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Air Force One likely to be Boeing 747's destination

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By Bloomberg News
Saturday, June 7, 2014, 12:01 a.m.

Boeing Co.'s iconic 747 jumbo jet is gliding deeper into its twilight years, with a new Air Force One fleet offering the strongest sales prospect for a passenger model that no longer fits most airlines' needs.

Even as Boeing talks with Emirates about an order for the upgraded 747-8, the carrier played down the chances of a deal because it's buying 150 Boeing 777X jets. That plane will be bigger and more efficient than the 777, a twin-engine aircraft so capable that it's cannibalizing Boeing's jumbo sales.

Commercial success has proved elusive for the 747-8, the latest update to an almost 50-year-old plane known for its distinctive humpbacked fuselage. While the 747-8 is a lock to win bidding that opens this year to replace the president's fleet, waning demand for the cargo variant further imperils an assembly line that has slowed to just 1.5 planes a month.

“Air Force One is it unless a miracle happens in the airfreight business,” said Glen Langdon, president of Langdon Asset Management, a San Francisco firm that has extensive experience selling used 747s and other wide-body freighters.

Discussions with Emirates were disclosed last week by John Wojick, senior vice president for sales and marketing at Chicago-based Boeing's commercial airplane unit, at the annual meeting of the International Air Transport Association in Doha. Emirates is the world's largest international airline and it operates a fleet of A380s from rival Airbus Group NV.

Boeing is fighting to land customers, even using trade-ins of older models to seal deals. Boeing faces a “material” accounting loss if it can't win sufficient 747 orders to recover the costs of development, according to a company filing. So far, Boeing has tallied just 51 sales for the passenger variant, known as the 747-8I or Intercontinental, since Deutsche Lufthansa AG placed the first order in 2006.

This year's 747-8 order count: one. It wasn't always so grim. Pan American World Airways announced a $525 million order for 25 of the first 747s in 1966, effectively starting a program that would go on to produce almost 1,500 planes.

But Boeing outdid itself with the 777-9X, the first twin- engine jet designed to carry a jumbo's haul of 407 passengers. Meanwhile, a glut of the previous 747 iteration remain parked and Boeing cut 747 production twice last year, to 18 jets a year, as the backlog dwindled.

“We expect 747-8 sales to increase with the economy, and customers flying the airplane tell us they love its strong performance,” Randy Tinseth, a Boeing vice-president for marketing, said in an email. “That's why we continue to invest in the 747-8 to make it even better.”

The 747-8's likeliest sales are to the Pentagon. The Air Force is planning to upgrade the all-747 presidential aircraft fleet by 2023 and has begun studying whether to replace the “Doomsday” fleet, four 747-200 jets hardened against nuclear blasts that provide a mobile military command, Charles Gulick, an Air Force spokesman, said in an email.

Both Airbus Group NV's A380 and Boeing's 747-8 fit the Pentagon's requirements. However, Toulouse, France-based Airbus faces a formidable political battle if it opts to compete for the Air Force One contract, said Loren Thompson, chief operating officer with the Lexington Institute, an Arlington-based think tank that consults for Boeing.

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