Is the end close for Boeing 747?

1By David Churchill,

The iconic Boeing 747 revolutionised global travel over the past half century, but is its time coming to an end? asks David Churchill

Regular travellers on the All Nippon Airways flight from Okinawa’s Naha airport to Tokyo’s Haneda at the beginning of April might have been puzzled to board a Boeing 777 rather than their usual 747 ‘Jumbo’, which had been used on the route for many years.

But this was no April Fools’ Day joke, because after nearly four decades of ANA being one of the most loyal supporters of Boeing’s flagship aircraft, on March 31, an ANA 747 commercial passenger flight had flown into Tokyo from Okinawa for the last time.

ANA’s decision to stop flying the giant aircraft was not taken lightly, especially as it came almost 45 years to the day since the Jumbo first flew from Boeing’s Seattle base. Yet ANA was not alone in signalling that the 747 era was seemingly coming to an end.

Singapore Airlines and JAL, for example, have already stopped flying passenger Jumbos, while others are scaling back their fleets. The number of 747s in service (both passenger and cargo) has fallen by about a third since the turn of the century to some 685 at the end of last year.

IAG-owned British Airways, which is now the world’s biggest single operator of the 747-400 passenger aircraft with 50 in its fleet is reportedly planning to ‘retire’ about 25 of these by the end of the decade to make way for new aircraft. But it has baulked at buying the next generation Jumbo – the even bigger Boeing 747-8 Intercontinental – despite of it having had an extensive technology upgrade to make it competitive with newer rivals.

Only Lufthansa among the major airlines has so far taken delivery of the 747-8
passenger Jumbo since it entered service a couple of years ago, with US and Japanese carriers, who traditionally supported the 747, notable by their lack of interest.

Falling out of fashion

Why has the iconic ‘Queen of the Skies’,as the 747 was dubbed when it first flew, fallen out of fashion? After all, it revolutionised air travel in the latter decades of the 20th century and captivated billions with its sheer size and distinctive hump-back fuselage. BA says more than 3.5 billion people have flown in a 747 during the aircraft’s lifetime so far.

Although the Jumbo is unlikely to disappear anytime soon – many aviation analysts expect the 747-400 model (the most common type flying today) to be in service with some carriers for at least another decade – there are others who think that once the Jumbo as a passenger plane starts to lose support, the end could come more quickly.

The basic problem with the 747 is that it has four giant, fuel-guzzling engines which have proved increasingly expensive to operate as oil – and hence aviation fuel – prices rose sharply in the late 2000s. Fuel represents about one third of flying costs facing airlines, according to IATA. Moreover, the 747’s brash new rival – the giant (some would say ungainly) A380 produced by the Franco-German Airbus Group – is more fuel-efficient than the Jumbo, given its use of new lighter materials and engine technology.

Wide-bodied competition

Yet for a long time the 747 held significant advantages over most other jets: notably, a longer range and ability to carry more passengers than rival aircraft. But all that changed in the mid-1990s when Boeing and Airbus developed new wide-bodied jets – the 777 and A330, in particular. Both aircraft utilised new engine technology for power, performance and efficiency, enabling them to compete more closely with the 747 for the first time in terms of routes and capacity.

Boeing moved further in this direction in 2011 with the 787 Dreamliner, albeit with some unfortunate launch problems, and has high hopes for the bigger and more powerful 777X aircraft expected in about 2020. Airbus has a new aircraft named the A350XWB (extra wide body) that is able to carry up to 350 passengers in a three-class set-up. It is due to enter service later this year with Qatar Airways as the launch customer.

But the key point about all these aircraft is that they only have two engines; historically twin-engine carriers have been restricted by regulators on how far from a ‘diversion airport’ they are able to fly on one engine, limiting the length of time they can travel over water without reaching a safe airport if one engine fails.

From the mid-1980s onwards, however, the restrictions were relaxed to take account of engine improvements, enabling flights by twin-engine jets to most parts of the world. From an airline’s financial point of view a twin-engine, long-haul jet is a no-brainer – a point emphasised by IAG chief executive Willie Walsh when recently presenting the airline group’s full-year results. He said the four A380s delivered last year to BA showed a “significant reduction in seat costs” in comparison to BA’s 747s.

Also, the rise of the new generation of smaller, yet wide-body jets with longer ranges and fuel-efficient engines is also having an impact on one of the basic tenets of the airline world: the ‘hub-and-spoke’ model that has dominated for decades. Hub-and-spoke enables airlines to achieve substantial economies of scale by operating out of large hub airports, feeding in traffic from smaller airports. The world’s biggest hub airport, according to figures released in April this year by Airports Council International, is Atlanta, Georgia, which saw some 94.4 million passengers pass through last year, followed by Beijing (83.7 million) and Heathrow (72.4 million).

But the fastest growing hub in the top ten is Dubai in seventh place, with more than 15 per cent growth in passengers last year to 66.4 million. Behind this growth has been the success of Emirates in positioning Dubai as a more convenient hub than Europe for Asian traffic to the West. Not surprisingly, Emirates has become the most prominent cheerleader for the giant A380, and accounts for about 30 per cent of the aircraft’s 452 deliveries and confirmed orders so far.

Hedging bets

Yet demand for the A380 has appeared to stall recently (as it has for the 747). This perhaps suggests that many airlines are hedging their bets over whether the hub-and-spoke model will continue in its present form, especially given the flexibility that buying new generation twin-engine aircraft gives them in providing what passengers want: frequent departures at main hubs and direct flights between smaller airports.

Demand for point-to-point flights is clearly shown by the success of Ryanair and Southwest Airlines in Europe and America respectively. This trend is also borne out by new research published last year by academics at Leeds University’s Institute for Transport Studies, based on a survey of travellers using Glasgow and Edinburgh airports. This concluded that there was a “strong aversion” to being forced to use connecting flights via a hub airport. “In particular, we observed a very high willingness to accept higher airfares in return for direct flights,” the survey added.

This poses a potential dilemma for travel buyers in seeking to enforce fare discipline on travellers who prefer direct point-to-point flights rather than the hassle of flying via a hub. One global travel director I speak to says her policy allows  “the most economical direct flight to be chosen”, while another buyer says: “We would not generally allow direct flights to be chosen if there was a cheaper flight including a connection.”

Yet cheaper fares may be on the way in any case as a result of global airlines currently “replacing their fleet at unprecedented levels”, according to James Stamp, global head of aviation at consultancy group KPMG.

BA, for example, is already in the midst of a fleet upgrade, including adding further A380s and B787s, starting in 2017. But it is also considering buying more jets in the early years of the next decade.  “We see aircraft like the A350-1000 and the new extra-long 777X as being natural replacement aircraft for the 747s we have,” said Willie Walsh recently, although stressing that no commitments have been made as yet.

Other airlines are also bullish: ANA has ordered a total of 70 new jets from Boeing and Airbus, worth almost US$17 billion, for delivery between 2016 and 2027.

These and other big orders, according to KPMG’s Stamp, will see a significant increase in capacity. “In this event, falling operating costs and competition to fill capacity should result in further downward pressure on ticket prices, which would be good news for airline passengers and their companies,” he added.

But while there may not be much good news ahead for the future of the iconic Boeing 747, there is still one ray of hope for its many fans. Two specially adapted 747s are used by the president of the United States when flying domestically and abroad, and whichever one is flown carries the radio call signal Air Force One – hence its popular name.

These Jumbos, however, are nearly 25 years old and, not surprisingly, the White House is seeking replacements before the end of the decade. Although approaches were made to both Boeing and Airbus, the European company has reportedly passed on bidding. Now the likelihood is that a new generation 747-8 will be adapted for the president, with its four engines preferred over the 787 Dreamliner’s two. So size does matter, after all.

Sourced by bbt


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