Can Jumbo Jets Survive In A Niche Market?

Last year both Boeing BA and Airbus EADSY saw demand for their jumbo jet offerings dwindle as the four engine jets were replaced with smaller, more cost effective offerings.

Now, investors are wondering whether or not the massive aircraft will be phased out in the coming years or sustained by a small, niche market.

A Drop In Demand

In 2014, Boeing was able to contract two sales for its 747 jumbo jet aircraft, both of which were canceled. Airbus reported a similar slowdown with zero sales for the entire year.

The decline in new orders reflects a changing tide in the airline industry and a rise in demand for smaller, two engine planes that are cheaper to run due to their much lower fuel consumption.

Many worry that this shift will eventually force both companies to stop producing the jumbo jets, something that would affect everyone from airlines currently operating the planes to suppliers who make parts to assemble the aircraft.

A Niche Market

Jumbo jets are still necessary in the airline industry, its just a question of how many actually need to be produced. In some parts of the world, a limited number of emergency landing locations means planes need to be equipped with four engines instead of only two.

Cargo shippers who need large planes in order to ship equipment around the world are also in need of the aircraft.

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Boeing's 747 has been invaluable to shippers as the plane's hinged nose makes it easier to load large machinery. However, many companies are opting to rent older 747s as the planes are much cheaper to lease and there are no worries about resale costs.

Airbus has found a market with Middle Eastern airlines, who use the spaciousness of the company's A380 jumbo jet to provide first class passengers with a luxurious flight experience.

So far through 2015, the company has secured 161 orders, but many of those are unlikely to be delivered. The slowing demand for such large planes could have an effect on the company's A380 production in the coming years.