Boeing Rents Cargo Jets to Russian Carrier
November 19 2015 - 04:14PM
Dow Jones News
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
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 19, 2015 15:59 ET (20:59 GMT)
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