AVITAS Key Takeaways – Cargo Facts Symposium – San Diego October 16-18
Cargo Facts Symposium 2019 – Key Takeaways
- Most delegates were positive on long-term growth despite trade headwinds. While cargo growth has been negative over the last year due to the tariffs and trade war, the express freight and e-commerce traffic have been growing at healthy rates. It has been the traditional heavy freight traffic and yield that has suffered and is expected to continue to decline as long as trade tensions remain elevated.
- GECAS and Israel Aircraft Industries (IAI) announced the launch of the 777-300ER freighter conversion program on October 16 with a firm order for 15 conversions and options for an additional 15. Program certification is expected by 2023.
- 777-300ERSF conversion cost was rumored to be $35 million, excluding maintenance. AVITAS believes the real conversion price will be under $30 million. This could put the on-ramp price at under $70 million by the certification date in 2023. A new 777-200LRF is valued at $165 million.
- The majority of the panelists on the appraiser panel believed 76-100 777s will be converted.
- While cargo executives on the airline panel agreed that the 777-300ERSF would be a good freighter for low-density e-commerce and express packages, Michael Steen, CCO of Atlas Air, was not convinced that the airplane would be a good replacement for large widebody freighters with nose loading capability such as the 747 and AN-124. He urged Airbus and Boeing to develop a real alternative to the 747-8F.
- Production of the 747 is only six aircraft per year. While there may be some limited demand for buying additional 747s, AVITAS believes Boeing will end production of the 747-8F around 2022.
- Most cargo executives believe the 767-300ER freighter is an excellent medium size aircraft for e-commerce and express freight. There is still a large supply of potential feedstock so conversion demand should continue for many years. It was noted that operators need to manage the supply of good, serviceable engines because those installed on conversion candidate aircraft are usually very close to their next shop visit.
- In a polling question, appraisers agreed that the 767 will be the most successful widebody freighter.
- DHL expressed interest in adding to their A330 conversions and possibly the CRJ200 conversion program.
- There was a consensus that both the 737-800 and A321-200 will make excellent conversion candidates to replace the 737 Classic and 757 freighters. The “pickle fork” issue on the 737-800 is viewed by most of the audience and appraisers as a temporary issue with no significant long-term impact.
- Panelists agreed that wide body freighter rents have softened but there is a strong market for nose-loading aircraft. Nose-loading aircraft not only provide for out-sized cargo shipments but also more efficient loading/unloading of typical cargo.
- There is a current shortage of narrow body feedstock for conversions, primarily caused by the MAX grounding.
- Jim Edgar of Cargo Facts advised that 1% of freight tonnage is shipped by air but this translates to 33% if freight is measured in value.