbus A380 as airplane model successes are determined over many years.

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)
Get Trefis Technology/>

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.


3 days ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the wor ...
Source: Business Times Singapore   Full article at: Business Times Singapore


4 days ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double trag ...
Source: Business Times Singapore   Full article at: Business Times Singapore


Don't miss ...


<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.


blog comments powered by Disqus

Latest stories

Nigeria to get Japanese drug for Ebola treatment
Abuja, Sep 2 (IANS) Nigeria will soon get a Japanese drug to treat Ebola, the country's Health Minister Onyebuchi Chukwu said Monday.
Japan to aid connectivity upgrade in northeast India
Tokyo, Sep 1 (IANS) India and Japan Monday decided to strengthen cooperation for improving connectivity and socio-economic development in northeastern states of India.
Three Ebola cases recorded in Nigeria oil hub
Abuja, Sep 1 (IANS) At least three cases of Ebola virus disease (EVD) have been recorded in Nigeria's oil hub of Port Harcourt, where a fatality was confirmed last week, the country's Minister of Health Onyebuchi Chukwu said here Monday.
India, Japan to elevate strategic partnership
Tokyo, Sep 1 (IANS) Prime Minister Narendra Modi Monday said relations with Japan were of the "highest priority" for his government and announced a slew of initiatives, including turning the strategic partnership into a "special" partnership and a fast-track channel for Japanese investors.

Latest from the Network

13 killed in Baghdad bomb blasts
Baghdad, Sep 2 (IANS) As many as 13 people have been killed in two explosions in Iraq's capital Baghdad Monday, a police source said. Thirteen people were killed and 45 others injured when two car bombs exploded in...
Read more on Politics Balla
Rebels, Syrian forces clash near Golan Heights
Cairo, Sep 2 (IANS/EFE) Islamic rebels clashed with the Syrian forces near Israeli-controlled Golan Heights Monday, the Syrian Observatory for Human Rights said. The observatory, in a statement, said that fighting...
Read more on Politics Balla
Kelly Brook suffered second miscarriage
London, Sep 2 (IANS) Actress-model Kelly Brook has revealed that she suffered a second miscarriage while dating Thom Evans. The 34-year-old and the former rugby star lost their first child May 6, 2011 when Brook gave...
Read more on Celebrity Balla
Russia may retaliate against fresh EU sanctions
Moscow, Sep 2 (IANS/EFE) Russia will take retaliatory measures to defend its legitimate interests if the European Union imposes new sanctions over Moscow's intervention in Ukraine, the country's foreign ministry said...
Read more on Politics Balla
Britney Spears looking forward to dating
Britney Spears is looking forward dating again. The 32-year-old singer admitted during her 'Piece of Me' show at the Planet Hollywood in Las Vegas yesterday (08.31.14) that she's excited about meeting someone new...
Read more on Celebrity Balla
Lindsay Lohan seeks hypnosis to quit smoking
Lindsay Lohan has reportedly been undergoing hypnotherapy to help her give up smoking. The 28-year-old actress has turned to psychotherapy in the hope of kicking her nicotine addiction before she performs in 'Speed-the...
Read more on Celebrity Balla
Ian Somerhalder and Nikki Reed spend $860 in sex shop
Ian Somerhalder and Nikki Reed allegedly spent nearly $1,000 in a sex shop yesterday (08.31.14). The new couple, who have been dating for the past few months, reportedly forked out $860 on a number of erotic toys -...
Read more on Celebrity Balla
Robin Williams' daughter returns to Twitter
Robin Williams' daughter has returned to Twitter. Zelda Williams posted her first tweet on the social networking site tonight (01.09.14) almost three weeks after she abandoned her account when she received abusive...
Read more on Celebrity Balla
Is Miley Cyrus dating Douglas Booth?
Los Angeles, Sep 2 (IANS) Pop star Miley Cyrus and British actor Douglas Booth are reportedly dating. The "Wrecking Ball" hitmaker was first rumoured to be romancing Booth in 2010 when they co-starred in teen drama "...
Read more on Celebrity Balla
UN chief alarmed by Israeli claim on West Bank land
United Nations, Sep 2 (IANS) UN Secretary-General Ban Ki-moon Monday expressed alarm at the Israeli declaration of a 400 hectares area in the West bank as "state land". "The secretary-general is alarmed by yesterday's...
Read more on Politics Balla