This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Boeing Can't Like World Air Cargo Trends

CHICAGO TheStreet) -- Did the Boeing (BA - Get Report) 747-8 freighter, in a final misfortune after two years of delays, come to market at the wrong time?

While it is difficult to say that an airplane that will be sold for decades should be judged on what happens during its first few months of availability, it is clear that the first two deliveries of the largest U.S.-built commercial aircraft will be made during a lengthening cargo slump stemming from the sluggish economy.

The first 787-8 freighter was delivered to Luxembourg-based CargoLux on Oct. 12, with the second delivered to Cathay Pacific on Tuesday.

Meanwhile, the International Air Transport Association reported Monday that September freight volumes were 5% below volumes at the end of the first quarter. "We think there's a cargo slump," said IATA spokesman Perry Flint. "Air cargo was stagnant for a year into the early summer and then it started to decline."

The slump has been accompanied by some carriers' reluctance to take scheduled early deliveries.

CargoLux initially declined delivery because of performance issues. Cathay Pacific, the world's largest international air cargo carrier, reconsidered an order for ten 747-8 freighters, but Boeing assuaged the airline with concessions on a recent order for eight 777 freighters, Reuters reported recently.

Atlas Air (AAWW - Get Report) said last month that it had exercised its right to terminate delivery of three "early build" 747-8s because of lengthy delays and performance considerations. The cargo carrier now expects to take nine aircraft -- rather than 12 -- between 2011 and 2013. Atlas is expected to take delivery of its first 747-8 shortly.

Also, Korean Air Lines had a delivery scheduled for August, but now prefers to wait until the second quarter of 2012, an industry source said.

The air cargo slump has been most pronounced on Asia-Pacific routes. "Asia-Pacific carriers are the largest players in air cargo and have been the hardest hit with a 6.3% decline in demand compared to September 2010," IATA said in a prepared statement.

On its Oct. 25 quarterly conference call, UPS (UPS - Get Report) said it had reduced trans-Pacific capacity by 10% during the third quarter.

The cutback was largely "driven by concern and uncertainty in the U.S." early in the third quarter, said CEO Scott Davis. "There was a lot of concern about a double-dip (and) people stopped buying" products from Asia and elsewhere." In Asia, added CFO Kurt Kuehn: "We built a network expecting a certain level of growth and it did not materialize."

On Boeing's Oct. 26 earnings call, CEO Jim McNerney called cargo trends "a watch item."

"The last couple of months, there has been some softening, but the path on these growth curves is often up and down quarter-by-quarter," McNerney said. He noted, however, that Boeing is not deeply concerned, "not ready to conclude that there's a fundamental change in our market assumption at all," adding there has been little change in customer receptivity to the aircraft.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
UPS $97.30 2.02%
AAWW $35.21 -1.12%
BA $119.47 -2.52%
AAPL $95.01 1.05%
FB $99.75 -4.15%


Chart of I:DJI
DOW 16,027.05 -177.92 -1.10%
S&P 500 1,853.44 -26.61 -1.42%
NASDAQ 4,283.7530 -79.3910 -1.82%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs