IBA forecasts 1,000 PTF aircraft conversions over next 10 years as demand for freight continues to rise

AEI

There will be an additional 1,000 passenger to freighter (PTF) aircraft conversions over the next ten years, according to consultant IBA, as the number of freighter flights continues to rise.

During a webinar held this week by IBA in partnership with narrowbody aircraft conversions provider AEI, it was revealed that there has been an approximate 39 per cent rise in active freighter flights globally since 2019.

As of September 2021, there were 132,000 active freighter flights across the globe, compared with just over 95,000 in September 2019.

Data from IBA’s ‘InsightIQ’ platform indicates that there is a steady volume of freighter activity, with 110,000 freighter aircraft flying every month since March 2020.

Click to enlarge. Source: IBA

“The Coronavirus pandemic has shaken up the freighter market like never before, driving sustained growth in demand which we believe will result in around 1,000 conversions over the next ten years,” IBA’s president Phil Seymour told the webinar.

“Despite the next wave of widebody converted freighters such as the Boeing 777-300ERSF and Airbus A330-300P2F starting to come on stream, demand for legacy aircraft such as the Boeing 777-300ERSF remains strong.”

Data from IBA’s InsightIQ also indicates dominance of certain aircraft types in the PTF conversion market. In the main narrowbody segment, the Boeing 737-800 now dominates, with 36 aircraft converted so far in 2021, up from 27 in 2020, IBA said.

The webinar discussed the popularity of the 737-800 freighter with international operators such as iAero (DHL Express), Sun Country, Allied Air, ASL Airlines, China Postal Airlines and more purchasing this type. Of the 87 aircraft converted so far, over 60 per cent were built between 2002 and 2007, with the average age of the current fleet at just over 18 years old.

Click to enlarge. Source: IBA

IBA’s data illustrates that the typical trading range for a 737-800SF is between US$18 million and US$19.5 million, however some newer aircraft might attract values of just over US$20,000,000.

The Boeing 757-200 continues to be the pre-eminent candidate for conversion in the large narrowbody segment, with eight aircraft converted so far in 2021, 10 in 2020, and an additional 30 due to be converted.

IBA’s team of ISTAT-certified appraisers also highlighted current conversion costs, and how the costs are lower on average for Boeing aircraft than Airbus.

The 757-300 averages at US$5.2 million compared with US$6.14 million for the Airbus A321-200. The average conversion cost for the 767-300ER is US$15.8 million, in comparison to US$18.4 million for the A330-300.

Click to enlarge. Source: IBA

IBA data forecasts that as the feedstock of 757s dries up, the prices of A321 aircraft will reduce and more of this type will be committed for conversions. The typical value range of the A321PCF currently stands between US$21.5 million and US$24 million.

The Airbus A330 family is currently the most popular widebody aircraft in the market in terms of purchases for freighter conversions, IBA noted. Feedstock pricing in the A330 cluster is rapidly reducing, with 2009-build Rolls-Royce powered A330-300s, priced at US$25 million before Covid-19, now available for around US$15 million.

IBA believes that cargo operators will now seek much younger examples of this aircraft than the earliest MSNs and reap the benefits of additional years’ useful life and a longer-term asset investment. The typical value and lease rate range for converted A330-200P2F and A330-300P2F is between US$27 million and US$38 million.

It also estimated the cost of 777-300ER conversions offered by IAI to be around US$34 million to $37 million.

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