Boeing Co. is notching down production of its 747-8 jumbo jet, the planemaker’s largest model, for the second time this year as demand continues to sink for four-engine aircraft.
More airlines choose to fly slightly smaller twin-engine planes in order to tighter cost management because they are easier to fill with passengers and burn less fuel despite new technologies incorporated in new models.
Boeing is shifting to producing 1.5 planes a month. That pace will be maintained through 2015, Chicago-based Boeing said in a statement. That’s a 14% drop from the 1.75 rate announced in April and a 25% decline from production at the start of 2013.
Sales of the 747 have been slow as only 107 of the 747-8 model have sold, and 56 have been delivered. So far this year, Boeing has received just five orders for the 747-8. Five older orders were cancelled, however, leaving no new orders. The biggest buyer of the passenger version is Deutsche Lufthansa AG, with 19. The jets use as a freighter also has been limited by weak cargo demand, although Boeing said it expects that market to recover next year.
The fall of demand wont affect financial forecasts for Boeing, analysts said, because production of the jet is very limited. Only about 5 planes, with a list price of $357 million, are currently on production. Analysts expect Boeing to report strong third-quarter results on Wednesday, and many predict its stock, currently at record levels, to continue climbing. Arment, a Bloomberg analyst, who rates Boeing a “buy”, said he doesn’t expect 2014 earnings to be affected by the production slump and sees Boeing lowering its 747 output to one per month by mid-decade.
Boeing and Airbus, The European-based plane maker that makes the competing A380 super-jumbo, say airlines flying into room constrained airports like London’s Heathrow will continue to need bigger jets to answer passenger demand as the global economy strengthens.
Boeing predicts demand for very large aircraft, such as the 747-8 and A380, will reach 760 planes valued at $280 billion over the next 20 years.
“We have plans to keep that airplane in production for a long time,” Randy Tinseth, a Boeing vice president for marketing, said of the 747 in an Oct. 7 phone interview for Bloomberg.
Boeing rose 0.2% on Friday while being up more than 62% year-to-date. The current consensus among 27 CNN Money polled investment analysts is to buy stock in Boeing Co.
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