The U.S. Federal Aviation Administration (FAA) has issued a safety directive requiring inspections on 11 Boeing 747-8F freighters registered in the United States, effective August 6. While the direct costs of the checks are relatively modest, the order highlights the ongoing tightness in the large freighter market and the importance of the 747-8F to operators like United Parcel Service (NYSE: UPS).
The FAA order, which follows a Boeing alert bulletin, mandates checks for cracks in fuselage stringers and splice fittings. The agency estimates 124 hours for the radius-filler inspection and 244 hours for the crack check, at a labor rate of $85 per hour. That translates to $31,280 per aircraft, or $344,080 for all 11 U.S. planes. However, the FAA notes that its cost analysis excludes indirect costs, such as aircraft downtime, which it says depend on the operator and could be significant.
Investors are closely watching the situation, as the 747-8F remains a key asset in the air cargo market. UPS operates 30 of these freighters, each with a maximum payload of 307,600 pounds and capacity for 34 main deck containers plus 12 belly positions. The nose-door feature allows for oversized cargo, making the 747-8F particularly valuable for specialized shipments.
The FAA has not identified the affected carriers, but stated that two operators are involved, both classified as large businesses. This suggests the issue is more about aircraft utilization than financial strain. Pulling a 747-8F from service during peak demand could lead to costly charters or missed shipments.
The global air cargo market is already experiencing capacity constraints. According to the International Air Transport Association (IATA), global air cargo demand rose 6.0% year-over-year in May, while capacity increased only 1.9%. Dedicated freighter traffic surged 11.0%, accounting for most of the growth. IATA Director General Willie Walsh noted that yield growth and higher load factors are helping recoup higher fuel costs, with air cargo yields up 37.9% in May.
The 747-8F remains relevant even after Boeing ended production. The last 747, a 747-8F, was delivered to Atlas Air in January 2023, concluding a program that built 1,574 jets. Atlas Air CEO John Dietrich previously stated that the company's history and success are directly linked to the 747 platform.
For investors, the FAA order serves as a reminder of the delicate balance in the freighter market. If inspections align with scheduled maintenance, costs are minimal. But any unscheduled downtime could ripple through supply chains and affect freight rates. No new equity trades for Boeing or UPS were reported on July 5; Boeing last traded at $226.49 (up $7.83) and UPS at $110.66 (up $1.10) on July 2.
