MIAMI — Korean Air Lines firmed up an order to purchase five additional Boeing 747-8 Intercontinental jets, doubling their total orders for the large airplane to ten. The purchase comes amid a slump in orders that has placed the long-term vitality of the program, along with the A380, in doubt.
The order, announced this morning, firms up a commitment Korean made for the jets back in June at the Paris Airshow. At list price the 747s would represent $1.8 billion in the bank to Boeing, though steep discounts are common. Each is to be outfitted with 467 seats in a three class configuration, and will replace the carrier’s aging 747-400 fleet.
The first of the new order of airplanes are due to be delivered in 2016 (though deliveries from the 2009 order are expected as early as this year), and will complement the carrier’s present fleet of 747-8 freighters. Korean is currently the only carrier to order both the passenger and cargo versions of the airplane.
While the order is certainly good news, Boeing’s iconic 747 program is certainly far from out of the woods. Sales have come in for both the passenger and cargo versions at a snail’s pace in 2013 as demand for large four-engined aircraft continues to wane.
This morning’s order is the first and only firm sale of the passenger version of the jet in 2013. The last order for -8i was from Air China in September of 2012, which was preceded by Korean’s first order in 2009. The only other airline to order the airplane was launch customer Lufthansa. The cargo version, known as the 747-8F, has fared slightly better, receiving five orders this year from Cathay Pacific and Silk Air as well as the bulk of the orders overall.
Responding to the slump in sales, Boeing announced last week that it was cutting production of the jumbo plane to 1.5 airplanes per month. The drop in assembly is the second this year, following a drop in the rate to 1.75 in April. Overall, rates have been slowly ramping down almost since the day the line even began. The program currently has a backlog of about sixty airplanes. At the latest production rate the backlog would run dry in just over three years.
Airbus’s larger A380, the 747-8i’s closest competitor, has not fared any better in 2013. The A380 has chalked up exactly zero orders so far this year, recently prompting Airbus to publicly consider scaling back production. Unlike the 747-8, the A380 has no freighter configuration to offer, after UPS and FedEx cancelled their orders years ago. If the European manufacturer fails to seal any deals the super-jumbo will wind up closing out the year with more cancellations than orders.
Both airplanes, known as very large aircraft (VLA), wound up being introduced at a time when fuel costs remain high and a tepid global economy, and twin engine widebodies have become increasingly fuel efficient. The Airbus A350 along with the Boeing 787-9 have become wildly popular, sucking sales away from the large jets. But the real wildcard is Boeing’s yet-to-be-launched 777X. The airplane is expected to be able to seat up to 400 passengers, abutting the lower end of the 747-8i’s current capacity. With the clear efficiency of two vs four engines, the 777-9X could easily wind up cannibalizing the 747-8 and the VLA market as a whole.