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Boeing quietly pulls plug on the 747, closing era of jumbo jets

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Re: Boeing quietly pulls plug on the 747, closing era of jumbo jets

#151

Post by fsckboy »

rlpb wrote: post #132
fsckboy wrote: post #118

Earlier quoted context omitted.

Generally, the sunk cost argument is used to mean "just because you've put a bunch of money in does not mean that your "progress" is worth what you paid for it, and is therefore not a justification to keep putting more money in; you've already lost what is gone so that's off the table." However, if a company borrowed the money it "sunk", it still has to pay that money back from future sales; if it was raised through…

> However, if a company borrowed the money it "sunk", it still has to pay that money back from future sales; if it was raised through equity, continued losses will continue to drag the share price down. Sunk cost is not a free lunch argument. Even if a company has borrowed the money it "sunk", it's still in its interest to maximize revenue even if that's not enough to pay the interest on that loan. The alternative wo…

Companies are required to keep books according to accepted accounting principles, under which sunk costs are in fact on your books, and that's what financial analysts look at, and those costs you need to amortize, both financial accounting and tax accounting. When you build a new factory, you charge what you need to to pay the price of the factory down (or assembly line). You don't spend lavishly on an expensive factory and say "sunk costs, let's call that money gone, what's our marginal cost, ok, that will be our price." Rather, you charge as high as the market will bear and hopefully make a profit. You don't control the market of course, and you have to respond to competition.

A competitor who has already paid down their investment has more flexibility than you do because they have more room to play with price and still report a profit.

The sunk cost fallacy refers to your decision making. What is the value of a project? its prospects, not what you have already spent. What has your spending done? It's bought you the option to make this decision. Do you call the option? Well, it doesn't matter how much you paid for it. Did you make money on the option? That does matter how much the option cost.

Some of it's psychological and perhaps not rational: if you have engaged in a big money losing project, if you pull the plug on it, your stock price will go up, because the market says "whew, at least we know they are not going spend money on that project any more" which I guess is them suspecting you will fall prey to the sunk cost fallacy. But these are complex decisions to make, especially in Europe where shutting down production entails a lot of costs that would be better put to something productive, and as you don't know the future, you try to figure out ways to make the project work.

Re: Boeing quietly pulls plug on the 747, closing era of jumbo jets

#152

Post by seltzered_ »

6nf wrote: post #139
jmkd wrote: post #119

Earlier quoted context omitted.

Have seen plenty of evidence of freight being shipped in passenger cabins the last few months too. Some in and on the seats and others with seats newly stripped out.

I don’t have evidence of this to show but friends in the airlines have told me stories of empty passenger planes flying just for freight, sometimes even with small items in the passenger cabin

Here's an announcement from KLM back in April (2020-04-30): https://news.klm.com/klm-introduces-cargo-in-cabin-carrying-...

Here's another piece with flexport: https://techcrunch.com/2020/04/26/ryan-petersen-flexport/ (scroll down and you have an image of packages strapped in a commercial plane)

Re: Boeing quietly pulls plug on the 747, closing era of jumbo jets

#154

Post by mynameishere »

perspectivezoom wrote: post #122
gsnedders wrote: post #89

Earlier quoted context omitted.

A _large_ proportion of worldwide freight is ordinarily carried in the belly of passenger aircraft. When most airlines stopped flying, the price of air freight _quickly_ rose (as the capacity pretty much fell overnight to just the dedicated freighter aircraft). This meant it became profitable (i.e., above the marginal costs of the flights) to fly passenger aircraft purely for the belly-hold freight. They certainly ar…

I just watched a video about this, that basically goes over all your points: "Air Cargo's Coronavirus Problem" by Wendover Productions https://www.youtube.com/watch?v=r2oPk20OHBE A summary of the video: - Passenger flight belly cargo used to be responsible for 25% of air cargo capacity, so capacity is severely reduced. - PPE emergency logistics has caused a huge spike in demand, since PPE allocations are currently to…

I like the shot of airline workers acting like old-fashioned stevedores loading packages one-by-one into the passenger cabin.

the cost of fuel, has understandably also become very cheap

Apparently, jet fuel was down around 40 cents a gallon. Kerosene, basically the same stuff, was never anywhere near that. Pretty strange.

Re: Boeing quietly pulls plug on the 747, closing era of jumbo jets

#155

Post by CydeWeys »

JAlexoid wrote: post #137
megablast wrote: post #133

Earlier quoted context omitted.

Yes, since roses can be grown almost anywhere, and they are 100s of replacement for a rose.

In theory bananas can be grown anywhere, but I believe biology has other things to say.

Bananas aren't flown though. They can be grown in many places, it's just the current supply chain for them is most cost-effective.

Re: Boeing quietly pulls plug on the 747, closing era of jumbo jets

#156

Post by bobthepanda »

DataJunkie wrote: post #138
innocenat wrote: post #24

Earlier quoted context omitted.

> The 737, 777 and 787 combined have eliminated the need for the 747, 757 and 767. There are huge demand for A321LR precisely because there is a need for 757-like capacity and range. Granted, when 757 was discontinued the demand wasn't there yet.

I suppose I can still see a need for a 757 aircraft. My thinking was that our economy now requires so much travel that a 787 could be mostly filled. There are so many variants of the A320/321 that I can't even keep track.

Generally speaking, part of the point to point trend has also been to downsize planes, not only to serve thin markets but to provide higher frequencies so that passengers have choice of when to travel during the day. Plus there's money to be made with premiums on thin markets still, given that the matrix of East Coast - Europe flights is not anywhere close to being full.

Re: Boeing quietly pulls plug on the 747, closing era of jumbo jets

#157

Post by numpad0 »

blackrock wrote: post #74
vl wrote: post #2

This is really sad. I love both 747 and A380. To me it’s still more comfortable to be in the large plane for a long flight. 4 engines are better than 2.

The fallacy of the A380 was the hub and spoke model. Airbus thought people wanted to fly from a small airport to a central airport, to transfer to a A380, then fly to the other side of the world, then transfer to a smaller plane to get to their final airport. Thus, your trip ended up becoming 3 possible transfers! This is insane that I can’t imagine why the designers didn’t think this through. And airports had to upg…

It’ll be funny if they make 787-6 or -4 like Airbus did with A319.

Re: Boeing quietly pulls plug on the 747, closing era of jumbo jets

#158

Post by flingo »

lmm wrote: post #140
gsnedders wrote: post #89

Earlier quoted context omitted.

A _large_ proportion of worldwide freight is ordinarily carried in the belly of passenger aircraft. When most airlines stopped flying, the price of air freight _quickly_ rose (as the capacity pretty much fell overnight to just the dedicated freighter aircraft). This meant it became profitable (i.e., above the marginal costs of the flights) to fly passenger aircraft purely for the belly-hold freight. They certainly ar…

> This meant it became profitable (i.e., above the marginal costs of the flights) to fly passenger aircraft purely for the belly-hold freight. That's not the usual definition of "profitable". As you say, they're turning a gross profit (if we treat aircraft leasing costs etc. as fixed, which over a short timeframe they are), but it's not enough to cover their fixed costs, so grandparent is correct that they are not (n…

Is there a single word for "it's more profitable to do this thing, rather than the other thing, or nothing"? I think that's what this counts as.

I think this is in the same category of decision as retailers selling old stock at a loss, because that's better than not selling it.

A large portion of the modern economy is run by spreadsheets, and crunching the numbers on what the "most-profitable" thing to do often leads to companies doing what seems insane to the average person. P.S.: only the first 2/3rds of that was directed at your comment specifically.

Re: Boeing quietly pulls plug on the 747, closing era of jumbo jets

#159

Post by mlyle »

fsckboy wrote: post #111
mlyle wrote: post #104

Earlier quoted context omitted.

I can see why you read this sentence > While Boeing’s hump-nosed freighters will live on, the fast-disappearing A380 risks going down as an epic dud. that way, but it's referring to A380 flights largely stopping but that the 747 freighter variants will be flying for a long time. But, the article (and other sources) are clear that production of 747-- including 747-8F-- is stopping. Explicitly explained later: > Boeing…

we are in so deep now :) just have one thing to add: Boeing has not pulled the plug on anything, it's the customers not ordering. 747 is open for business and sadly, based on your deep dive, Boeing seems not expect more orders of any variant. oh, one more thing: in terms of passenger versions, there are two Air Force One's on order, aren't there? yeah yeah, I know, it's not AF1 if the president's not on it.

Yup.

Though I'm not sure Boeing really would take your order, given that the 747 line is running at a loss.

Re: Boeing quietly pulls plug on the 747, closing era of jumbo jets

#160

Post by bobthepanda »

supernova87a wrote: post #116
Traster wrote: post #13

As I understand it, 4 engine planes are less economical and are now unnecessary due to the reliability of 2 engine planes. I could see the last 747s serving as great monuments purchased by Billionaires to add to their collections. No 737 Max is going to give you a spiral staircase. I can't help but see this as a problem though, as we converge on a single type of aircraft it moves more and more to winner take all for…

Two main things as I understand it: 1) The variability of traffic leads to jumbos being underutilized, wasting fuel and capital tied up in such oversized planes, when it's better to have a 787 in use full time more consistently 2) Airlines got tired of having to maintain 4 engines when they could just have 2...

Other thing is that 787 and A320 can reliably fill up on "thinner" routes, which siphons off people who would otherwise change at a hub airport onto a jumbo, and filling jumbos was already tricky.

There is a reason the largest operators of A380s and 747s are the ones with absolutely massive hubs; either a legacy European flag carrier, a Middle Eastern mega-hub airline, or an airline handling large amounts of transfer volume from an out-of-the-way place like Australia.

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