Strong airfreight demand in China and Singapore spur Boeing 737 orders and new conversion lines

Dive Brief:

Boeing has opened conversion lines in Guangzhou, China, and Singapore to turn passenger planes into freighters in response to a growing demand for air cargo in the region. The company received an order for two 737-800 converted freighters, according to a statement this week, bringing the total ordered or committed conversions to 134.
The new Guangzhou and Singapore conversion lines are set to open early 2021 and later this year, respectively. The 737-800 freighter is suited to short hauls of less than 2,000 nautical miles, according to Boeing.
Airfreight capacity continues to be down from last year, down 24% year over year in the third quarter. Capacity has been slow to return to the market with year over year declines inching down 11 percentage points between April (down 42% YoY) and July (down 31% YoY). The recent boost in global economic activity has outpaced capacity, creating a challenge in meeting demand, International Air Transport Association Director General and CEO Alexandre de Juniac said in an August statement.

Dive Insight:

New orders for Boeing 737-800BCFs and additional conversion lines — one for Guangzhou Aircraft Maintenance Engineering Company Limited and another at ST Engineering’s facility in Singapore — will add more airfreight capacity and options to the market. Since planes were grounded at the start of the pandemic, increased demand for air cargo is driving carriers to meet the current need to get goods from suppliers to customers fast.

Although airfreight capacity is down, the drop is driven by the lack of cargo held in the belly of commercial flights, underscoring the need for additional air cargo. Still, "cargo revenues have supported airline finances and network restart and are one of the few bright spots," as stated in an IATA Cargo Chartbook for Q3 2020.

The restart of the global economy in the spring allowed for air cargo volumes to slightly lift, based on data collected in July by the IATA. The launch of new freighter conversion lines, and Boeing's 134 orders for the 737-800BCF suggest that the trend is continuing.

Boeing had asked its suppliers to halt production in June, citing high inventory and low airline industry demand because of the pandemic. There are now signs that more production is to come, at least for airfreight. "Demand for freighters continues to increase in multiple markets," company spokesperson Rafeal Gonzalez shared by email. He added that the assembly of 1,040 new freighters and 1,780 converted freighters are needed to replace older generation ones to alleviate demand pressures.