The time to order a new aircraft fleet for the President has arrived, and the American aero major Boeing (NYSE: BA) has been awarded the task. On Jan. 28, a press release announced that the Boeing 747-8 was selected.
"The Boeing 747-8 is the only aircraft manufactured in the United States [that], when fully missionized, meets the necessary capabilities established to execute the presidential support mission," said U.S. Air Force Secretary Deborah Lee James.
The deal will be final after Boeing gets the contract.
Boeing's been the sole manufacturer of Air Force One to date, so it's little surprise that it got the job. Some experts think a key reason why Boeing kept the assembly lines open for the 747-8 was for winning this prestigious order . Otherwise, the demand for the iconic 747 has dwindled over the years, and Boeing has been cutting production rate at regular intervals.
Will this order turn out to be the last for the 747-8?
Boeing 747 a clear choice...but needed fast action
The current Air Force One fleet of two Boeing 747-200B jets will reach the end of their useful lives in 2017. That meant the Pentagon had to act quickly to upgrade the fleet. There's an unwritten rule that says a president can order new planes only in his second term. President Obama is already in his second term, so if the orders aren't placed under his tenure, the process could be delayed until another president got elected to a second term.
For the Air Force One fleet, the Pentagon prefers jets with four engines (plenty of backup in case of a malfunction), high-tech navigation, and the most modern electronic and communications equipment.
The two available jets that meet the criteria are the Boeing 747 and the Airbus A380. Political considerations would prevent picking a French company over an American one for the task, and making modifications to the A380 was a task that Airbus probably wouldn't want to take up.
Understandably, the Boeing plane was the obvious choice. However, Boeing has pulled down the 747's production rate to 16 airframes from 18 a year as demand is nearly non-existent. So, the government not only had to act before Obama's term ended, but it also had to make sure the assembly lines for the 747-8 were still humming.
Being highly customized, the aircraft will cost a lot more than the standard 747-8s that list for $368 million. The U.S. government has set aside $1.65 billion for the new fleet.
Last order for the "Queen of Skies"?
Despite all the hubbub about the Air Force One deal, it won't offer a big boost to 747 production . Two planes (three, according to some reports) fall well short of the 16 Boeing needs to fill a year's production. The company had just 36 pending orders for 747 planes at the end of 2014. At current rates, this would mean that production would end in 2017 unless Boeing wins more orders. The Air Force One deal merely adds two more months of work at the 747 factory.
Boeing believes in the jet's future potential and is keen to have the production lines open till the end of the decade. Last year, Bloomberg reported that the aero major is talking to some prospective clients, and this month, aerospace consultant Scott Hamilton posted on Leeham News that a third party is pitching 100 Boeing 747s to Gulf airline Emirates. The Leeham article also mentioned that according to some sources, Boeing is working to improve 747-8's fuel efficiency under the code name Project Ozark. But, it's still difficult to predict how many new orders will come the 747's way.
The 747-8 has two problems. First, it's not fuel efficient like the twin-engine wide-body jets such as the 777. The current generation Boeing 777-300 consumes nearly 20,000 gallons less jet fuel compared with the Boeing 747-8 that burns 64,055 gallons at maximum capacity . Boeing is currently working on improving the 777's fuel efficiency even further. The new model dubbed 777X will offer 12% fuel savings over competing models. The new 777-9X model will have comparable seating capacity and greater range than the 747-8.
Second, the 747-8's capacity falls well short of Airbus A380 – so it isn't that attractive an option for long and congested routes.
Investors would love to see Boeing win a huge order for the iconic aircraft but that looks like a remote possibility. It's difficult for Boeing 747 to regain its past glory as more modern technology continues to erode its demand. But, irrespective of whether Boeing wins new orders for the 747 or not, it's going to be a matter of great pride for the company to build the planes that will fly the U.S. President for the next 30 years.