Since that first delivery to Pan Am in 1970, Boeing has delivered 1,508 747s and has 32 orders for new planes on its books, 18 for the 747-8 passenger plane and 14 for the 747-8F freighter. Boeing delivered a total of 250 of the original 747-100s, the last in 1986. The follow-on model, the 747-200, was first put into commercial service in 1971, and Boeing delivered 393 of this model before production was stopped in 1991. The 747-300 followed in 1983, and 81 were delivered before production was halted in 1990.
In April of 2013, the company announced a production cut from two planes a month to 1.75, and further cuts will culminate in a rate of 1.3 per month beginning in September and lasting until a one-per-month rate takes effect next February. The latest 747 passenger jet competes against the Airbus A380 for a small part of the global commercial fleet. The A380 can carry as many as 555 passengers, nearly 90 more than the 747-8. Dual-engine planes like Boeing’s 787 and the Airbus A350 are more economical on many of the routes that the 747 was originally designed to fly, and the A380 is more economical than the 747 on the longest routes.
The price of the 747-8 includes four engines, compared with two on the 787 Dreamliner and the $330 million 777-300ER. Boeing claims the plane will be 10% lighter per seat and consume 11% less fuel than the A380, which carries a list price of $428 million.
The 747-8 is longer than previous versions of the aircraft and uses the same engines and cockpit technology as the 787 Dreamliner. The passenger version, often referred to as the 747-8I, is designed to carry 467 passengers at a cruising speed of 650 miles per hour.
The more advanced engines, the more sophisticated cockpit technology, the larger carrying capacity — all these add up to a new 747-8 that costs about two and a half times the original’s inflation-adjusted price.
To add to the issues Boeing faces in selling these planes, the recent failure of Congress to reauthorized the U.S. Export-Import Bank will make it harder for potential customers to line up financing to buy a 747. According to a report from Bloomberg News, nine of the planes currently on order are headed for markets like Russia, Azerbaijan and Nigeria, all of which would require guarantees from the Ex-Im bank in order to finance the $3.3 billion purchase price of the nine planes. Of course that’s the list price, and none of these customers is paying list price, but even at a typical discount of between 40% and 60%, that is a substantial amount of cash.
Boeing took an order for 20 new 747-8F freighters at the recent Paris Air Show, and the company may have to finance the purchases itself. Boeing can afford to do that, but that ties up cash that the company may have been able to use to return to shareholders through dividends and stock buybacks.
What to do about the 747 is one of the first decisions that new CEO Dennis Muilenburg will have to make. Does Boeing believe that the 747 maintains enough strategic value to the company to make it worth committing cash that it could use for other purposes? We are about to find out.