Dive Brief:
- Facing a shortage of wide body freighters, and the prohibitive cost of new aircraft, Boeing is considering a conversion program for its fleet of 777s, The Loadstar reports.
- Despite a few new orders from Qatar Airways, Lufthansa and All Nippon Airways, most airlines are reluctant to order brand new freighters.
- A new jet from Boeing would cost between $394 million and $425 million, depending on the model, according to 24/7 Wall St. A conversion model is estimated at $50-$55 million, one aviation expert told The Loadstar.
Dive Insight:
As supply of wide body freighters shrinks, the demand for them is growing. Combined with capacity issues, Boeing (and other manufacturers) have decisions ahead of them. Some carriers have tried it with older models, such as the 747-400 passenger plane, as well as the MD-11F, The Loadstar reported. There are not enough of either model, however, to fill the gap.
Boeing has yet to make a decision. "We are studying the market right now," said Tom Crabtree, regional director, market analysis, marking and business development at Boeing.
Lucas Kuehner, Global Head of Air Freight at Panalpina, told Supply Chain Dive that conversions might be the answer.
"Conversions could be a good option to address the air freight capacity crunch we have seen since the last quarter of 2016, especially if you consider that demand will continue to outpace supply in the foreseeable future," Kuehner said. "Quite a few cargo aircraft are older than 20 years and will be retired in the coming years. Also, Boeing is not expanding its production for 747 or 777 freighters. In other words, the incoming capacity over the next years will simply not be enough to cope with demand."
While much less than the cost of a new freighter, conversions are still expensive. According to a white paper from aviation consultants IBA, it’s also a very complex, time-consuming project.
"Not only does the conversion require additional investment in the asset, typically millions of dollars, critically the aircraft is also not generating revenue for the conversion period," the white paper stated. "Heavy maintenance and modifications are usually accomplished in conjunction with the conversion for convenience and cost saving, but operators and lessors should still plan for three to four months without revenue until the aircraft enters freighter service."
