Military
Boeing Finally Set to Get Firm $4 Billion Order for 747s
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At the Paris Air Show last July, Boeing Co. (NYSE: BA) signed a memorandum of understanding with Volga-Dnepr Group, a Russian company that operates cargo carrier AirBridgeCargo Airlines that currently includes 14 Boeing 747s in its fleet, for an additional 20 of the freighter version of the venerable aircraft. That memo is about to be converted into a firm order for 10 new 747-8Fs, according to a report from Bloomberg.
The firm order could be announced at next month’s Farnborough Airshow, according to Bloomberg’s unidentified sources. At a list price of $379.1 million per copy, the order would be valued at nearly $3.8 billion. A Volga-Dnepr spokesman said that the company plans to take all 20 of the planes that it signed up for in Paris.
While passenger airlines were booking strong profits in 2015 due primarily to low fuel costs, cargo carriers had a tougher time. According to the International Air Transport Association, air freight revenues have dropped from $67 billion in 2011 to $52.8 billion in 2015. One reason is the increase in capacity (called belly-hold) for freight on passenger planes, and another is growth in the ocean freight business. Cargo carrier load factors dropped to 47.4% in 2015 compared with to a passenger carrier load factor of more than 80%.
Boeing has just 22 orders in its backlog for the 747, 11 for the passenger jet and 11 for the freighter. According to the company’s website, Boeing has taken orders from unidentified customers for four of the planes in March 2016.
The Russian cargo hauler confirmed that it had placed an order for two of the four jumbo jets ordered in March. Bloomberg noted that Volga-Dnepr took delivery of two 747 whitetails last November. The planes had been built for another customer that did not take delivery.
Beginning in March, Boeing will cut the production rate on the 747 to one per month and plans to cut it further to 0.5 planes per month in September. Boeing did say in its annual report for this year that it plans to raise the production rate back to one plane per month in 2019.
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