Change is afoot in the P2F market, as supplies of stalwarts including Boeing’s 737-400 and 747-400, and Airbus’ A300 are exhausted, opening the door of opportunity to the 737-800, A320 Family, 777 and A330 as Paul E Eden finds.
Thomas Crabtree, regional director – Airline market Analysis at Boeing Commercial Airplanes, recently shared his view of the air freight industry with the author.
There are scare stories, sure, but he reckons that although the market may be a little soft, his customers are making money, and while e-commerce continues to expand, so too will the need for freighter conversions.
Surveying the industry from Boeing 737-sized aircraft up to the large widebodies, there are multiple variables at play. Among the narrowbodies, 737-400 feedstock is all but exhausted.
The earliest 737-800s are just becoming viable as passenger-to-freight (P2F) conversions for some operators, but the ongoing MAX crisis is likely to affect availability and values as airlines retain their NGs longer than expected to cover the MAX grounding.
Robert Convey, SVP sales & marketing at Aeronautical Engineers Inc (AEI), which dominated the 737-400 P2F market, says the company has delivered a pair of 737-800 P2Fs.
But, surprisingly, Convey notes: “Feedstock prices aren’t even close to favourable. It’s still very early in the programme for large numbers and the initial conversions have been for a small group of very select airlines.
I think it’ll be 2021 or 2022 before we start seeing a broader acceptance of lessors doing conversions and cargo airlines buying -800s for conversion. To me that’s a true testament to when a programme comes to maturity.
“Compared to our 737-400 conversion, we change all the aft floor beams, because it’s a cleaner, faster solution than the one we employed on the -300/400, otherwise the -800 conversion is similar. Freighters are like pick-up trucks; you want them simple and reliable, especially a converted narrowbody.
They need a proven airframe and dependable systems. Operators want to know the door will open when they need it to, and close afterwards.”
Convey says the -800’s more comprehensive avionics hold up well in the lower utilisation regime typical of a narrowbody freighter versus the airliner from which it was converted. His feeling is that the ‘highly complex’ Airbus A320/A321 may do less well with lower utilisation.
Nonetheless, the A320 is the obvious alternative to the 737-800, but represents a less straightforward conversion. Meanwhile, the A321 avoids the conversion complication of its smaller sibling and represents a worthy competitor to both 737-800 and 757-200 P2F options.
Feedstock levels for the 757 remain healthy, but will dwindle, leaving the A321 as the only realistic alternative.
Above the 757 in size, Boeing’s 767 remains an exceptional P2F product, while the Airbus A300-600 is at the very end of its conversion life.
The obvious continuation of the Airbus widebody P2F story, the A330, is just now becoming viable, while those looking for an even larger aircraft are restricted to one of two Boeing products, the 747-400 or 777.
Of the former, few seem likely for future conversion, and while no 777 has yet been modified, the aircraft is regarded by many as the future of the large widebody P2F market.
Portland, Oregon-based Precision Aircraft Solutions specialises in 757-200 and A321-200 P2F conversions, offering 757-200PCF and Combi versions, and the A321-200PCF.
Speaking about the future 757 P2F market, sales director Zach Young explains: “More than 220 suitable conversion candidates remain in passenger service, manufactured between 1990 and 2004 and with less than 28,000 cycles. Almost half these were manufactured between 1998 and 2004, which easily puts them in an acceptable age bracket for conversion over the next few years.
“Earlier aircraft tend to have more favourable pricing, but in the case of the 757 and many other newer aircraft, the bulk of the value resides in the engines. More recent aircraft tend to have better avionics, which also adds value.
“Many jurisdictions are imposing rules on imported aircraft age. It can be as low as 15 years old, as high as 25, or not an issue, depending on the region. Another consideration is aircraft operating weight. Low operating weights, such as that of the 220,000lb MTOW variant are not desirable for freighter operations. Such an aircraft would require an OEM upgrade to 230, 240, or 250,000lb, which is estimated to cost approximately $23/lb.
“Finally, we shouldn’t forget supply and demand. We see many 1993–95 assets converted because they are the only available airframes. Newer, more desirable airframes, although expected to exit passenger service over the coming years, are unavailable and force those needing 757 lift into older airframes. Nonetheless, even the older examples are generally very low cycle, less than 25,000 on average, when converted.”
Precision has Vallair signed as a launch customer for its A321-200PCF. Young expects more customers as feedstock becomes available, noting: “When 757 feedstock eventually runs out, operators will have no choice but to go to the A321 as a replacement of similar size.
“The A321-200PCF actually competes with the 757-200 and 737-800. It has 95 per cent of the volume of the 757-200, but burns 20 per cent less fuel, while it has similar operating economics to the 737-800, but with 30 per cent more containerised cargo volume. Each aircraft has its own niche and the A321 fits nicely in between.”
Precision does not offer an A320 conversion. “There are two issues that stand out on the A320. First, its engine costs are almost identical to the A321’s, and engines represent the largest cost associated with a freighter conversion. It makes sense to have an aircraft that hauls enough cargo to pay for its engines, which many believe the A320 cannot,” Young says.
“The second issue is the A320’s angle-of-attack [AoA] sensor, placed exactly where the main cargo door would go. Relocating it and making the new location work with the fly-by-wire system would not be impossible, but it’s definitely a challenge that would likely drive up the conversion cost.
“The A321’s AoA sensors are set far forward of the main cargo door and therefore not interfered with. After the cost of engines, heavy maintenance and conversion, only the fuselage is different and we feel the cost savings, if any, of the smaller A320 fuselage over an A321 are not significant enough to offer the A320 any advantage, especially considering the A321 will carry three extra main deck positions for its entire useful life of 12–15 years as a freighter.”
Asked about the effects of engine costs on P2F viability, AEI’s Robert Convey confirms it’s an issue for the 737-800 too. AEI’s -800 has an additional pallet position compared to its -400, which helps offset the additional cost of its engines. “The -400’s CFM56-3C engines might cost $2 to 2.5 million each to overhaul, but that rises to as much as $6 million for the -800’s CFM56-7B and many of those engines have yet to go through their first major shop visit.
They’re quite young and freight operators tend not to want engines with, say, 18,000 cycles remaining. They want no more than 6,000 cycles because they’ll never use more. The engine is really good, it’s designed to hardly ever come off wing, but when eventually it does, it’s for a $5 million plus overhaul. Operators are used to buying and converting a -400, putting it through maintenance and painting it for around $8.5 million, so the -800 represents a different world.”
Based in Dresden, Germany, Elbe Flugzeugwerke (EFW) offers both A320 and A321 P2F conversions.
Wolfgang Schmid, vice president of sales & marketing, quickly debunks any negativity on the A320 Family’s durability in freighter service: “Working with our joint venture partner Airbus, we looked at their customer support data for lower-utilisation aircraft. A320s employed this way match the operational reliability of higher-utilised examples; and average A320 Family reliability is above 99 per ent.”
The ST Aerospace/Airbus JV launched its A321 P2F programme against ten orders and Schmid says the first aircraft is scheduled for certification before the end of the year. He reports considerable interest in the A320, too, but says the company is not yet ready to announce customers.
While he shares Young’s enthusiasm for the A321 P2F, Schmid’s take on the aircraft is slightly different. “Although smaller than the 757, the A321 provides 14 per cent more containerised volume due to its unique lower deck loading features.
“On typical densities, it may cube out at 27 tonnes, but 27 tonnes is its payload, guaranteeing optimisation of operational costs. The A321 freighter won’t have a serious competitor. The A320P2F will compete with the 737 and holds 20 per cent more containerised freight than a 737-800. But it might be difficult to kick the 737 out of a market where it is already well placed.”
EFW is completing the last of its A300-600P2F conversions, for Uni-Top China. The future of its widebody P2F business therefore resides with the A330 and Air Hong Kong began operating two of its A330-300P2Fs for DHL early last year. The company awaits engines for its third and Schmid says there will be more conversions this year.
Meanwhile, EgyptAir has two EFW A330-200P2Fs in daily service and a third scheduled for August delivery. Again, Schmid says more conversions will follow.
On the factory A330F, Airbus relocated the forward undercarriage leg, levelling the aircraft’s otherwise pronounced floor slope, but requiring an underfuselage fairing to fully enclose the retracted gear. EFW avoids that complex requirement by installing a powered cargo loading system.
“It uses intelligent logic,” Schmid explains, “enabling smoother, safer and faster loading/unloading. It can move more than one container simultaneously and reduces staffing requirements to just two or three people.”
IAI BEDEK has long been known for its MRO and P2F conversion services, the latter specialising in Boeing airframes. Rafi Matalon, EVP Marketing at IAI Aviation Group says its busiest line is the Boeing 767, although its unique 737-700 P2F is also proving popular.
The 737-800 line is picking up, but he remains cautious over used prices during the MAX crisis; for the time being, he says, the 737-700 remains an excellent, affordable alternative to meet growing e-commerce demand.
Considering the 767, Matalon reveals: “We are fully booked through this year and 2020. The only limitation on 767 demand is feedstock, but we believe that over the next four or five years more will become available.
We provide a complete package, under a single contract, during every conversion, including full maintenance checks, within our standard four-month turnaround time [for a 767; three months for a 737]. The only thing we can’t do during conversion is painting, since you can’t paint an aircraft while it’s on jacks, so that might add another 10 days.
Also, if an undercarriage unit needs to be removed we’ll do that before we begin the process of structural modification. Once you’ve started ‘cutting’, you can’t change any of the loads on the airframe, so we don’t reinstall the landing gear until the structural work is complete – that can add two or three days too.”
BEDEK produced its most recent Boeing 747 P2Fs two years ago, but Matalon says the line remains open and the company is in dialogue with a customer interested in new conversions. “There are no longer any 747 freighters or converted freighters parked in the desert, so as the market grows, operators are looking for solutions. I’m certain we’ll do more conversions, because the market has a clear need for widebodies.”
Matalon explains that BEDEK has specialised in Boeing conversions primarily because of feedstock availability, but is now looking at the A330, which he considers an excellent, if not pricey, platform. “We’re seeing aircraft coming off their first lease, with the lessors facing the options of spending a lot to refurbish the cabin, sell the aircraft or tear it down. We’re offering another solution, requiring less investment than refurbishing the cabin and providing another 20 years’ service.”
Like the 767, the A330 satisfies the requirement for medium widebodies, and as 747 airframes become rarer, Matalon sees the Boeing 777 coming into its own. “We think it’s an excellent aircraft that will become the lead widebody platform. I believe we can expect to see the first 777 P2F appearing in about three years.”