With a flood of orders and two product launches, Boeing has reversed its fortunes in the large freighter market
Only a year ago, prospects looked worrying for Boeing on the freighter front. Orders for the production of the 747-400F seemed to be dwindling and former customers for the aircraft – such as Cathay Pacific Airways, Korean Air and Singapore Airlines – were flocking to place orders for the recently launched 747-400 passenger to freighter conversion.
Boeing had still not confirmed launch customers for the stretched 747 (then known as the 747 Advanced), or for the proposed new 777-200LRF. Meanwhile, Airbus had run up 27 orders for the freighter version of the A380.
But then came a dramatic turnaround. In all, according to Thomas Crabtree, regional director, airline market analysis at Boeing, the company received 73 orders for factory-built large widebody freighters in the year to February – this in a sector where an order for 10 aircraft can still make the headlines.
Why the sudden rush? And does it suggest that cargo operators are showing a greater willingness to invest in new equipment? Crabtree insists not. “Up to the end of 2004, 45% of the freighters of over 65t of payload were conversions,” he says. “In the next 20 years, we predict that just over half will be new. So this is a gradual change, not a paradigm shift.”
Instead, Crabtree suggests a convergence of factors that created a bow wave of orders in 2005. Among these were an excellent 2004, with cargo growing 11%, and the fact that new aircraft launches generally attract a rush of orders. “Carriers hold back because they don’t want to be the first to jump in. Then once one jumps in, they all jump in,” he says.
There are other factors at work that could point to more permanent changes in buying behaviour, however. The most obvious is the high fuel price. This has led to a dramatic rush by major carriers to retire their gas-guzzling fleets of 747-200 freighters. The same trend is also making them choose replacements that will be fuel efficient in the longer term.
Japan Airlines has 10 747-200s that it is replacing with -400 conversions, and Air France will be using its 777s to phase out its remaining eight -200s. Even Northwest Airlines, which only got its 14th -200F in January, is now thinking about how to replace its older ones.
Perhaps the most dramatic story, however, is Nippon Cargo Airlines. Not content with signing for 14 747-8s, the carrier has also taken delivery of two 747-400Fs with six more to come, to replace its 11-strong fleet of -200Fs. According to Jacques Springer, its European marketing manager, it is so keen to get rid of the -200Fs that it is prepared to temporarily downsize its fleet, or lease them to other carriers under capacity-sharing deals. “With fuel prices as they are, the -200Fs simply don’t make money for us any more,” he says.
Production freighters
Nippon Cargo is also interesting because it originally placed orders for four -400 conversions, but has now changed its mind and gone for production freighters. The reasons are partly particular – it ended a relationship with All Nippon Airways, which was to have provided the passenger aircraft for conversion – and partly more universal.
The airline decided that the extra fuel efficiency, payload and range of the production freighter was worth paying for. The carrier also got a new majority shareholder – shipping line NYK – prepared to put up the finance.
Nippon Cargo is not the only airline arriving at such decisions, it seems. Korean Air ordered one -400 conversion from Boeing and 19 kits, but it now says only four of the kits were firm orders, and seems to be casting doubt on whether it will use those in its own fleet. Meanwhile, it has been taking more extended-range freighters (ERF) – it now has up to eight – and looking at the 747-8 and Airbus A380F.
Elsewhere, the availability of capital is leading lessors to switch to new aircraft. Air Atlanta Icelandic, for example, has until now leased 747-200s from their owners and wet-leased them to other carriers. Now it plans to exit - 200Fs sooner than expected – by 2009 – and replace them with eight 777Fs that it is purchasing outright.
It can do this thanks to the financial backing of the Avion Group since last year. Another example of investment money being prepared to back new freighters is lessor Guggenheim. It started by ordering -400 conversions, but last June also put in an order for six ERFs.
Crabtree is happy to acknowledge this trend among lessors. “They are seeing the same forecast numbers that we see. They see that cargo will continue to grow faster than the passenger business, so they realise it is a good thing to be involved in,” he says.
There are some more mundane factors at work in the rush for freighters. One thing that was notable in 2005 was the number of second-rank cargo airlines that talked about expanding their fleet with a clutch of MD-11 freighters, but then proved unable to source any.
The problem was that there was always a limited supply of conversion candidates, with only three dozen or so still in passenger service. And as one airline cargo manager ruefully acknowledged late last year: “UPS tend to get all those that are going anyway.”
The drying up of the supply of these freighters has led some of these carriers to look at 747-400s. Others will probably be purchasers of the -200Fs being retired by the majors.
What of Airbus? It has had no recent orders for the A380F, and has so far sold only two freighters to a conventional cargo airline – Emirates (the other orders are 10 each for FedEx and UPS and five for leasing company International Lease Finance). But Richard Carcaillet, director of marketing for the A380, remains sanguine. “It is being evaluated by several airlines, and one or two could make a decision this year,” he says. “We are sold out till the end of 2010, so there is no big incentive to rush the decision.”
Even the launch of the 747-8 only “animates the market”, he insists. While the two are closely matched in payload – 140t for the Boeing and 150t for the Airbus – the much greater range and superior cost per tonne of the A380F will count, Carcaillet reckons.
There are indeed encouraging signs: airlines such as Air France, China Airlines, Korean Air, Singapore Airlines and even Northwest Airlines all say they are considering the A380F, while FedEx and UPS plan to use theirs for heavy freight as well as express packages.
On the downside, Emirates shows no sign of expanding its order for two A380Fs and instead recently ordered eight 777 freighters. “The A380F will not have the same operational flexibility as other types because of the equipment required to load the upper deck,” says Ram Menen, senior vice-president cargo. “Until more airports are equipped with new high loaders that have this capability, the A380Fs will be restricted to our high-density trunk routes.”
Handling restriction
Nor, despite also operating A310 freighters, is Menen impressed by the Airbus boast about how easy it is to interline standard ULD containers and pallets between aircraft in its freighter family. “The A310 can contour to a maximum height of 92in [2.3m], while the A380 upper deck contours to a maximum of 82in. Whatever aircraft we use, there is still work to be done,” he says.
Carcaillet insists the high-loader issue is well on the way to being resolved, and says carriers who have compared the A380F and 747-8 have been impressed with the former. It is orders that count, however, and the next year will be an interesting test. A year does not make a trend, but Airbus could do with a convincing A380F order from a conventional cargo airline. As Crabtree says: “Once one jumps, others jump.” ■
PETER CONWAY / LONDON
Source: Airline Business
