US cargo carrier Southern Air has committed to acquiring 10 Boeing 777 freighters and expects to be the first wet lease carrier to operate the new type.
Southern chief executive James Neff revealed during a speech today at the Cargo Facts 2008 aircraft symposium in Miami that Southern will begin the process of replacing its ageing Boeing 747-200s with 777s next November. He says Southern, which specialises in the aircraft, crew, maintenance and insurance (ACMI) or wet-lease market, has now committed to 10 777Fs, up from an initial commitment of six.
"We'll be leapfrogging two to three generations in aircraft technology," says Neff. "We'll be the first ACMI airline in the world to operate next generation widebody freighters."
Air France is the launch customer of the 777 freighter, with the first batch of deliveries now scheduled for delivery later this year. The 777F flew for the first time in July and Boeing vice-president marketing Randy Tinseth says the manufacturer continues to flight test the aircraft despite the current machinist strike, albeit at a reduced schedule. He says it is too early to say if there will be an impact on the delivery schedule.
Neff says all the 777F customers ahead of Southern are scheduled carriers rather than wet lease operators. He says Southern Air will also beat rival Atlas Air in offering a next-generation freighter in the ACMI market as Atlas is not scheduled to receive its first of at least 12 747-8Fs until early 2010.
Neff says Southern, which also looked at acquiring the 747-8F, was attracted to the 777F because it can operate most transpacific routes without a fuel stop in Anchorage. "That's a huge savings for us," he says.
He says the 777F also burns 40% less fuel per hour when operating empty compared to when operating full loads. This is another key benefit on Asian routes as most transpacific air cargo flows are heavily imbalanced in favour of eastbound traffic.
Southern first revealed plans last year to lease six 777Fs from its new sister leasing company. US private equity firm Oak Hill Capital, which acquired Southern Air last July, placed orders for six 777Fs in early 2007 on behalf of its new leasing subsidiary.
Neff, which founded and continues to own a stake in the carrier, says "Oak Hill has given us the opportunity" to renew Southern's fleet.
According to ATI's ACAS database, Southern currently operates 12 747-200s. Neff says despite the rise in oil prices and the shutdown of several 747-200 operators over the last year the 747-200 is "not dead".
He claims those 747-200F operators failed to invest in the infrastructure required to run a reliable operation.
"There's more to the story than just fuel. The 747-200 is viable but it's extremely maintenance intensive. You need to invest in infrastructure," he says, adding Southern does its own maintenance in-house.
But Neff acknowledges "sometime in the next decade" Southern will retire its last 747-200. "All good things must come to an end," he says.
Neff also claims the US air cargo industry is not in crisis and what it really needs is a relaxation of ownership restrictions which now prevent carriers from selling majority stakes to foreign owners.
"It's time to look at that. It's an important issue," Neff says.
He adds that with the 777F, 747-8F and new A330 freighter now available, US cargo carriers have more new aircraft options than ever before. But he says they need to be able to attract capital from outside the US.
"We all know these companies need to re-equip, need new systems," he says.