Boeing announced Friday that it’s cutting the production rate on its 747-8 jumbo jet in January to 18 airplanes per year, down from the current rate of 21 per year.
The rate reduction to 1.5 jets per month is not a surprise, as orders for this newest, largest model of the 747 have been sparse.
The move “better aligns us with near-term demand,” said 747 Vice President Eric Lindblad.
Launched in 2005, the 747-8 — Boeing’s largest jet, at 232 feet in length — was beset by technical problems during development that delayed the first delivery until late 2011, two years later than planned.
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Boeing has sold 40 passenger and 67 cargo versions; 56 jets have been delivered.
A recent study commissioned by Washington state to assess the economic impact of the aerospace industry here estimated that about 6,400 Boeing employees work directly on the 747 program in Everett, with another 3,000 or so indirectly supporting it.
Prospects for further sales of this version may recede after Boeing launches the 407-seat 777X, expected next month at the Dubai Air Show.
The twin-engine 777X will be more fuel efficient and capable of carrying almost as many passengers.
Although the 747-8 is bigger, airlines don’t fill it to its nominal 467-seat capacity. Lufthansa, the only airline operating the 747-8 passenger version, has 362 seats in three classes.
That leaves the future of the 747-8 depending largely on the freighter version.
However, the air-cargo business has endured a prolonged slump since the 2008 financial crisis and has shown scant sign of recovery.
This week, the International Air Transport Association (IATA), the global trade group for airlines, reported that since 2010, while world trade has grown by 12 percent, “air cargo demand growth has been basically flat.”
Revenues from air cargo in 2013 are expected to be $59 billion worldwide, which is some $8 billion lower than two years earlier.
As a result of the cargo slump, two 747-8 freighter jets have been parked for months at Paine Field, painted white with no buyer to pick them up.
Ned Laird, former managing director of Seattle-based Air Cargo Management Group, said Friday that the airfreight business today compares poorly with the more efficiently run and less expensive ocean transport alternative.
“Heavyweight airfreight is not a good business right now,” said Laird. “The service stinks and it’s expensive. Why pay four or five times more when I can get it there by sea?”
Ken Herbert, aerospace analyst with investment bank Canaccord Genuity, said that although Boeing indicated its 747-8 production cut will last through 2015, prospects beyond that don’t look better.
“We see very little chance that the rate on this plane ever increases and, in fact, see more pressure for additional rate reductions,” Herbert wrote in a note to investors. “Demand for the passenger version of the 747-8 is extremely limited, and the expected demand as a freighter has not materialized.”
Yet Boeing insisted Friday that it “expects long-term average growth in the air cargo market to begin returning in 2014.”
“Although we are making a small adjustment to our production rate, it doesn’t change our confidence in the 747-8 or our commitment to the program,” said Lindblad.
The 747-8 list price is $350 million. But based on market-pricing data from aircraft-valuation firm Avitas, a passenger version sells for about $163 million after standard discounts, and the cargo version for about $187 million.
The news of the rate cut did not stop the recent relentless rise in Boeing’s share price. The stock closed Friday at an all-time high, $122.52 a share.
Dominic Gates: 206-464-2963 or firstname.lastname@example.org