The jumbo jet faces a make or break year at Boeing, Airbus

Thu Apr 16, 2015 1:52am EDT
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By Alwyn Scott and Tim Hepher

Seattle/Paris (Reuters) - The jumbo jet, for many years the workhorse of modern air travel, could be close to running out of runway.

Last year, there were zero orders placed by commercial airlines for new Boeing 747s or Airbus A380s, reflecting a fundamental shift in the industry toward smaller, twin-engine planes. Smaller planes cost less to fly than the stately, four-engine jumbos, which can carry as many as 525 passengers.

The slump in sales of the jets has raised questions over how long manufacturers can sustain production. It has also fueled internal debate in both companies over the future of the planes, sources said.

The outcome of those discussions will affect the value of existing fleets and thousands of production jobs at the plane makers and their many parts suppliers.

Sales forces at Airbus Group NV (AIR.PA: Quote) and Boeing Co (BA.N: Quote) are fighting for potential orders plane by plane as they seek to keep production going beyond the end of the decade, said other aviation market sources. The aircraft makers are offering discounts of at least 50 percent from catalog prices of around $400 million for a jumbo jet, those sources said. Airbus has said it is also considering a revamp to make its 'superjumbo' more attractive to buyers.

Boeing in September plans to slow the pace of production of its latest 747-8 model to an average of 1.3 planes a month from 1.5 currently. At that rate the orders it already has in hand will only keep the production line going for 2 1/2 years.

The crunch, though, will come earlier because it can take up to two years from ordering the first part to finishing a jet, and no one wants to start the process if it is unclear whether the plane will be completed and delivered to a customer.

"I can see demand for the 747-8 in small numbers, but you have got to ask if they can keep the production line open if they don't get some new orders," said Tony Whitty, chief executive of UK-based aircraft re-marketing firm Cabot Aviation, which trades, manages and leases jets. "You also wonder at what price they are selling."   Continued...

The new Boeing 747-8 Intercontinental jetliner lands at Le Bourget airport on the eve of the Paris Air Show, in this June 19, 2011 file photo. REUTERS/Pascal Rossignol/Files