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

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 BA -0.34%’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.

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.

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Qatar Airways to receive its first A380 by early June

Qatar Airways Chief Executive Officer His Excellency Mr. Akbar Al Baker announced the airline’s expansion plans on the opening day of Arabian Travel Market (ATM) – the Middle East’s premier travel show held in Dubai every year.

During a packed press conference at the Dubai International Convention & Exhibition Centre, Al Baker gave Middle East and international media an update on the newly opened Hamad International Airport and the airline’s highly anticipated arrival of its first Airbus A380-800 in early June, the first of 13 such aircraft on order.

The airline’s new A380 luxury First Class seats are a key feature on its exhibition stand at ATM this week providing travel professionals from around the world with an opportunity to sample the seats and amenities.

Featuring a tri-class configuration of seating in First, Business and Economy, over two decks, the A380 is the largest passenger jet in the world and will provide a superior traveller experience to the airline’s customers.

“Qatar Airways is making news yet again with the newly opened Hamad International Airport and the anticipated arrival of the airline’s first A380 early next month.

“This is indeed an exciting year and a new chapter for Qatar Airways as we will move our entire hub operations to Hamad International Airport on 27 May.

“We also eagerly await the delivery of the world’s largest passenger jet and have no doubts that our new A380s will play a key role in our strategic expansion plans, and will help expand the onboard capacity – in the full comfort and luxury that our passengers expect,” said Mr. Al Baker. 

During ATM, the airline’s CEO introduced the A380’s new First Class seat to the Middle East for the first time. The product offers a seat pitch just over 2.2 meters long and can be converted into a fully flat bed. In addition, the seat unit, the widest in the industry, allows for access to a 26-inch screen with a variety of entertainment options. There is also a privacy screen, increased personal storage as well as the ability for two passengers to sit across from each other while dining.

Mr. Al Baker also showed glimpses of its amazingly designed A380 First and Business Class lounge and bathroom interiors to the Middle East media audience.

It is the “Year of the Fleet” for Qatar Airways as the airline has plans to significantly expand its fleet with 300 additional aircraft, worth more than USD $60 billion, on order including, 80 Airbus A350s, 13 Airbus A330 Freighters, 60 Boeing 787s, 13 Boeing 777s (including freighters), 50 Boeing 777x, 80 Airbus A320s Neos and 13 Airbus A380-800s.

Qatar Airways is also the first Airbus customer to receive the newly-launched Airbus A350 long-range, twin-engine, wide-bodied jet. This new airliner represents the latest generation of passenger aircraft, designed for optimized fuel consumption, lower operating costs, and increased environmental efficiencies. Qatar Airways’ first A350 was showcased at the Singapore Air Show after a high-profile delivery event at the Hamad International Airport, Doha, Qatar, earlier this year.

The airline is also introducing a new daily all premium Business Class service from its hub in Doha to London Heathrow. The new service will be the first of its kind in the Middle East, commencing from 15 May, with an Airbus A319 aircraft fitted with an all Business Class, single aisle, 2–2 seating configuration offering 40 seats.

Qatar Airways, the national carrier for the State of Qatar, has seen rapid growth in just 17 years of operation, to the point where today it is flying a modern fleet of 134 aircraft to 138 key business and leisure destinations across Europe, the Middle East, Africa, Asia Pacific, North America and South America.

Over the next few months, the network will grow further with Al Hofuf, Saudi Arabia (May 15), Istanbul Sabiha Gokcen Airport, Turkey (May 22, 2014), Edinburgh, Scotland (May 28, 2014), Miami, USA (June 10, 2014), Haneda, Japan (June 18, 2014), Dallas/Fort Worth, USA (July 1, 2014) and Djibouti (July 27, 2014).

Complementing its global expansion, Qatar Airways is also commencing its domestic operations within Saudi Arabia, and is on track to launch its new airline, Al Maha, in November. Al Maha Airways plans to have 10 A320 aircraft in service within the first 12 months of operations.

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Airbus quietly shows off big ambitions for carbon free jets

Imagine an all electric 90 seat regional airliner able to fly at turbo-prop speeds for up to three hours operating Canberra-Sydney/Melbourne or major rural routes like those from Wagga Wagga, Coffs Harbour or Dubbo. An airliner with zero fossil carbon emissions,  if the batteries were charged from solar power ‘fuel’ farms, mostly near or on airports.

Flights that would be quieter than a breeze on approach or departure over suburbs near airports. These startling possibilities arise from an E-Fan Day held by the Airbus Group at Bordeaux yesterday. It was a remarkably low key event,  but Tim Robinson, editor in chief of Aerospace the flagship magazine of the Royal Aeronautical Society tweeted photos and observations that indicate how significant the E-Fan project is, both for GA or general aviation in the immediate term, and higher capacity airline operations in the medium term.

The first intended commercial application of the E-Fan all electric aircraft technology is a two seater suited to general aviation flight training and glider towing roles, and it made its first public flight at Bordeaux yesterday. The first flight of all occurred on 11 March.  The aircraft which uses lithium polymer (Li-Po) batteries to store energy, takes off at 110 kmh at sea level and cruises at 160 kms for between 30-60 minutes, depending on what you might be doing with it.

Recharging the batteries from the grid (in France some 80% derived from nuclear power plants) takes 30 minutes.  It is intended to go into commercial production in 2017 at a price comparable to light aircraft used for similar purposes. Robinson tweeted a number of instructive images from the event which can be found on his twitter account.

Shown below is but one of them, of a model of what appears set to be the second E-Fan offering, a four seater hybrid electric and combustion engine power generating augmentation arrangement which could extended its range from around three hours to four and a half hours.

Those who have followed the distributed E-fan powered proposals for larger airliners, will understand the significance of hybrid power augmentation plans for the four seater.

Such “E-thrust” plans are intended for low to zero emissions longer range and larger capacity airliners. These airliners, for a more distant future,  would buffer as well as distribute to banks of E-fan engines a power supply generated on board by liquid fuel derived ultimately from zero fossil carbon emitting algal fuels, or lower polluting bio-fuel blends, perhaps including lower fossil carbon containing liquid gas fuel.

Tim Robinson tweeted that the Airbus Group’s goal was for a 90 seat electrically powered regional E-fan airliner with a range of up to three hours. It is easy to imagine that at a competitive cost to acquire and run beside conventional large turbo-props, slightly larger than today’s Q400s and ATRs, and with the benefits of a carbon trading scheme, such an airliner would have a very substantial role to play in world aviation and ‘green’ energy technologies in general.

If highly reliable 90 passenger regional E-Fan airliners with Sydney-Adelaide range are in service in the middle to latter part of the next decade, further advances into 200-300 passenger jets electric with the capacity to take over Melbourne-Sydney or even transcontinental and trans Tasman routes would be inevitable.

They are needed.

What was shown off at Bordeaux could thus prove pivotal for the development of  air transport that eliminates fossil carbon release into the atmosphere.

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