Boeing extended its sales leadover archrival Airbus in December.
In its latest update on airplane orders,released last week, Boeing confirmed that 2014 "gross" orders for commercial aircraft reached 1,423 by mid-December, versus 1,328 planes for Airbus (at last report). After cancellations -- 106 at Boeing, but nearly three times as many at Airbus -- the U.S. aircraft maker's lead over its European rival only got bigger.
This is good news for Boeing -- but, as we'll see in a moment, it might be bad news for one of Boeing's favorite customers: the U.S. president.
This Boeing 747-200B serves the nation as Air Force One. Photo: Boeing.
Part of the reason Boeing is winning is its uber-popular 777 line of long-haul, twin-aisle passenger aircraft. Boeing has booked sales for 269 of the planes so far this year without suffering a single cancellation. On the face of it, this is great news for Boeing. But there's a downside to the 777's popularity: Suddenly, no one is buying Boeing 747s anymore, and Boeing might have to cease production.
So long, jumbo jet This isn't exactly a surprise. Analysts have been predicting the 747's demise for over a year, warning that in an industry in which fuel costs are paramount, the four-engine 747 just can't compete with more modern, fuel-sipping two-engine jets.
As of today, Boeing has orders for just 39"jumbo jets" in its pipeline, and the company recently announced plans to slow production to just 1.3 planes per month.Barring new orders, best case, Boeing might have enough work to keep 747 production going for 29 more months. But come June 2017, Boeing will run out of orders to fill, and must shut down 747 production.
This could mean the U.S.won't be able to buy new Air Force Ones.
Scheduling conflictsAccording to the U.S. Air Force, which flies these birds for the president, replacements for the two Air Force Ones in service won't be needed before 2021. But if Boeing stops 747 production four years prior, it's going to be tricky trying to find a replacement ride for the commander in chief. ("Have you checked eBay, Mr. President?")
ThePuget Sound Business Journal, published in Boeing's hometown of Seattle, reported the White House is therefore pondering placing an early order for a replacement Air Force One in 2016, for 2018 delivery. Combined with further production slowdowns, that could permit Boeing to manufacture the plane before production lines go dark.
A pretty, pricey planeBuilt in 1987 as modified Boeing 747-200Bs (designated VC-25s), each Air Force One cost taxpayers $325 million -- roughly $675 million in today's dollars. Boeing's current 747-8 model lists for more than $360 million --before modifications to turn it into aerial HQ to the Free World.Presumably, were the Pentagon to order two new Air Force Ones, we'd be talking about a $1.3 billion contract.
That would equal 1.5% of Boeing's annual revenue of $86.6 billion,according to S&P Capital IQ data -- a nice bump, and several years ahead of schedule. But even if the Pentagon passes on the 747, and allows production of the plane to shut down, Boeing may not miss out entirely. Its two-engine 777-300ER, similar in size to the 747, sells for $330 million before upgrades -- and Japan just ordered a pair of 777s to serve as its version of Air Force One at a total cost of just $832 million.
That wouldn't be $1.3 billion, true. But it would be better than not getting to build Air Force One at all.
The article Will the Boeing 747 Fly Off Into the Sunset? originally appeared on Fool.com.
Rich Smith has no position in any stocks mentioned. The Motley Fool recommends eBay. The Motley Fool owns shares of eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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