Upping the game for cargo with freighter conversions

Airlines and leasing firms are looking to convert older passenger jets into freighters, betting big on the boom in the e-commerce sector as used planes witness depreciation amid the pandemic. This has opened a window of opportunity for passenger-to-freighter (P2F) conversion companies who are witnessing a massive replacement wave that will push older freighters downstream to make room for newer conversion products.

Since last May, nearly 200 narrow-body and widebody aircraft have joined the worldwide freighter fleet, with the active fleet of narrow-body freighters growing from 61 to 625 aircraft with newly-converted B737-800s accounting for half that growth, according to data from IBA’s InsightIQ platform.

The demand for freighter aircraft grew strongly since the start of the pandemic after the loss of belly hold capacity following the grounding of passenger aircraft were grounded. The number of freighter aircraft flights, which was averaging around 100,000 per month before the pandemic, has grown, peaking at over 145,000 in December 2020 as the holiday period drove supply chain demand. Conversely, passenger aircraft utilisation fell from over 2.9 million flights in January 2020 fell to 556,000 in April 2020, and since then has only partially recovered to around 1.5 million flights in January 2021, IBA’s platform revealed.

Last October, Boeing published its latest 20-year cargo outlook where the aircraft manufacturer forecasts that airlines will need 2,430 additional freighters; this will include 930 of them newly built widebodies such as the 747-8F, 767F and 777F, as well as 1,500 P2F conversions.

With the closing of the B747 production freighter programme, the number of options for widebody freighters continues to narrow with the B777F production freighter, B747 conversion and the B777 conversion the main options. Several companies are also in the process of launching A321 converted freighters, which will compete with B757s and B737s.

In fact, several P2F companies have already declared that all or at least a majority of their aircraft conversions for 2022 were booked.

“AEI is currently experiencing tremendous demand for all five of our active conversion products. We are sold out through the end of 2022 on our market leading B737-800SF and through mid-2022 on our B737-300SF, B737-400SF, MD80SF and the CRJ200 SF,” said Robert Convey, senior vice president - sales and marketing, Aeronautical Engineers Inc.

Last year, Aeronautical Engineering converted 13 aircraft, 11 conversions above its figure in 2019. This year, the company is on track to deliver more than 30 units, including 26 737-800s.

AEI is currently experiencing tremendous demand for all five of our active conversion products. We are sold out through the end of 2022 on our market leading B737-800SF and through mid-2022 on our B737-300SF, B737-400SF, MD80SF and the CRJ200 SF. Robert Convey, AEI

Meanwhile, Israel Aerospace Industries’ (IAI) has announced its plans to open multiple freighter conversion sites across different parts of the globe to meet demand. Recently, it opened a new B777 freighter conversion line at Incheon International Airport in South Korea and another passenger-to-freighter conversion site in Naples, Italy - its first in Europe. This facility will convert Boeing 737-700/800s. The new site is expected to increase income from aircraft conversions by tens of millions of dollars, IAI said.

What’s more, Elbe Flugzeugwerke (EFW) is adding new conversion lines for the platform in China and the United States to increase redeliveries to up to twenty-five units per year by 2023 in response to the increasing demand for A330 passenger-to-freighter conversions.

Airlines and leasing firms are making a beeline to convert older passenger jets into freighters, betting big on the boom in the e-commerce sector as used planes takes a beating amid the pandemic.

Recently, the leasing arm of Air Transport Services Group, Cargo Aircraft Management (CAM) committed to purchase its first two Airbus A321-200 passenger aircraft, one this year and a second in the first quarter of 2022. Freighter conversion of the first aircraft will begin in the fourth quarter of 2021 with its redelivery to a CAM dry lease customer projected to occur in the second quarter of 2022. The second aircraft will begin freighter conversion in the second quarter of 2022 with redelivery projected during the fourth quarter of 2022. Both aircraft will undergo passenger-to-freighter conversion at ATSG’s PEMCO Conversions facilities in Tampa. Earlier this month, PEMCO Conversions inducted its first A321-200 for conversion.

“We have accelerated our plans to invest in and offer this midsize, mid-range freighter type because our express-network customers have expressed strong interest in adding it to their fleets,” said Mike Berger, chief commercial officer of ATSG, in a media statement. “It is very well suited for air-express service and e-commerce fulfillment over shorter routes and with smaller payloads as a complement to our existing fleet of more than eighty-five larger Boeing 767 converted freighters, and with better performance than Boeing 757 freighters or any Boeing 737 freighter variants. The time is right to launch this milestone initiative for ATSG and its aircraft leasing customers.”

Aircraft lessor Gecas is looking to convert three more B777 aircraft in response to the ongoing cargo demand. This brings Gecas’ total commitment since the launch of Israel Aerospace Industries’ (IAI) ‘Big Twin Programme’ in 2019 to 18 firm orders, with a remaining 12 options.

Gecas went ahead to announce that Kalitta Air had agreed to lease two more B777 converted aircraft from Gecas, adding to the two companies’ initial deal for three of the freighters. Gecas attributed the exercise of options to “the growing industry demand for dedicated cargo planes.”

Air Canada had begun converting some of its retired passenger Boeing 767s into full-freighters in a planned move announced in January 2021. Initially, the carrier had strategised to convert two aircraft but extended the plan to cover seven aircraft in February. The airline aims to complete the programme by the end of 2022.

While the pandemic provided unique opportunities such as cargo only flying, the plan to return to freighter operation predates the current context. We remain focused building a long-term business that complements our global passenger network. Matthieu Casey, Air Canada Cargo

“The first two converted Boeing 767 freighter aircraft are arriving in the fall of this year, and several more will be incorporated into the fleet over the next few years. While the pandemic provided unique opportunities such as cargo only flying, the plan to return to freighter operation predates the current context. We remain focused building a long-term business that complements our global passenger network,” said Matthieu Casey, senior director, cargo global sales and revenue optimization, Air Canada Cargo.

Casey goes on to explain how dedicated freighters allow the flexibility to provide consistent capacity year-round in markets where there is some fluctuation for a belly carrier. “In that sense, the freighters will allow us to best utilize the fleet available to us – freighters will provide steady capacity in critical markets, catering to freighter cargo as well as feed the belly cargo routes and global network,” he said.

LATAM Cargo also decided to convene Avianor at the beginning of this year to work in the interior of three Boeing 767-300 and obtain the certification of temporary modifications as a freighter.

The conversion of these aircraft was done in record time, taking into account the pandemic and the entire current context. The pace of work allows 3 aircraft to be converted in less than three months.

Explaining the rationale behind these freighter conversions, Kamal Hadad, director of network and alliances, LATAM Cargo explains, “Even though one of the consequences of the pandemic is that passenger aircraft operations have been affected, which has in turn increased the demand for cargo aircraft, our interest in expanding our cargo fleet is a plan that was in fact developed before this sanitary crisis.”

“In that context, we currently have a fleet of 11 Boeing 767 freighters (8 767F and 3 767BCF), and our plan is to grow up to 15 by 2022 and up to 21 by 2023. We will become the first scheduled combination carrier to surpass the barrier of twenty Boeing 767 freighters,” he added.

We currently have a fleet of 11 Boeing 767 freighters (8 767F and 3 767BCF), and our plan is to grow up to 15 by 2022 and up to 21 by 2023. We will become the first scheduled combination carrier to surpass the barrier of twenty Boeing 767 freighters. Kamal Hadad, LATAM Cargo

These freighters will strengthen the carrier’s capacity in Colombia and Ecuador to support the flower export industry there. Also, LATAM Cargo looks to reinforce its offering in Chile to support Chilean salmon exports as well as import traffic. As for Brazil, it will strengthen connectivity with North America and Europe to boost the import market.

Furthermore, Lufthansa Cargo is permanently converting Airbus 321 passenger aircraft into freighters starting 2022. For this purpose, the twin-engine medium-haul aircraft will receive large cargo doors to enable the transport of containers on the main deck as well. Initially, the conversion of two Airbus aircraft is planned. These aircraft will be operated by Lufthansa CityLine on behalf of Lufthansa Cargo and will be stationed in Frankfurt.

“Lufthansa Cargo wants to offer customers in the ecommerce segment fast intra-European connections. With the converted A321s, we are meeting our customers' growing demand for same-day solutions and further strengthening our dense network of global connections as well as our product offering,” said Dorothea von Boxberg, CEO of Lufthansa Cargo in a press statement. “The selected aircraft type can transport 28t per flight, significantly larger cargo volumes than in the short-haul bellies of passenger aircraft. In addition to forwarders, integrators and postal operators, ecommerce providers will be customers for this offering,” she added.

Leasing firm GTLK Europe has also signed up for four A321 conversions from EFW as it looks to meet growing e-commerce demand. Three of the four aircraft will be inducted for conversion this year, with the fourth conversion to be carried out in 2022.

Similarly, riding on the ecommerce wave, Canada’s WestJet recently announced its plans to acquire a small fleet of converted Boeing 737-800 freighters to commence dedicated cargo service to support the needs of freight forwarders, shippers and other Canadian firms amid robust demand for air transport. The carrier plans to start service with four of the narrowbody aircraft during the second quarter of 2022.

Meanwhile, IndiGo, which is operated by InterGlobe Aviation Ltd, is sourcing four Airbus A321ceo aircraft, each of which will be converted from passenger jets to a full freighter configuration. “The A321P2F (passenger-to-freighter conversion) is the most efficient narrow-bodied freighter available, offering 24 container positions and supporting a payload of up to 27 tonnes,” it said.

The aircraft will be converted through a programme involving ST Engineering and Airbus with their joint venture, Elbe FlugzeugWerke (EFW). IndiGo is expected to take the delivery of its first freighter in the first half of 2022, which will be used for both domestic and regional operations.

“The remaining three aircraft in the initial commitment are expected to arrive within a year or so from arrival of our first freighter, and further aircraft may be sourced depending on market development,” the carrier said.

Looking forward, freighter conversion companies remain optimistic about the market for passenger-to-freighter conversions. They are continuously studying the freighter market to determine if there is match between an aircraft that will soon be entering the zone of conversion and a freight sector that would benefit from that aircraft’s capabilities as a freighter.

“I am very optimistic that we are at the beginning of a four to six year period of hyper expansion in the P2F conversion market. This expansion is being driven by explosive growth in ecommerce that will require several hundred converted freighters of all types to meet aggressive growth targets,” said Convey. “In addition, we are starting to see the beginning a massive replacement wave that will push older freighters downstream to make room for newer conversion products such as the B737-800SF, A321SF, A300SF and the 777SF.”