Boeing (BA, Financial) virtually had no orders for the 747 in 2014. It was basically Silk Way West that ended the drought early this year by ordering for three 747-8 Freighters. The improving air freight volumes appears to be giving Boeing’s747-8F freighter new life. The passenger market for the jumbo jet remains difficult, but Boeing CEO Jim McNerney recently said that with the cargo market looking upbeat, demand for the 747 freighter could keep the “Queen of the Skies” flying. Will the fading queen revive to take to the skies? Let’s take a look.
Freighter market looking strong
The demand for freighter aircraft is trending higher. According to the forecast Air Cargo Management Group (ACMG), the air cargo market would require around 125 cargo planes a year to satisfy the growing market along with the replacement needs in the next two decades. This pleasant projection comes after around tumultuous 15 years of ups and downs in the cargo market. Even in a soft scenario where the cargo demand doesn’t grow, the consultancy firm estimates that airlines would need around 60 freighters a year for the replacement of their retiring fleet to maintain the capacity of their existing fleet.
Robert Dahl, managing director of ACMG commented “some vigor returned to the air freight market last year, and that has only continued this year…When looking over the long term, the outlook for freighters is healthy.” Dahl continued “despite challenges facing the freighter market in the post-recession period, there continue to be new developments that will have an impact on the market going forward…The news on the freighter front over the past year was a mix of good and bad, with most of the good news coming in the narrow body sector.”
The freighter airplane market has remained challenged for a long time post-recession. It’s underwent an era of notable revolution since 2000, witnessing an exceptional level of uncertainties over a decade. In actual fact, three of the worst years in the history of air freight traffic regression were seen in this span. The global freighter fleet peaked to 1,800 units in prior to the recession in 2006-2007. However, it also marked the beginning of the market’s contraction. Nevertheless, with the cargo market taking a U-turn, things seem to be looking up for both the jumbo makers – Boeing and Airbus.
The Queen of the skies has a lot more to deliver
Dahl says that Boeing could bag orders for around 55 units for its largest freighter. This could help the company keep its assembly running through 2022 or 2023, which was otherwise struggling to somehow manage to sustain through the end of this decade. The 747 aircraft is manufactured in Boeing’s Everett assembly building.
The past few years saw waning sales for the jumbo jet, making the company trim the aircraft’s production rate and causing concern regarding its viability. This also bears an impact on the aircraft’s component suppliers. The Air freight demand went down by as much as 12% during the recent recession. The future of this magnificent plane looked bleak until cargo operator Silk Way West ordered for the freighter version starting this year. Boeing is confident to win more orders.
As per a Bloomberg report, at the latest annual shareholders conference McNerney’s speech echoed the company’s confidence on the 747-8 Freighter when he said that its demand looks quite strong. He said, “We actually have a pretty good pipeline right now of cargo discussions going on… It’s premature to say we’re at the end of the program…I don’t think we are at all.”
Looking ahead
If Dahl’s forecast is even partially close to true, it would give the ailing 747 a new lease of life. Boeing’s iconic aircraft that revolutionized air travel shall get an extended life which was otherwise being considered edging lose to death. Boeing executives have been consistently discussing potential orders with prospective customers, targeting cargo operators even more. A steady recovery of the cargo market augurs well for the plane maker.
