Asia is the hub of the world’s 747 cargo-conversion market, with the region’s overhaulers performing the work and its airlines accounting for most of the orders
Boeing is relying almost entirely on Asian airlines and maintenance companies to back its new 747-400 cargo-conversion programme, which entered production at the end of December following delivery of the prototype to launch customer Cathay Pacific Airways.
© CATHAY PACIFIC
Delivery of the first 747BCF to Cathay in December kicked off Boeing's programme
Over two-thirds of the 37 orders so far secured for the 747-400 Boeing Converted Freighter (BCF) programme are from Asian operators (see chart). All three maintenance, repair and overhaul (MRO) shops that have so far been appointed conversion centres are in Asia and more Asian MRO providers are looking to join the programme because most of the conversion slots for the first three years have already been sold.
China’s Taikoo (Xiamen) Aircraft Engineering (TAECO) is the only conversion centre under the Boeing supplemental type certificate (STC), which was secured from the US Federal Aviation Administration in December after two months of flight testing over the South China Sea near Hong Kong. It was the first time a US FAA certification programme took place entirely overseas.
TAECO shareholder Cathay placed the prototype 747-400BCF into service on 20 December. Also in mid-December, TAECO began work on the first production aircraft for another shareholder, Japan Airlines (JAL), and it will open a second 747-400BCF line at the end of this month and a third at the end of next month.
“We are having a little break, but by April we’ll have three lines,” says TAECO general manager of marketing Hans Chau. The prototype took six months to convert and the first production aircraft will take five months. But Chau says from the fifth aircraft the conversion, which includes installing a side cargo door and strengthening the main deck floor, will be carried out in only 128 days. TAECO’s three 747-400BCF lines will therefore give it capacity to convert about eight 747s a year.
Boeing, which also owns a stake in TAECO, has already committed to converting 50 747s in Xiamen. Chau says this commitment, which expanded from 33 to 50 in December, ensures that TAECO will operate its three 747-400BCF lines continuously until at least 2012. Boeing has already sold 26 of these slots – including six to Cathay, eight to JAL, one to Korean Air (KAL), one to Singapore Airlines (SIA), three to Air France and seven to US lessor Guggenheim Aviation Partners – and is responsible for selling the remaining 24.
“The marketing is done by Boeing and Boeing will assign aircraft to our facility,” says Chau.
Cathay says its second aircraft will be handed to TAECO on 20 February and redelivered on 20 June. Its other four slots at TAECO specify deliveries of converted aircraft in August 2006 and April, May and July 2007. JAL says its first aircraft will be completed at TAECO in mid to late May or early June at the latest. It plans to receive two more 747-400BCFs in the second half of this year, followed by three in 2007 and the final two in 2008.
The other two MRO companies that have also secured roles as conversion centres, KAL Aerospace and SIA Engineering, are independently marketing and selling passenger-to-freighter (PTF) conversions. KAL Aerospace general manager I H Kim acknowledges this arrangement means “sometimes Boeing and Korean Air are competitors and sometimes Boeing and Korean Air are in co-operation. Boeing marketing people say they will like to utilise their line [at TAECO], but if they exceed capacity of their own line they’d like to sell kits to Korean Air.”
KAL Aerospace will begin 747-400BCF conversions at the start of July and plans to operate two conversion lines from October. Singapore Airlines (SIA) Engineering says it plans to begin converting its first 747-400 in the third quarter of this year and will dedicate one of its widebody MRO lines to 747-400 conversions.
“We are buying the kit and selling the service with engineering support from Boeing,” explains SIA Engineering. “We are already doing business with other airlines for MRO. This is just another extension of our service offering.”
KAL and SIA KAL will be responsible for certificating each aircraft they convert, although Boeing will certificate the parts and engineering supplied as part of the kits sold to the two airlines. “These entities are responsible for certificating their own conversion work and showing that they have installed the Boeing service bulletin correctly,” Boeing says.
Neither KAL Aerospace nor SIA Engineering has converted aircraft before. But KAL Aerospace has manufactured components for commercial aircraft including the 747 and modified military aircraft. SIA Engineering points out that it already has experience with other modifications, including Section 41 of the 747 fuselages.
To help prepare their MRO shops for conversions, KAL and SIA will send their first 747-400s along with a team of technicians to TAECO before launching their own conversion lines. KAL says its first passenger 747-400 will be delivered to TAECO on 15 March and redelivered on 8 August. Kim says it will take KAL Aerospace just under six months to convert its first aircraft, which will be delivered at the end of this year. Subsequent aircraft will take four months to convert.
KAL Aerospace will dedicate two bays at its 100,000m2 (1 million ft2) Gimhae facility, where it now modifies and maintains military aircraft, to cargo conversions. KAL’s maintenance unit also has a large facility at Gimhae that is capable of performing passenger to freight (PTF) conversions, but the company decided to give the 747-400BCF project to the aerospace division.
SIA Engineering expects it can complete its first conversion in only three months. “We’re looking to get up the learning curve quickly,” it says. The company opened two new one-bay hangars last year and plans to dedicate one of these to cargo conversions.
The SIA aircraft to be converted at TAECO has been acquired by Dragonair of Hong Kong. Dragonair says this 747-400BCF will be delivered in October.
Of the seven 747-400s SIA Engineering plans to convert itself, four also have been sold to Dragonair, while the other three will be delivered to SIA Cargo following conversion. Dragonair says it will receive its first SIA Engineering-converted aircraft in December 2006. Its final three aircraft will be delivered in August and December 2007 and November 2008. SIA Cargo is scheduled to take delivery of its three 747-400BCFs from 2007 until 2009.
All seven aircraft to be converted at SIA Engineering are part of SIA’s passenger fleet, but the airline���s maintenance subsidiary is also looking to perform third-party conversions. “We’re very focused in growing our non-SIA, third-party work,” says SIA Engineering. “This PTF work is pitched at other airlines as well.”
KAL Aerospace has capacity to perform conversions for third parties
Kim says KAL Aerospace is also negotiating with several potential third-party customers, but so far it only has received commitments from KAL’s cargo division to convert four aircraft that are now in the carrier’s passenger fleet. KAL also holds options to acquire another 15 kits from Boeing, five of which would be used to convert aircraft for its cargo division and 10 of which it would use for third-party customers. KAL Aerospace seems to be in a good position to perform conversions for other carriers because it is the only provider with spare capacity in the near-term.
Boeing now has an agreement only with TAECO to convert the 747-400BCFs it sells, but the original equipment manufacturer (OEM) says it “may add capacity later”. Several MRO providers say they are considering introducing 747 conversion lines because demand has already exceeded capacity at TAECO.
Singapore Technologies Aerospace (ST Aero), for example, is interested in joining the programme within the next few years. “It depends on the market and whether the OEM needs more capacity,” says ST Aero president Tay Kok Khiang.
ST Aero aims to introduce a new cargo conversion product to replace its Boeing MD-11 PTF conversion line, which Tay expects will continue for about three more years. Tay predicts it will be difficult for KAL and SIA to certificate their own conversion products and secure contracts from third-party customers, which he believes are more inclined to give work to independent providers such as TAECO and ST Aero.
“It’s glamorous, but they [KAL and SIA] will discover the only way out will be to ask Boeing for technical assistance and that will not come at a low price,” Tay says.
Taiwan’s Evergreen Aviation Technologies (EGAT) may also later pursue a tie-up with Boeing on the 747-400BCF. EGAT does not have spare capacity now, as two of its four widebody slots are being used to convert 747-400s into Large Cargo Freighters (LCF) for Boeing. The first of three 747-400LCFs, to be used to transport 787 subassemblies, is due for delivery in the second quarter and the second in the fourth quarter of this year. EGAT could begin simpler 747-400BCF conversions in 2007, but an EGAT source says if the price of the conversion is unattractive it will stick to MRO and speciality conversion work.
To meet a possible surge in demand for 747-400BCFs, TAECO may also increase its conversion capacity after it opens an additional two-bay hangar in mid-2007. “By then we’ll decide how to use this hangar, for maintenance or cargo conversions. It depends on demand at the time,” Chau says. “We want to balance the two.”
TAECO opened its fourth hangar in December, giving it total capacity to handle up to eight 747s simultaneously. The fourth hangar, which can accommodate two 747s, is now being used for heavy maintenance, but starting this month will be used exclusively for 747 cargo conversions. One of the original three hangars, which was used to convert the prototype 747-400BCF, now houses the first JAL aircraft and will continue to be used for conversions. “We think three lines is an optimal number, but we’re not closing the door on more. It depends on the requirement,” Chau says.
SIA Engineering, which has the capacity to work on eight widebodies simultaneously, says it can add a second 747 cargo conversion line if necessary. “At the moment it’s one at a time,” it says. “[But] it has a huge potential as a freighter. We do foresee demand as the cargo business picks up.”
Boeing projects the widebody freighter market will grow from just over 800 aircraft today to more than 2,200 aircraft in 2024. It estimates almost 500 of the roughly 1,400 widebody freighters to be added over the next 20 years will be converted 747s.
But Israel Aircraft Industries (IAI) also aims to capture some of this market and is developing its own PTF and combi-to-freighter conversion products for the 747-400. IAI is similarly looking to Asian carriers and MRO shops to back its programme. Taiwan’s EVA Air has already placed a launch order with IAI for four 747-400 combi-to-freighter conversions and China’s Guangzhou Aircraft Maintenance Engineering (GAMECO) has expressed an interested in becoming a second conversion centre using the IAI STC.
IAI is now converting a prototype aircraft at its own shop in Tel Aviv and says 747-400 conversion slots at the facility are already fully booked through 2009. GAMECO, which earlier this month opened for IAI a cargo conversion line for Boeing 737-300/400s, says it will be ready to introduce a 747-400 cargo conversion line in 2007. GAMECO business development director Joey Lo says there is a lot of demand now for 747-400 conversions because “there is a backlog” at all the existing conversion centres. But he says GAMECO has to build up its 747 heavy maintenance capability before it can enter into serious discussions with IAI over establishing a 747 PTF conversion line.
GAMECO began 747 C checks in 2003 and is now doing its first 747 D check. “We need to do four to six D checks until we are comfortable doing a cargo conversion,” Lo says. “It will take at least a year.”
IAI also earlier approached EGAT and ST Aero. But Tay says ST Aero decided against joining IAI’s programme since at the time it had no spare capacity. “Currently there is no discussion” with IAI, Tay says.
BRENDAN SOBIE / SINGAPORE