UPS spends $5.3 billion on over a dozen Boeing 747s

UPS has ordered 14 Boeing 747-8 cargo jets in a deal worth $5.3 billion. According to CEO David Abney, this is a reflection of rising demand in the industry after years of stagnant growth.

The deal is notable since Boeing was considering cancelling the 747-8 aircraft due to low demand, intending to make only six per year as of September and potentially phasing out the 747 entirely after almost fifty years of production.

The Boeing 474-8 has faced increased competition from smaller, more fuel-efficient planes, but has remained unique in its ability to carry large air cargo thanks to its hinged nose model.

Boeing now predicts 4.2% annual growth in air cargo traffic over the next two decades. It also expects some recovery in demand for its cargo jets once older 747s face retirement starting from 2019.

UPS intends to employ its new 747-8s on trunk routes between Europe and Asia, and Asia and the US, using the older 747s on other routes where smaller planes have been used.

Abney has emphasised the “net add” of this purchase, stressing that it is part of a growth strategy rather than simply a case of replacing old aircraft.

(Source: Reuters)