UPS saves Boeing 747 with 14-plane tax cut investment
A few weeks after Emirates Airline singlehanded saved Airbus’ A380 jet program, UPS has handed a major lifeline to the Boeing 747, ensuring its continued production (as an air freighter at least) with a major 14-plane order.
The deal is part of a wide ranging US $12-billion series of investments into its infrastructure by UPS following the US tax cuts agreed by Washington in December. In addition to the 747’s, UPS will also add four Boeing 767 freighters to its fleet, and an official confirmed last week that “no current aircraft will be phased out”.
“The biggest reason we decided to expand is, one, we had an option on the 14, and with the tax reform that came in, it made us more optimistic that the economy was going to continue to be clicking,” said UPS Chief Executive Officer David Abney.
UPS’ 747 deal is worth US $5.65 billion at Boeing’s list price of US $403.6 million for the freighter. But with standard discounts, the value of the deal is closer to US $2.6 billion, according to estimates from aircraft-valuation consultant Avitas.
The news comes after a drip-feed of reports of UPS struggling to cope with demand, a drip-feed that became a cascade in late 2017 when it was revealed by LateShipment.com that UPS and FedEx had both struggled to process record-high delivery volumes.
According to LateShipment, around a quarter of all UPS domestic volumes in the US were delivered late between November 27 and December 24.
UPS has signalled that it plans to ramp up investment in automation, aircraft and other technology that it needs if it hopes to compete in the e-commerce marketplace.
Of the US $12 billion that the company said it was reinvesting, US $7 billion will be spent over the next three years on construction and renovation of facilities, and acquiring new aircraft and ground-fleet vehicles.
The Boeing deal will see all 32 of the new 747 jets delivered by the end of 2022, adding more than 9 million pounds of cargo capacity, UPS said.
The company’s global airline network includes more than 500 owned and leased aircraft. UPS received three new 747-8 freighters in 2017.
UPS’ appetite for the 747 means Boeing will continue producing its largest aircraft into the 2020s, more than half a century after the plane was first launched.