Manufacturer aims for launch order as values tumble and IAI studies rival programme

Boeing is slashing the cost of 747-400 freighter conversions by almost $10 million as it looks to boost interest in the programme to secure a launch order.

David Tamer, Boeing aircraft valuation and trading specialist, says the manufacturer has already reduced the list price for a -400 conversion from $30 million to $25 million and is aiming for the "low $20 millions".

"The freighter guys want to get [the price] down," said Tamer at the Commercial Aviation Report US Valuation Conference in Washington DC last week.

Boeing has been working on a 747-400 Special Freighter (SF) conversion for many years, but neither it nor any independent specialist has yet launched a programme for the latest 747 variant, claiming used aircraft acquisition costs remain too high. But 747-400 used values have plummeted over the past year, and about 10 of the 500 747-400 passenger and combi aircraft in service stand idle. United Airlines has six of its 44 747-400s parked and may withdraw more in an impending restructuring. Values could drop further if United goes ahead with a possible fire sale of 22 747-400s.

Aircraft valuation experts say conditions may ripen to support the launch of at least one 747-400 freighter conversion programme in the next 12 months. Israel Aircraft Industries (IAI) is studying a rival conversion programme for the 747-400.

Aviation Specialist Group president Fred Klein says cargo carriers are not willing to pay any more than $60 million for a 747-400SF. Given Boeing's new conversion price, carriers need to find used passenger 747-400s for $35-40 million.

Aircraft valuation experts say market values are still higher than this, but the expected availability of some early model 747-400s next year could open up new opportunities. Four 13-year-old 747-400s are coming off lease from Singapore Airlines from next April, and experts estimate the aircraft will fetch $35-45 million each.

It is widely believed Boeing has been in no rush to offer a competitively priced 747-400 conversion because it could undermine sales of new-build 747-400Fs, which now make up the bulk of new deliveries. However, with IAI's rival programme on the horizon, Boeing is keen to be the first into the market.

MergeGlobal consultant Brian Clancy expects the cargo market to bottom out in the third quarter of this year, and that traffic will return to 2000 levels next year. After that cargo traffic should again reach all-time highs, driving demand for additional large widebody freighters.

Source: Flight International