Summary
As the international freight market still seeks recovery, Boeing’s progress on the 747-8F without a competitor means that any potential delivery delays are only a minor hindrance to the overall success of this program.
Analysis
While the overall 747-8 program (Freighter & Intercontinental) has been hit with almost $1bn in charges due primarily to design changes, the long term appeal for the model(s) is anything but bleak.
Based on IATA’s last six months statistics, a moving average decline of 21.4% shows that a rebound is not yet on the horizon. As the financial crunch hits the biggest buyers of Asian goods/products, namely Europe and the United States, its not a surprise to see that in the Asia-Pacific region alone that freight demand has declined on average over six months by almost 20%*.
As the wider passenger 747-400 fleet starts to be withdrawn, the availability of cheaper option converted freighters has not seen any immediate growth – in part due to the price of oil pushing demand for more efficient ways of freight distribution.
Despite last years delay, the 747-8F has actually benefited from waiting to enter a broadly depressed market. As Boeing shuffles staff between the 747-8F and 787 programs, many of the 747 customers have had to combat a difficult 12 months. Firstly, the sky-rocketing price of fuel, and then the financial meltdown that has seen spending patterns drastically alter the way in which global commerce is enacted.
With a fifth setback on the 787, resources diverted there may end up impacting the 747-8F schedule.
When the inevitable up tick occurs, we’re more likely to see demand for new large freighters increase rather than see the parked fleet resume service. Evidence of this is in Boeing’s order book, which to date has not seen a single cancellation of any 747-8F.
Cargolux and Atlas Air have earmarked their older 747-400F’s to be stood down when their 747-8F’s arrive – right now, there certainly isn’t a rush for it, save the compelling economics and better fuel burn than any other freighter out there on the market today or in the next 10 years.
With no Airbus product to rival the 747-8F, the big Boeing jet has already cornered the marketplace before it has even debuted. Financially, the 747-8 has become a burden in the short term – it’s longer term prospects, however, far outweigh these near term costs and Boeing will naturally want to avoid more penalty payments due to further delays.
Forty years ago, the 747 had no competitors. History is about to repeat itself. When the 747-8F enters service, it too will have no rival.
The 747, like the 737, has shown that evolution in design can extend a lifecycle into a high-value product – despite the short-term financial implications, the 747-8 family can overcome these hurdles to solidify its position as a profitable machine for Boeing and its customer base. That’s precisely why the order book for both passenger and freighter has remained intact, aside from single-digit adjustments to the 747-8 Intercontinental.
Retaining and being able to deliver those orders without constant shuffling of over-inflated production rates is key here and Boeing is already streets ahead of its rival in this respect when it comes to large airplanes.
*IATA Asia region freight figures for March 2009 not available
