Cargo Conversion Specialists See Strong Demand Despite COVID-19

Boeing freighter aircraft
Boeing still sees strong demand for freighter conversions, despite COVID-19.
Credit: Boeing

The COVID-19 pandemic has turned the air transport industry on its head. Travel restrictions are hampering recovery efforts on the passenger side, while demand is outstripping supply in the cargo sector. In this context, strong interest in converting passenger aircraft to freighters is set to continue.

Amid major upheaval for all operators, air cargo is faring better than the passenger category: In August, according to figures from the International Air Transport Association (IATA), global cargo demand was down 12.6% compared with a year earlier, a slight improvement on the 14.4% drop recorded in July.

  • Growing e-commerce is driving air cargo demand
  • Air cargo capacity squeeze is set to underpin demand for new freighters and conversions
  • COVID-19 crisis is likely to increase feedstock for conversions

The real problem for cargo operators is a lack of capacity. Global capacity measured in available cargo ton-kilometers was down 29.4% in August, and the 67% drop in belly capacity for international operations was only partially offset by a 28.1% increase in dedicated freighter capacity, according to IATA. Daily widebody freighter utilization was close to 11 hr. per day, the highest levels since tracking of those figures began in 2012.

In its 2019 commercial market forecast, published before the novel coronavirus pandemic, Boeing had predicted demand for 1,040 new widebody deliveries and 1,780 conversions over 20 years. In its latest update at the beginning of October, Boeing scaled those numbers back—although it is still predicting a need for 930 production freighters and 1,500 passenger-to-freighter conversions during the 2020-39 period.

“Despite recent challenges, air cargo is forecasted to grow at an average annual compound rate of 4% in the next 20 years, led by the robust markets in East Asia and acceleration of e-commerce,” the manufacturer said. “Acceleration of passenger-airplane retirements as a result of the pandemic will provide additional feedstock opportunities for freighter conversions. The freighter fleet will increase by more than half: from 2,010 airplanes in 2019 to 3,260 by 2039, representing 62% fleet growth over 20 years.”

Michael Doellefeld, vice president of commercial services programs at Boeing Global Services, says demand for freighter conversions is still strong. “Even during COVID, we continue to see strong demand for both our 737-800 converted freighter as well as the widebody 767-300 converted freighter,” he notes. “That demand has not subsided during COVID, and in fact we are taking steps even now to open up some new conversion lines to react to that growing customer demand.”

Doellefeld says the company is seeing an uptick with orders from existing customers as well as interest from emerging customers.

The manufacturer is opening additional passenger-to-freighter conversion lines at Gameco in China for the 737-800BCF and at ST Aerospace Services Co. for the 767-300BCF.

“Those are [maintenance, repair and overhaul sites where] we have conversion production at today, but we are opening up additional capacity for the growing demand we’re seeing across our passenger-to-freighter offerings,” Doellefeld says.

In September, Boeing secured another two 737-800 freighter conversions for an undisclosed customer, taking its total to 134 orders and commitments for the type. It has 51 orders and commitments for the 767.

“Both pre-COVID activity late last year and more recent orders and commitments this year were factored into those decisions as well as the longer-term outlook,” Doellefeld says, referring to the additional capacity moves in China and Singapore. “We have confidence that growth will remain strong over a long-term of forecasted operation.

“We do expect demand for dedicated freighters to continue to grow,” he adds. “And it’s really being driven by increasing demand and expansions of express cargo markets and further developments in e-commerce, as well as the inherent demand of cargo itself.”

According to the Aviation Week Network Fleet Discovery database, by Sept. 15, 221 passenger aircraft had been converted to freighters since the beginning of 2018.

In Europe, the Airbus passenger-to-freighter conversion specialist EFW says demand for the A320/A321 passenger-to-freighter conversion is “very strong,” with conversion capacity booked out until the second quarter of 2022. The company obtained FAA validation for the type back in February, based on existing approval from the European Union Aviation Safety Agency.

“As part of the regular plan, we will ramp up our production and have started to qualify more and more conversion lines to satisfy this demand,” says Thomas Centner, EFW’s sales director of aircraft conversions.

EFW—based in Dresden, Germany—is focusing on ramping up its A321 and A330 passenger-to-freighter production capacity. Its secondary goal is to start A320 passenger-to-freighter prototype installations, a plan that was pushed back slightly in favor of escalating the A321 passenger-to-freighter activity more quickly than originally planned, Centner says.

According to Fleet Discovery data, EFW has converted two A330-300s so far this year.

EFW also attributes some of that demand growth to the growing e-commerce segment. While the COVID-19 pandemic has hit economies hard, with repercussions on spending power, on the flip side, lockdowns have also shifted retail behavior patterns toward increased online purchasing.

“COVID-19 has quickly accelerated online retail, and express demand grew in parallel,” Centner says. “In addition, the corona crisis kicked a huge portion of belly hold capacity out of the market, and today freighter aircraft are much more in demand.”

Israel Aerospace Industries (IAI) points to Chinese demand for freighters to fulfill the growing appetite for e-commerce. It delivered its first Boeing 737-700 passenger-to-freighter conversion to Tianjin Cargo Airlines in early October. The conversion took place at its Tianjin maintenance site through a partnership with the Haite Groupe. “With the rise of e-commerce and the resulting higher demand for cargo aircraft, together with the effects of the COVID-19 pandemic, cargo aircraft have become the lifeblood of the Chinese economy,” IAI says.

In addition to affecting day-to-day air cargo operations and demand for freighter aircraft, the COVID-19 crisis shows signs of creating a shift toward younger aircraft on average entering conversion programs, given the historically large numbers of parked passenger aircraft around the world, Centner says.

“Lessors and combination carriers have started to rethink their strategies, and many will return to invest in conversions to balance their businesses better,” Centner says. “Lower residual aircraft values make passenger-to-freighter conversion even more attractive as a sound investment opportunity.”

Centner adds: “I’m convinced that one of the lessons learned from this crisis will be that operating freighters is essential for global logistics chains as well as essential for revenue-balancing of airlines and asset management of lessors and investors.”

Helen Massy-Beresford

Based in Paris, Helen Massy-Beresford covers European and Middle Eastern airlines, the European Commission’s air transport policy and the air cargo industry for Aviation Week & Space Technology and Aviation Daily.