Old airplanes, including Boeing 747-400s, are stored in the desert in Victorville, California, March 13, 2015.（Reuters/Lucy Nicholson）

Last year, there were zero orders placed by commercial airlines for new Boeing 747s or Airbus A380s, reflecting a fundamental shift in the industry toward smaller, twin-engine planes. Smaller planes cost less to fly than the stately, four-engine jumbos, which can carry as many as 525 passengers.

The slump in sales of the jets has raised questions over how long manufacturers can sustain production. It has also fueled internal debate in both companies over the future of the planes, sources said.

The outcome of those discussions will affect the value of existing fleets and thousands of production jobs at the plane makers and their many parts suppliers.

Sales forces at Airbus Group NV (AIR.PA) and Boeing Co (BA.N) are fighting for potential orders plane by plane as they seek to keep production going beyond the end of the decade, said other aviation market sources. The aircraft makers are offering discounts of at least 50 percent from catalog prices of around $400 million for a jumbo jet, those sources said. Airbus has said it is also considering a revamp to make its 'superjumbo' more attractive to buyers.

Boeing in September plans to slow the pace of production of its latest 747-8 model to an average of 1.3 planes a month from 1.5 currently. At that rate the orders it already has in hand will only keep the production line going for 2 1/2 years.

The crunch, though, will come earlier because it can take up to two years from ordering the first part to finishing a jet, and no one wants to start the process if it is unclear whether the plane will be completed and delivered to a customer.

"I can see demand for the 747-8 in small numbers, but you have got to ask if they can keep the production line open if they don't get some new orders," said Tony Whitty, chief executive of UK-based aircraft re-marketing firm Cabot Aviation, which trades, manages and leases jets. "You also wonder at what price they are selling."

LONG DESCENT

Use of the 747 has dropped steadily over the last two decades, reflecting the rise of two-engine jets that have come close to matching its range. Over the same period production of large twin-engined jets like the Boeing 777 has risen seven-fold. Last year, Boeing booked 283 new orders for the 777 and now has a backlog of 547 orders.

Airbus is more upbeat than Boeing about the prospects for jumbo jets but both now agree it has become a niche category. Airlines still need jumbo jets but only for certain polar flights - where a two-engine jet may be less safe than a four-engine jumbo because of the lack of places for an emergency landing - and busy routes where landing slots are scarce.

The risk is most visible for Boeing, where investors could face a $1 billion accounting charge if 747 production is shut down, according to company disclosures.

Boeing recently received a high-profile boost with a provisional order for two new jets to serve as Air Force One for the U.S. President but the 747's future depends a lot more on sales of the much-less glamorous windowless freight model. That has a unique hinged nose and can carry very large equipment, such as oil drilling rigs.

So far this year, Boeing has sold three. Atlas Air Worldwide (AAWW.O) recently said it plans to order more for its cargo fleet, but wouldn't say when or how many. The world's biggest 747 freight customer, Cargolux [CLUX.UL], also says it likes the plane, but has a pending order for only three.

A sustained upturn in air freight traffic could secure the 747 a longer future. International freight traffic rose 4.8 percent last year, but volume has only just recovered from a collapse in 2009 during the financial crisis.

CARGO HAULER

Boeing reckons some 143 older freighters will need to be replaced, stretching demand for the 747 through the 2020s, the program vice president, Bruce Dickinson, said in an interview.

"We know there is a long-term market for this airplane and some of the unique things it can do," Dickinson said from his office overlooking the 747 production line at the giant Everett plant near Seattle.

But Boeing’s effort to sell new 747s is overshadowed by the many older 747s available for lease, which have suddenly been made more attractive because of a big slide in fuel prices since the middle of last year. Leasing companies say there is scant interest in new 747-8s when 82 freighters are baking in desert parking lots.

The older planes can be leased for as little as $400,000 a month, compared with up to $1.4 million in monthly lease payments for a new 747-8 freighter, experts say.

"That's a pretty big difference," said Gueric Dechavanne, vice president at Collateral Verifications, a Connecticut-based aircraft appraisal firm.

Some companies have extended 747 leases for three to four years, said Aengus Kelly, chief executive of leasing company AerCap (AER.N).

"It's a challenge to lease a freighter," Kelly told Reuters. "It's definitely a challenge to sell them."

Airbus’s A380 is a newer plane – its first flight was almost exactly 10 years ago - and has become a mainstay of Middle East carriers that offer opulent suites to first class passengers. But the drop in demand is prompting Airbus to weigh whether to revamp the plane with new engines, or carry on with the existing model. 

Airbus has 161 orders for the planes in hand, or more than five years of production. But it acknowledges that not all of those jets will be delivered, leaving it with barely three years of guaranteed output. Given the long lead times, Airbus must bring in more orders soon to avoid having to taper production.

“We are always looking at product improvements, but there is so much untapped potential in the existing aircraft,” said Airbus marketing head Chris Emerson.

Airbus could announce an A380 revamp as early as the Dubai Airshow in November, but must first find a way to assure investors it can recover several billion dollars of development costs, sources said. Analysts say on option could be to apply for more European government loans, though that risks exacerbating trade tensions with the United States.

Top customer Emirates is offering to double its planned purchase of 140 A380s if Airbus carries out the improvements, which the Dubai carrier’s Chief Executive Tim Clark tells Reuters will be "extremely good for the (airline’s) bottom line."

But Airbus’s board is unlikely to back a new A380 model for just one customer.（Alwyn Scott and Tim Hepher）