In the past few weeks, Boeing’s (BA 0.18%) wide-body warhorses - 747 and 767 – have seen things go their way after a long time. First, it was commitment for 20 747 jets at the Paris air show in June, and now, FedEx has placed a firm order for 50 767 aircraft with the option of buying 50 more. Let’s take a look at how important these developments are for Boeing.
The FedEx order and Boeing
Speculations around FedEx mulling to expand its 767 fleet had been going around for a while now, with some pegging the prospective order at 50 and some at 25. FedEx has outdone all those presumptions by ordering 50 767-300s, the biggest order in the jet’s history, at $9.9 billion (list price). Boeing will deliver the latest 767 order, which FedEx has slated for its Express business, between 2017 and 2023.
767. Source: Boeing
FedEx has been a dedicated 767-300F customer since 2011 and had ordered 53 of the jets so far through June, and Boeing had delivered 18. The FedEx pending deliveries pretty much constitutes the whole of Boeing’s 767 backlog. Through June, Boeing’s total 767 backlog was 39, 35 of which were for FedEx.
Though the 767 entered service (in 1982) as a passenger plane, it’s the aircraft’s freighter version that has kept the program alive. In December last year, Boeing had increased the jet’s production rate from one in two months to 1.5 every month. The company plans to increase the rate to two per month from next year.
As fellow Fool Adam Levine-Weinberg had calculated, Boeing would have felt pressed with the 767 backlog (before the FedEx order) by 2019. However, with the addition of 50 into the backlog, the company’s worries are put to rest. Reuters says Boeing will now be able to take the 767’s production well into the next decade. This is what makes the order so special for the 767 program – it has infused fresh blood into an aircraft nearing its end.
The 747 is getting lucky, too
The 747 was Boeing’s first wide-body jet and revolutionized air travel. But times have changed a lot since then – technological advancements have brought in fuel-efficient twin engine aircraft like the 787 or Airbus’ A350 that are increasingly preferred by airlines over the fuel-guzzling four-engine jumbo jets.
747-8. Source: Boeing
Like the 767, it’s the 747’s freighter avatar that has kept the order book ticking. At the recently-held Paris air show, though Boeing lost out on Airbus in total orders (including commitments) won, getting 747 commitments from the Volga-Dnepr Group was a major highlight. The deal for 20 747-8 freighters is the largest for the aircraft in many years.
It has come at a time when the company has been steadily decreasing monthly production of the jet. From the present 1.5 per month, it will go down to 1.3 from September and then to one per month from March 2016. The 747’s backlog is at a dismal 31 through June. The Volga-Dnepr Group order is not firm, so it doesn’t show in the order list on the Boeing site, but once it is confirmed, it will and make the production line a little busier.
Foolish last words
These recent 747 and 767 orders become special in two ways– they will help ensure a smooth landing for the aging aircraft; and being wide-bodies, they let Boeing pocket a good amount (even after the discounts). Boeing has always maintained that there is still demand for these jumbos, especially in the cargo market. Air freight is slowly crawling back to its feet -- International Air Transport Association expects the market to strengthen in the year. The FedEx order has only reconfirmed the outlook, and there could be more good news in store for the jumbos.
