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Boeing Co. has a temporary plan to save the iconic but slow-selling 747 jumbo jetliner: buying its own planes and leasing them to cargo haulers.
With the effective shutdown by Congress of the U.S. Export-Import Bank — which traditionally has helped overseas carriers purchase planes — Boeing lost a key sales tool. Making matters worse, leasing companies have been hesitant to finance a plane with a dwindling customer base.
So Boeing is now renting out the massive, hump-backed 747s to cargo carriers in countries such as Russia and Azerbaijan, which increases the company’s exposure to potential defaults on payments.
Through the end of 2016, Boeing had provided financing valued at $1.26 billion to 747 customers through Boeing Capital Corp., regulatory filings show. That’s about a fivefold increase from the close of 2012. In fact, 747-related loans and operating leases now account for about one-quarter of the portfolio managed by Boeing’s lending arm.
As the air-cargo market recovers, the strategy may pay off for Boeing. The manufacturer recently landed a crucial 747 order from UPS Inc. that could serve as a bridge to the future for the wide-body plane. But tomorrow’s 747 — a symbol of luxury travel when it made its debut with Pan-American World Airways in 1970 — most likely won’t be flying globe-trotting tourists. It instead will haul oversize cargo such as oil-drilling equipment as demand fades for bulky four-engine passenger carriers.
UPS ranks No. 1 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers.
“We believe in the long-term need for this aircraft,” said George Dimitroff, head of valuations for Flight Ascend Consultancy. “As long as they don’t overproduce, which Boeing aren’t doing at the current rate, we believe there will be long-term demand.”
| By Julie Johnsson Bloomberg News |
© 2017, Transport Topics, American Trucking Associations Inc.
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