ACMG Narrowbody Freighters Webinar Presentation (PDF)

Narrowbody  Freighters:  How  
Long  Will  the  Boom  Last?
Air  Cargo  Management  Group  
27  February  2014  
11:30  (UTC  -­‐5)  
Alan  Hedge  
Research  Director  
+1  (206)  801-­‐8472  
ahedge@acmg.aero  
www.acmg.aero  
 

The  Current  Boom
•  A  remarkable  resurgence  in  the  narrowbody  freighter  conversion  market  

•  Despite  weakness  in  global  air  freight  demand  
•  Despite  no  demand  for  widebody  freighter  conversions  
•  The  number  of  narrowbody  freighters  is  on  the  rise  while  the  quanSty  of  widebody  
freighters  is  declining  

•  56  narrowbody  freighter  conversions  were  delivered  in  2013  
•    30  737-­‐300s/-­‐400s  
•    19  757s  
•    7  Other  (MD-­‐80F  and  737-­‐400,  757-­‐200  combis)  

•  Demand  is  widespread    
•  A  healthy  backlog  is  building  

Where  and  Why?
•  Overall  freight  traffic  growing  slowly  since  mid-­‐2013  
•  But  nine  consecuSve  months  of  y-­‐o-­‐y  gains  

•  Asia  trade  lanes  growing  fastest  –  especially  Express  
•  China  express  package  volume  grew  by  nearly  70%  in  2013  
a^er  growing  50%  in  2012  
•  Much  of  this  was  ground  

•  China’s  express  carriers  operate  about  60  NB  freighters  
(10%  of  global  fleet)  

•  Air  China  Cargo,  China  Postal,  Donghai,  SF  Express,  Yangtze  River  
Express,  Zhejiang  Loong  
•  WaiSng  in  the  wings:  STO,  YTO,  and  others  

Domes?c  China    
Air  Cargo  Demand
•  DomesSc  China  air  freight  demand  
has  experienced  nearly  11%  
compound  annual  growth  since  
2000  

Photo:  Maarten  Visser  

•  Traffic  is  sSll  less  than  3%  of  world  
•  Less  than  1/3  of  US  domesSc  market  

•  If  China  air  freight  market  grows  at  
8%  per  year  it  will  be  as  large  as  
today’s  US  domesSc  market  in  16  
years  

Photo:  Shimin  Gu  

Photo:  Alec  Wilson  

Narrowbody  
Freighters  by  
AircraB  Type

•  Two  models  dominate  
•  737  Classic  (-­‐300/-­‐400)  
•  757  

•  One-­‐third  are  older  
types  headed  for  
reSrement  

MD-­‐80  
0.2%  

[CATEGORY  
NAME]  
 
757-­‐200s  
39%  

737-­‐400s  
8%  

Older  Types  
32%  

737-­‐300s  
21%  

600  Aircra^  

Regional  Distribu?on  and  Type  of  Carrier  –  Express  Dominates
North  America  and  Europe    
Dominate  Now  
LaPn  America  
7.1%  

FedEx  and  UPS  More  Than  One-­‐Quarter  –  
Express  and  ACMI  (mostly  Express)    
Over  Two-­‐Thirds  

Middle  East  
1.7%  

Africa  
7.8%  
Other  Asia  
Pacific  
10%  

North  America  
42%  

China  
10%  
Europe  
21%  

120  airlines  =  600  aircra`  
 
Concentrated  at  the  top:  
 
 Top  four  (US  &  European  
Express)  =  1/3  fleet  
 
 Next  three  are  Chinese  
Express  operators  =  8%  
 
 Remaining  113  airlines  =  58%  

CombinaPon  
8.1%  

FedEx  
14%  

All  Cargo  &  
Other  
24%  

UPS  
13%  

Other  Express  
and  ACMI  
41%  

737-­‐300
•  Over  1,000  produced  1984-­‐1999  
•  Price    $5-­‐6  million  
•  Feedstock
million  
•  Conversion

 

 $2.5-­‐3.5  

 $2.5  million  

•  Payload  

•  8  pallets  (88”  x  125”)  
•  20  tonnes  

•  STCs  

•  AeronauScal  Engineers,  Inc.  (AEI)  
•  Israel  Aerospace  Industries  –    
Bedek  (IAI)  
•  PEMCO  

•  8  redelivered  in  2013  

737-­‐400
•  Almost  500  produced  1988-­‐2000  
•  Price    $6-­‐8  million  
•  Feedstock
million  
•  Conversion

 

 $3.5-­‐5.0  

 $2.75  million  

•  Payload  

•  10+  pallets  
•  22  tonnes  

•  STCs  

•  AEI  
•  IAI  
•  PEMCO  

•  22  (+4  combi)  redelivered    
in  2013  

757-­‐200
•  Over  900  produced  1982-­‐2005  
•  Price    $10-­‐15  million  
•  Feedstock
million  
•  Conversion

 

 $5-­‐10  

 $4.5-­‐5.0  million  

•  Payload  

•  14/15  pallets  
•  35  tonnes  

•  STCs  

•  Precision  Conversions  
•  ST  Aerospace  

•  19  (+1  combi)  redelivered    
in  2013  

Photo:  i4lcocl2/Shuperstock  

MD-­‐80
•  Over  1,200  produced  1982-­‐2000  
(MD-­‐80/90)  

•  55%  of  fleet  younger  than  25  years  

•  Price    $3-­‐4  million  
•  Feedstock
million  
•  Conversion

 

 $0.75-­‐1.5  

 $2.35  million  

•  Payload  

•  12  pallets  (88”  x  108”)  
•  21  tonnes  

•  STCs  

•  AEI  

•  2  redelivered  in  2013  

•  6+  scheduled  for  2014  
Photo:  AEI/Lans  Stout  

How  long  will  popular  feedstock  last?
Max  Avail  757-­‐200  Units  Aged  15-­‐20  Years  

Max  Avail  737-­‐400  Units  Aged  15-­‐20  Years  
250  

140  
120  

200  

80  

Aircra^  

Aircra^  

100  

60  

150  

100  

40  
50  
20  
0  

0  
2014  

2015  

2016  

2017  

2018  

2019  

2014  

2015  

2016  

2017  

2018  

2019  

What’s  Next?
•  Not  all  about  China

   

•  Great  air  freight  potenSal  in  the  intra-­‐Asia  market  
•  Brazil  and  India  offer  longer-­‐term  opportuniSes    
•  Growing  economies,  expanding  middle  classes,  geographically  large  

•  Current  narrowbody  demand  is  global  
•  Korea  and  SE  Asia,  North  America,  LaSn  America,  Europe  and  Africa  

•  New  conversion  opSons  will  follow  the  737  Classic,  757-­‐200,  and  MD-­‐80  
•  Interest  is  building  among  converters  and  airlines  for  737NG  and/or  
A320  freighters  

Boeing  737NG
737-­‐700F  

737-­‐800F  

•  Over  1,100  produced  since  1997   •  Over  3,100    
produced    
•  88  units  now  aged  15-­‐20  years  
since  1998  
•  Feedstock  price  $11-­‐12  million  
•  65  units  now    
aged  15-­‐20  years  
•  Payload  
•  Feedstock  price  $15-­‐17  million  
•  8  pallets  
•  19  tonnes  
•  Payload  
•  11  pallets  
•  Market  analysis  phase  by  Boeing  
•  23  tonnes  
and  others  
•  Market  analysis  phase  by  Boeing  
and  others  

Airbus  A320  Family
A320-­‐200  P2F  
•  Over  3,500  produced  since  1988  
•  176  units  now  aged  15-­‐20  years  
(HGW  1996-­‐  )  

•  Feedstock  price  $12-­‐15  million  
•  Payload  
•  10  pallets  
•  23  tonnes  

•  STCs  

•  Airbus  Freighter  Conversion  (program  
suspended  during  engineering  phase)  
•  Non-­‐OEM?  

A321-­‐200  P2F  
•  Nearly  800  produced  
since  1996  
•  36  units  now  aged  
15-­‐20  years  

•  Feedstock  price    
$13.5-­‐17  million  
•  Payload  
•  13  pallets  
•  28  tonnes  

•  STCs  
•  Airbus  Freighter  Conversion  (program    
suspended  during  engineering  phase)  
•  Non-­‐OEM?  

Conclusions
•  Narrowbody  freighter  demand  is  strong  globally,  driven  today  by  China  express  
market  growth  
•  737  Classic  and  757  dominate  now  
•  At  current  conversion  rates,  availability  will  taper  in  next  five  years  

•  MD-­‐80  program  has  found  a  successful  niche  role  
•  Launch  of  a  737NG  program  by  Boeing  or  one  of  the  conversion  houses  
increasingly  likely  
•  Will  an  A320/321  follow?  
•  Will  Airbus  resume  its  AFC  project?  If  not,  who  will  step  in?  

•  How  will  demand  respond  when  the  on-­‐ramp  converted  freighter  price  doubles?  
•  Will  the  China  express  market  follow  the  US  example?  
•  How  fast  and  how  strong  will  other  markets  develop  a^er  China?