Boe­ing 747 on hold as Bri­tish Air­ways ex­tends reign

The Pak Banker - - COMPANIES/BOSS -

If it's the end of the line for Boe­ing Co.'s 747 jet­liner, no­body told Bri­tish Air­ways. The largest op­er­a­tor of the hump-backed icon -- dubbed the Queen of the Skies on its de­but in 1970 -- is plump­ing up seat cush­ions, hang­ing fresh cur­tains and up­grad­ing en­ter­tain­ment sys­tems on 18 planes. Yet com­peti­tors can't seem to park the four-en­gine air­craft fast enough.

Up­grad­ing the best-selling 747-400 ver­sion of the jumbo bucks a wave of re­tire­ments that have cast doubt on the model's fu­ture, with Sin­ga­pore Air­lines Ltd. and Ja­pan Air­lines Co., which once vied with BA for the ti­tle of No. 1 op­er­a­tor, end­ing flights more than three years ago. De­mand for the latest 747-8 vari­ant has also faded as air­lines pre­fer leaner twin-jet types.

A clue to BA's lin­ger­ing love af­fair with the 747 lies in the model's abil­ity to eke out ca­pac­ity from scarce op­er­at­ing slots at its Lon­don Heathrow hub at a time when lower fuel prices make re­tain­ing older planes an op­tion. The re­vamped jets, the first of which re­turns next month from a re­fit cen­ter in Cardiff, Wales, will also get 16 ex­tra busi­ness-class seats, aid­ing de­ploy­ment on lu­cra­tive trans-At­lantic ser­vices.

"It makes hard busi­ness sense," JLS Con­sult­ing Di­rec­tor John Strickland said. "These air­craft have a lot of life in them and can be used in very ef­fec­tive com­mer­cial ways. Given the ca­pac­ity con­straints at Heathrow and the high de­mand they have on cer­tain routes, it's still a very good model."

While BA has parked or scrapped 15 of its old­est 747s, about half its re­main­ing 42 planes were built in the late 1990s, and "ought to have a good 10 years of life at least left in them," said Ge­orge Fer­gu­son, a Bloomberg In­tel­li­gence an­a­lyst. Of the 694 747-400s built be­tween 1988 and 2009, only 266 pas­sen­ger vari­ants re­main in ser­vice, down from 362 in 2011, ac­cord­ing to anal­y­sis of fleet data held by As­cend World­wide, he said. Most are re­tired as they ap­proach their mid-20s.

The ar­rival of Boe­ing's 777 in 1995, just six years af­ter the - 400's in­tro­duc­tion, marked the start of the jumbo's slow de­cline, with its sta­ble­mate able to carry al­most as many peo­ple but with two en­gines. The latest 787 Dream­liner and the Air­bus Group SE A350 are has­ten­ing the re­treat by com­bin­ing twin­jet eco­nom­ics with com­pos­ite ma­te­ri­als that of­fer a 20 per­cent ef­fi­ciency sav­ing ver­sus planes far newer than the 747.

Boe­ing is also slow­ing out­put of the 747-8, the stretched model that re­placed the -400 amid weak sales. The back­log stands at just 17 planes, ex­clud­ing freighters, af­ter de­liv­ery of the last of 19 or­dered by Deutsche Lufthansa AG, the only ma­jor air­line to sign up to the pas­sen­ger ver­sion.

At Bri­tish Air­ways, the re­vamped 747s will be no shrink­ing vi­o­lets, with the jets ear­marked for high-fre­quency des­ti­na­tions in­clud­ing Chicago, Bos­ton and New York, as well as cities such as La­gos, Dubai, Riyadh and Kuwait where the onus is on max­i­miz­ing seat num­bers on one or two daily flights.

With fuel costs forecast to fall fur­ther amid con­cern over a slow­ing Chi­nese econ­omy, BA's com­bi­na­tion of "most­ly­paid-for 747s" and mod­est spend­ing on "sur­face treat­ments" will look more and more at­trac­tive ver­sus a bill in ex­cess of $250 mil­lion for the latest Boe­ing and Air­bus mod­els, said Robert Mann, an aerospace con­sul­tant in Port Washington, New York.

The rel­a­tively low cap­i­tal out­lay on spruc­ing up the 747s means BA will be un­der less pres­sure to uti­lize them should the cost and de­mand land­scape change, ac­cord­ing to Strickland. "If things turn sour they can stand any of these air­craft down al­most at a mo­ment's no­tice know­ing there are no ex­pen­sive capex com­mit­ments," he said. "They can dip into the avail­abil­ity of these air­craft and not worry that they have an ex­pen­sive as­set that needs to be sweated come what may."

The ex­tra busi­ness seats on the re­vamped 747s will take the to­tal to 86, only 11 fewer than on BA's Air­bus A380s, mak­ing it eas­ier to switch be­tween mod­els with­out crimp­ing avail­abil­ity of high­yield berths.

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