Falling plane values, e-commerce surge fuels boom is transforming passenger planes to freighters
From Air Canada to China's CDB Aviation, airlines and leasing firms are rushing to permanently convert older passenger jets into freighters, betting on a boom in e-commerce as the worthiness of used planes tumbles amid the pandemic.
That has created a huge chance of passenger-to-freighter (P2F) conversion corporations, including Singapore Technologies (ST) Engineering Ltd, Israel Aerospace Industries (IAI) and US-based Aeronautical Engineers Inc.
Aviation analytics firm Cirium expects the amount of P2F conversions globally will rise by 36 per cent to 90 planes found in 2021, also to 109 planes in 2022.
"We estimate that a lot of slots are sold for 2021 and at least 40 per cent for 2022," Cirium Head of Market Examination Chris Seymour explained. "There is an upsurge in newer-generation programs, notably the 737-800 and A321 along with the A330, although elderly types just like the 767 continue steadily to see solid demand, driven before few years by Amazon setting up their individual fleet."
The marketplace value of 15-year-old planes has fallen by 20 % to 47 per cent since the start of year based on the model, according to advisory firm Ishka, which makes freighter conversions more appealing.
Air Canada is looking to convert many of its Boeing Co 767s, Russia's S7 Group is acquiring its initial 737-800 converted freighters from lessor GECAS, and lessor CDB Aviation has ordered two Airbus SE A good330 conversions from ST Engineering's EFW jv with Airbus.
The P2F conversions certainly are a step beyond the cheaper non permanent conversions various airlines have implemented during the pandemic, which remove passenger seats to carry more cargo. Permanent conversions certainly are a financial bet that atmosphere freight demand, that was fragile before COVID-19, will remain strong for a long time to come as shoppers turn to e-commerce. The airline market estimates it will require until 2024 for passenger traffic to recuperate to 2019 levels.
Freight markets are actually notoriously volatile, however, and also have been beset by extended downturns; shortage can easily become overcapacity, analysts warn.
Normally about half of the world's cargo is carried in the bellies of passenger planes, but the hit to demand has left the world extra reliant in dedicated freighters.
"2020 possesses seen record high freighter aircraft utilisation, and our look at can be that the pandemic possesses accelerated the long-term structural change towards heightened e-commerce demand," stated CDB Aviation leader Patrick Hannigan. Boeing stated cargo yields possessed risen by 40 % through September due to the pandemic-related passenger disruptions, and it forecasts more than 60 % of freighter deliveries over another 20 years will come to be conversions instead of new widebody freighters like the 777. Narrowbody freighters are virtually all conversions.
The conversion boom can be helping aviation maintenance, repair and overhaul groups offset some of the lost business from the decline in passenger flights.
Such conversions generally cost huge amount of money on top of the expense of the aircraft and have three to four months, said ST Engineering Aerospace president Jeffrey Lam said.
His business is ramping up capability, with plans to convert at least 18 A321 planes next time, rising to around 25-30 annually later on, up from single digits this season. "We all have been booked out for 2021 for aircraft conversions," Lam said. "The primary slots are very well into 2022."
ST Engineering also might increase converted freighters to its leasing business, which has focused on passenger planes, he said.
IAI can convert 18 or even more 767s a 12 months and produces almost all of those used by Amazon.com Inc.
"We are investing a lot of effort to meet the market demand," said Yosef Melamed, basic manager of IAI's aviation group, which can be focusing on the first-ever before P2F conversion of the bigger 777-300ER within a 15-plane deal with GECAS.
"What happened with the coronavirus outbreak, professional flights were significantly lowered ... international flights dropped to practically zero," he said. "Therefore the only choice for transporting cargo, and with the trend that persons are residing at home ordering on line, is cargo planes."
US-based Aeronautical Engineers is also seeing a dramatic upsurge in demand for conversions, explained Robert Convey, its senior vice president for revenue and marketing, citing a 30-40 per cent fall in the worthiness of planes.
"We're seeing younger and young aircraft being converted as a result of large numbers of passenger aircraft that contain been grounded and so are not likely to return to service soon," he said.
Grant Stevens, vice president of corporate solutions at Canada's KF Aerospace, said increased demand for P2F conversions, which grew from about 10 per cent of its business prior to the pandemic to about 50 % today, has helped offset a decline in requests for aircraft maintenance.
"We have been in a position to employ almost all of our staff by doing conversions," he said.
