UPS Gives Boeing Jumbo a Boost

United Parcel Service Inc. on Thursday said it was buying 14 Boeing Co. jumbo freighters, doubling the plane maker's order book for the jet even as it slows production.

The order and options to acquire 14 more are a huge boost for the 747-8 program as both the passenger and freighter versions have been slow sellers. Airlines have opted for smaller planes and the moribund air cargo market has led others to cancel planned purchases.

Boeing has halved production to six planes a year and warned in regulatory filings that it may stop making them unless market conditions improve.

UPS said it would take the first planes in 2017, with deliveries running through 2020.

The 14 jets have a list price of $5.3 billion, but UPS is expected to have secured steep discounts from Boeing and may be able to unload some of its older 747 cargo jets to Boeing as part of the deal, said one aircraft financier familiar with the negotiations.

Boeing and UPS declined to comment on the financial terms of the deal.

The plane maker has just 15 firm orders for the 747-8, including six for the freighter version after securing a deal for four this year from AirBridgeCargo Airlines LLC.

Boeing has been renting rather than selling some of the new planes and has more than $1 billion in exposure to 747 leases on its balance sheet, according to a regulatory filing.

It has produced some 747-8s that still lack a customer, but Boeing said the UPS planes would all be newly built.

Boeing Chief Executive Dennis Muilenburg said on the company's quarterly earnings call this week that 747 production was sustainable at six a year. The U.S. Air Force is due to acquire two of the planes for use as the future Air Force One fleet.

The biggest operators of the 747-8 cargo jet are Cargolux Airlines International SA and Cathay Pacific Airways Ltd., with 14 apiece.

Write to Doug Cameron at [e-mail]

(END) Dow Jones Newswires

October 27, 2016 13:15 ET (17:15 GMT)

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