By Doug Cameron 

Boeing Co. is renting two more homeless 747-8F cargo jets to a Russian air cargo airline, highlighting the tough task the plane maker faces in keeping its jumbo production line open.

The plane maker on Thursday added a firm order for two of the jets to its backlog but is in fact leasing the planes from its finance arm to AirBridgeCargo Airlines LLC, a unit of Volga-Dnepr Group. The Russian company said in June it may acquire up to 20 of the planes in a move that promised to almost double the backlog of the slow-selling jumbo.

Both new deliveries were so-called "white tails" previously parked at Boeing's plant near Seattle following the cancellation of a previous order, according to a person familiar with the situation. Boeing said four other completed 747-8s are still parked following order cancellations, including one painted in the colors of the Seattle Seahawks football team.

Volga-Dnepr's 20-plane commitment looked to provide a crucial boost for a program that has just 22 outstanding orders for the freighter and passenger versions, forcing Boeing to cut production to just one a month from next March as it seeks new customers.

However, Boeing faces the challenge of placing the unsold planes and potentially renting or financing additional deals, said aircraft financiers.

Plane makers typically only rent planes directly to airlines unable to secure commercial funding to buy them, and the 747 now accounts for more than half of the operating lease liabilities on Boeing's balance sheet.

AirBridge Cargo President Denis Ilin confirmed the two 747-8Fs were being leased from Boeing Capital Corp., the company's finance arm. AirBridge now rents three 747-8Fs from Boeing, which is also leasing three more to Silk Way West Airlines. Azerbaijan-based Silk Way hit a snag last year trying to secure a guarantee from the U.S. Export-Import Bank to support buying two of the jets, forcing Boeing to retain ownership and rent them.

Boeing said it remained in talks with Volga-Dnepr about selling or leasing 18 more of the jets, which Mr. Ilin said could be delivered up to 2022. Industry executives said AirBridge Cargo had the capacity to take up to three of the jets a year.

The company has delivered 100 747-8s, but has just eight firm orders for the cargo version and 14 for the passenger model, though the latter includes four for bankrupt Russian carrier Transaero. Japan's Nippon Cargo Airlines Co. in September canceled an order for four of the freighters, and Boeing has garnered six firm orders for the plane this year, including three from Silk Way and one from Atlas Worldwide Holdings Inc.

Boeing's balance sheet exposure to the 747 rose to $734 million as of Sept. 30 compared with $461 million a year earlier, according to regulatory filings. The otherwise buoyant jet market has allowed Boeing and rival Airbus Group SE to prune their customer finance exposures in recent years, with the U.S. company's portfolio now down to $3.5 billion, having peaked above $9 billion in the early 2000s.

Boeing said it remains committed to the jet and expects a recovery in the air cargo market to drive future sales. The one-a-month rate is still profitable for the company, executives have said, but Boeing jet programs rarely have dropped below this level.

Slowing production to extend the program's life would also allow Boeing to remain on track to supply two heavily-modified 747-8s to replace the aircraft that serve as Air Force One, the U.S. presidential transport. The Air Force in January selected Boeing to provide the planes, with a contract expected to be awarded by the end of the year.

Write to Doug Cameron at doug.cameron@wsj.com

 

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(END) Dow Jones Newswires

November 19, 2015 15:59 ET (20:59 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
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