Boeing cuts 747-8 production on weak cargo market
22 / 01 / 2016
Boeing has announced it will cut the production rate of its 747-8 aircraft as a result of weak supply and demand fundamentals in the cargo industry.
The Seattle-headquartered manufacturer announced that from September it would cut production of the aircraft from one per month to one every two months to match supply with near-term demand in the cargo market.
Boeing Commercial Airplanes chief executive Ray Conner said: “Global air passenger traffic growth and airplane demand remain strong, but the air cargo market recovery that began in late 2013 has stalled in recent months and slowed demand for the 747-8 freighter.
“While we remain confident in the 747-8’s unique value-proposition and an upcoming replacement cycle for late-model 747-400 freighters, we’re taking the prudent step to further align production with current market requirements."
On a pre-tax basis at the segment level, Boeing Commercial Airplanes will report a charge of $885m as a result of the production slowdown.
Boeing executive vice president of business development & strategy and chief financial officer Greg Smith added: “We are closely monitoring the air cargo market as we work to win additional orders to support ongoing future production.
“At the same time, we continue to aggressively drive productivity to lower costs across our production system to offset the current market challenges.”
Last year, Boeing told Air Cargo News that it would slow production of the aircraft to one per month from March this year.
According to the manufacturer it has seven unfulfilled orders for the freighter, although AirBridgeCargo has signed a memorandum of understanding for 20 747-8s and so far has only ordered two.
While supply and demand conditions have weakened, lower fuel prices have not helped the model’s cause.
It has a list price of $380m partly because of the overall efficiency it can offer because of its large cargo capacity compared with rival models, but with lower fuel prices at least for the foreseeable future and weaker demand, operators are looking to other solutions to meet their needs.
It has also suffered from a decision to allow aircraft with two engines to fly across the Atlantic.
In September, ANA axed an order for four of the aircraft because of changed market conditions.
Last year, a total of six 747-8s were ordered, while seven were delivered. Silk Way ordered three in February, Atlas Air took one in June and AirBridge took a further two in November.