Tuesday’s bankruptcy filing by Japan Airlines (JAL) ended weeks of speculation about the airline’s uncertain financial future. As part of the upcoming restructuring that will see more than 15,000 jobs eliminated, the airline is retiring its fleet of 35 747 passenger aircraft (27 -400s & 8 -400D) .
The retirement decision came juxtaposed to the 40th anniversary of the 747’s entry into service. With the help of Flightglobal’s ACAS database I crunched some numbers about the 747 fleet today.
Currently, of the 1418 747s built and delivered since 1970 (RA001 was never delivered), the worldwide active fleet of 747s (all variants) stands at 810, this includes military and governmental VIP customers as well, compared to the 633 active -400s. Japan has been a vital market for this airplane over the years with 1 in 10 747-400s in the world flying with a Japanese operator today.
However, as a result of the economic downturn and a progressive retirement of older 747s, 56 -400s of all types are parked, nearly 1 out of every 10 747-400 built.
By 2013, Air New Zealand, Air India, Singapore Airlines will no longer fly passenger 747s, all opting to replace their models with smaller 777s or larger A380s. With the coming retirement of the 37 JAL -400s, the number of parked -400 aircraft will more than double when combined with other airlines’ future fleet plans.
With surplus 747-400s available, the result will be to hasten a steady and precipitous drop in purchase and lease rates for -400s. The introduction of the new -8F and -8F will only serve to drive those prices lower and lower. There are two ways to look at this:
OPPORTUNITY
The retirement of older 747-400s means that less efficient large aircraft will be replaced with equally large or larger more efficient aircraft meaning future competitions for Airbus and Boeing to sell the A380 or 747-8I, respectively. Boeing vice president of marketing, Randy Tinseth, said at the Dubai air show in November that “ultimately we believe that market is going to pick up when airlines…this coming cycle…start to replace their older 747s.”
CHALLENGE
However, with 747-400 values dropping, the incentive to purchase a new 747-8F drops (where Boeing believes the market is) making it potentially cheaper to convert passenger -400s to freighters even if they are less efficient. Steve Rimmer, chief executive for Guggenheim Aviation Partners, which recently canceled two of four 747-8Fs on order, said in October that “we’ve never seen this quantity of freighters before in the desert” and added that “this time we won’t see the market pick up fast because there’s a lot of good quality aircraft in the desert”.
Too many aircraft?
While a difficult point to concede for this aviation geek, there are perhaps too many aircraft in the world. I would add that this point extends to narrow-body aircraft (which are also dropping in value) also. Boeing and Airbus responded to staggering demand for aircraft big and small hiking production to potentially unsustainable rates. As a long term business the immediate benefits of hiking production are weighed against long term impacts (positive and negative) on future sales.
External factors are more often than not blamed for causing aerospace downturns, but I close on a much broader question: If Boeing and Airbus are solely responsible for their production rates, do aerospace industry downturns rest in their own hands if the market is oversupplied?
This post was originally published to the internet between 2007 and 2012. Links, images, and embedded media from that era may no longer function as intended.
This post originally appeared at Flightglobal.com from 2007 to 2012.