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This was in today's Chicago Tribune:

Boeing 747 flying high with orders picking up

By Michael Oneal
Chicago Tribune staff reporter
Published August 18, 2005

For many observers of the intercontinental dogfight between Chicago-based Boeing Co. and Europe's Airbus SAS, it has long been taken for granted that Boeing's 747 is all but dead.

Apparently, nobody told United Parcel Service Inc.

On Wednesday, UPS gave the iconic humpbacked jumbo jet a new lease on life when it ordered eight cargo versions of the 747-400, worth about $1.8 billion at list prices.

That order, and a surprising streak of 13 others this year, may provide a crucial boost to the program at a time when Boeing is analyzing whether to invest in a new version of the 747 or let it die a natural death.

The company has said it will decide which way to go by the end of this year.

"This gives us a very good indication that we will be able to take a proposal to our board of directors," said a company spokesman.

"Judging by how the situation looks, they're probably going to go ahead [with a launch]," said aerospace analyst Richard Aboulafia with the Teal Group near Washington, D.C.

It's easy to see why the outlook for the 747 has been so grim. Once hailed as the "Queen of the Skies," interest in the plane has been waning since 1996, when airlines ordered 60 of them. By 2003, Boeing got only four 747 orders. Last year it won 10.

The company hasn't sold a passenger version of the plane in several years and builds just one plane a month. Analysts have been predicting that the production rate eventually would wind down to nothing.

Soaring fuel costs and sagging traffic after the stock-market-bubble pop have driven airlines to Boeing's 777, which is 90 seats smaller than the 450-seat 747-400 but much more modern and efficient.

If customers want a bigger plane with better efficiencies, they can turn to Airbus for its A380, a 550-seat, double-decked behemoth that took its first test flight this year and will enter commercial service in 2006.

The sag in 747 business has been so pronounced that analysts widely have assumed that Boeing simply planned to cede the upper end of the market to the new Airbus plane, handing over a lucrative monopoly it had enjoyed since launching the 747 in the late 1960s. Airbus has collected 159 orders and commitments for the A380, including 10 from UPS. And Boeing has been focusing most of its energy and investment capital on a much smaller, single-aisle jet called the 787 Dreamliner.

But booming foreign trade over the last year, most of it between the U.S. and Asia, has lit a sudden fire under 747 demand. That has given Boeing another pleasant surprise in a year that has seen the company finally pull out of a nose dive that allowed Airbus to pass it in 2003 as the industry leader in orders and deliveries.

A spokesman for UPS said the issue isn't a competition between the A380 and the 747. The freight giant needs both airplanes to balance its mix and address specific markets, mostly in Asia.

Besides, he said, the 747 is available much sooner. UPS will take delivery of all its Boeing planes in 2007 and 2008 but won't be able to get its first A380 until 2009.

For Boeing, the spurt in demand may provide a crucial bridge between the old 747 and the proposed 747 Advanced, a new, more efficient version under consideration. If Boeing had to stop production of the old plane, it might prove prohibitively expensive to ramp up the assembly lines again for a new version.

This year's orders will give the company the luxury to decide whether to push ahead based on future demand alone. It already has one possible customer: Luxembourg's Cargolux Airlines International SAS recently said that it was negotiating to replace its fleet of 747 cargo planes with at least 10 cargo versions of the 747 Advanced.

Aboulafia suspects that Boeing's final decision will come down to whether the company thinks it can attract customers for both the passenger and cargo versions of the new 747. He believes it can. The A380, he said, is turning out to be heavier and less efficient than originally thought, meaning the 747 Advanced may be more competitive for customers interested in a smaller airplane.

"It's like Mystery Date," he said, comparing the Airbus plane with the old board game. "It could be a dud. It could be a stud."

Both companies will use a new breed of high-powered engine that is quieter and more fuel-efficient than those used on older jets. Boeing is telling airlines that the new engine would help the 747 Advanced save 6 percent on the expense of flying each passenger seat one mile, a common industry cost measure. The new engine also will comply with environmental standards at crucial airports like London's Heathrow.

Inside the plane, Boeing is responding to the challenge posed by the A380 by offering airlines the chance to extend the 747's hump back toward the tail. The so-called Sky Loft would allow for first-class facilities like bunks, cabins or lounges. Or it could be a place to locate galley equipment, making it possible to add more seats below.

Whether customers will respond to the new plane is an open question, but the old one clearly isn't done yet.

"Nobody would have guessed they would have had 21 747 orders in the first half of the year," said analyst Paul Nisbet with JSA Research.