A few months ago I posted about the fact that Airbus is having problems with the A-380 and Boeing is having troubles with the 747 staying in production.
In the former case they European company bet a substantial portion of the company on mega jumbo jets being the future and designed an aircraft that holds from 500 to 850 passengers depending on how it is configured. To make back their Research and Development costs they knew up front they had to sell a lot of units at a good price, but sales are less than half what they needed to get back their investment in development and production capacity.
At the same time the largest capacity American jet, the venerable Boeing 747, has received a double blow. On the one hand the units they could have sold that were replaced in airline inventories by the A-380 hurt them very badly. On the other hand the airlines because of high fuel prices starting in late 2005 and lasting through 2014 reconfigured their system model from Hub and Spoke and many have replaced it with city to city models. When you use Hub and Spoke the goal is to move large numbers to the hub with a high capacity aircraft and then distribute those passengers with regional aircraft to their final destinations. Turns out passengers are not keen on the hub and spoke because unless you are traveling from one hub to another hub you have to transfer and go through some hassles in the process with timing, potential missed connections, misdirected luggage and so on. Passenger want as close to a direct flight as they can get and the airlines responded by buying smaller aircraft to fly more city to city routes with near capacity flights. If they are NYC to LA flights often a 747 makes sense because there are plenty of people taking that route. On the other hand if it is Detroit, Michigan to say Richmond, Virginia there are still people who want that flight, but not enough to fill a 747 to capacity. In those cases a A-320 or Boeing 737 make a lot more economic sense for the airline.
So Boeing announced a few months ago they have significantly slowed the delivery rate of the remaining 747 orders on their books so that they can justify keeping the building plant going. That means keeping all the manufacturing dies and specialized equipment operating at a low rate and workers on the line familiar with the equipment and procedure on the payroll so that if demand picks back up in 2017 they can resume building at a higher rate. They also indicated if demand doesn't pick up by the end of this year they will consider just finishing production of current orders and closing down future production permanently. That means pulling out the 747 specific equipment and replacing it with equipment for a more popular design, or just scrapping out the 747 plant and closing it permanently.
So with President Elect Trumps recent statements about Boeing and the next generation Air Force One project what are the chances those future orders for 747 will arrive in time to revive production?
Well I think I know the answer. Boeing just singed a deal with Iran worth $16.6 Billion dollars for 80 new passenger jets. 50 Boeing 737 and 30 Boeing 777, zero new 747 to replace the ones already in Iran airlines fleet of aircraft.
http://www.chicagotribune.com/business/$this->bbcode_second_pass_quote('', 'I')ran seals deal with Boeing to buy 80 planes worth $16.6B
By Tribune news services
December 11, 2016, 10:09 PM |TEHRAN, Iran
Iran's flag carrier finalized a major deal with U.S. plane maker Boeing Co. to buy $16.6 billion worth of passenger planes Sunday in one of the most tangible benefits yet for the Islamic Republic from last year's landmark nuclear agreement.
Iran Air's deal for 80 jetliners is the biggest agreement Iran has struck with an American company since the 1979 revolution and U.S. Embassy takeover. It has the potential to transform Iran's creaking and accident-prone aviation industry, which has been hobbled by years of sanctions.
Those curbs have prevented the country from buying new planes from Chicago-based Boeing and European rival Airbus, and in many cases made it difficult for Iranian airlines to secure much-needed spare parts.
The deal covers 50 single-aisle 737 Max 8s, a soon-to-be-introduced version of Boeing's existing narrow-body 737 line.
It also includes 30 777s, a wide-body, twin-engine plane typically used on long-haul routes that is popular with other Persian Gulf carriers such as Dubai-based Emirates. Half of the order will cover the 777-300ER version, while the rest will be of the 777-9 model still under development.
Iran's state-run IRNA news agency said the planes would be delivered over the next decade. The first will start to arrive in 2018, Boeing said.
In September, Washington granted permission to Boeing and Toulouse, France-based Airbus to sell billions of dollars' worth of aircraft to Iran. Airbus needed U.S. approval because at least 10 percent of its planes' components are of American origin.
The U.S. and other world powers agreed last year to lift crippling sanctions on Iran in exchange for it curbing its nuclear activities. The U.S. still maintains extensive sanctions on Iran for activities unrelated to its nuclear program.
President-elect Donald Trump and several Republican lawmakers have criticized the nuclear deal, but it's unclear whether they would scrap the agreement, which was reached with Britain, France, Germany, Russia and China.
Iranian Transport Minister Abbas Akhoundi, who attended the signing ceremony, said it was a "historic" day for Iranian aviation and that the deal would create 8,000 jobs for Iranians.
"The deal has a clear message for the world: we support peace and security as well as the growth of Iran based on a win-win policy," he was quoted as saying. "We hope that despite changes in the U.S. administration, the country will remain loyal to its commitments.
The Republican-led House of Representatives last month voted to bar commercial aircraft sales to Iran in a move that could block the Boeing deal. That legislation must still pass the Senate, where it will likely face opposition from Democrats. U.S. President Barack Obama has said he will veto the bill if it reaches his desk before he leaves office on Jan. 20.
Boeing made a point of saying it worked closely with the U.S. government throughout the deal-making process and will continue to "follow all license requirements." The Iran Air deal "will support tens of thousands of U.S. jobs" linked to the 777s alone, it said.
The plane maker said the deal value was based on list prices, though in practice customers typically negotiate discounts for bulk orders.
Most of Iran's aging fleet of 250 commercial planes was purchased before 1979, and as of June only 162 were operational, with the rest grounded because of a lack of spare parts. Iran Air, whose website lists a fleet of 43 planes, offers direct flights to over 30 international destinations, including London.
Associated Press
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