What happened to the widebody conversion market?

2013 was a very good year in the narrowbody conversion market, as orders poured in for passenger-to-freighter conversion of 737-300s, 737-400s, MD-80s, and 757-200s. For those offering widebody conversions, however, it was “the year that wasn’t.” That is, as far as we know, there was not a single widebody conversion order placed in 2013.

Passenger-to-freighter conversion programs were available for the 747-400, MD-11, A330-200/-300, and 767-200/-300, as well as the recently-introduced LCF conversion program for A340, A330, and 777 airframes,  but if there has been an order for any of those, it was not announced. The most recent activity is a three-unit 767-300BCF order placed by Guggenheim Aviation Partners in late 2012. In fact, that Guggenheim order is the only widebody conversion order placed in the last two years – there were a handful of 747-400BDSFs/BDFs and 767-300BDSFs redelivered in 2012, but the orders for those conversions had been placed earlier. [Note: A reader from DHL Express has reminded me that DHL took delivery of rather a lot of freighter-converted A300-600s in 2012 and 2013. However, these conversions were ordered earlier.]

Part of the explanation lies in the fact that the last two years have seen almost no growth in demand for airfreight, coupled with a significant increase in capacity. Dozens of new-build 767-300Fs, A330-200Fs, 777Fs and 747-8Fs entered service during the period, along with a steady stream of cargo-friendly 777, 787, and A330 passenger aircraft. This put pressure on yields and carriers responded by parking older freighters.

If the trend of demand growth that began in the third quarter of 2013 continues through the first half of 2014, carriers looking for widebody lift but unable to afford new-build freighters may come back to the market, and we would not be surprised to see some orders for A330 and 767 conversions. However, given that there is no shortage of large widebody freighters – both production and conversion – available in the used aircraft market, a fresh round of 747 conversion orders seems much less likely. The US desert is awash with 747-400Fs, BCFs, and BDSFs, many in excellent condition, and more are on the way. And while the MD-11 P-to-F program may be still officially on offer, no one expects that there will be any more conversions. Not only are there plenty of used MD-11Fs available, but there is almost no feedstock.

As to the LCF – the Low Cost Freighter based on using internal lifts to move pallets from lower deck to main deck, thereby eliminating the need for a main-deck cargo door, the jury is still out. The concept has been on offer from LCF  Conversions for about two years, but so far the company has received no orders. Will an upswing in air freight demand change that? We shall see.

And what about future conversion programs? If the air freight market had seen strong demand growth over the last few years, it is possible that Boeing or Bedek Aviation Group might already have launched a P-to-F program for the 777-200. But now, with so many used 747-400Fs/BCFs/BDSFs and MD-11Fs available, can Boeing or Bedek see enough demand for a freighter-converted 777 to justify the investment required to launch such a program? In the near term, at least, that seems unlikely.

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14 Comments

  1. davidharris says:

    Note: A reader from DHL Express has reminded me that DHL took delivery of rather a lot of freighter-converted A300-600s in 2012 and 2013. I’ve added this to the above story, but since these conversions were ordered earlier, it doesn’t change the fundamental thrust of the story — that widebody conversion orders have dried up.

  2. Specially for CargoFacts supporters of the ‘First Concubine’ vs ‘Crazy Uncle’ line freight strategy paradigm, here’s some ad hoc literature on how Retail Psychologists may use line freight to improve their on-line (CRS) bottom-line offer (Tony Fernandes, this is for Air Asia !!) : http://media.wix.com/ugd/4f7666_8025416a5df54a55adc9aeaec3dd066e.pdf?dn=H21QR%2Bfor%2BLCC%2B199%2Bpax%2BSweet%2BSpot%2Bvs%2BA321%2Bhighest%2Bdensity.pdf

    http://media.wix.com/ugd/4f7666_730523837cffb0b756ff60295b792bd6.pdf?dn=PIP%2B-%2Bdeterring%2BRASM-CASM%2Bstrategy%2Bfor%2Bairline%2BRetail%2BPsychologists.pdf

  3. http://avia.superforum.fr/t1377p60-nouveau-superfreighter#37367

    Not to allow the within embryon of discussion dry up into oblivion (thanks for your inputs, Alan & Don !), with the assistance of David Harris I’d suggest to move this whole debate over to a new à-propos thread c/o CargoFacts, to be labelled something like “Could a New SuperFreighter (or an AGA-liner or a TEU-liner) accelerate Modal Change from shipping to airfreighting ?” … also note related comment c/o Leeham : http://leehamnews.com/2014/02/03/updating-the-a380-the-prospect-of-a-neo-version-and-whats-involved/#comment-53681 – it spells out the exact nature of the current Long Haul fleet planning vacuum problem @ Airbus …

  4. Morten — best wishes.

    It remains my perspective that if there were demand to air freight TEUs then the 21 civil An-124-100s would be doing it today.  When there are four of them flying TEUs exclusively … then it’s time to develop thinking on what is next.  Airship or airplane. 

    Boeing would love seeing Airbus get more into freighter development tying up engineering resources.  Given the state of production built freighters by Airbus when their sole production freighter the A330-200F is subject to fratricide by its own EADS-EFW/ST Aero conversion partners the idea of a production A350-based double hull freighter is in my opinion well beyond their universe. 

    Suggest as this is clearly a passion of yours that you not trap yourself in mode and means and consider the full end to end value chain.   If there is a market for premium expedited TEU traffic that bypasses canals, Panamax-limited ports and commodity choked rails and roads then suggest letting the problem find the best solution … in which case it may well be the airship model which evolves.

  5. Don’s view above is pretty much the same as mine. There is currently no real demand, and if such demand develops, I expect it to be met with airships, rather than freighter aircraft.

    The longstanding problem of dealing with buoyancy while loading and unloading now appears to have been solved (the Aeroscraft is a good example), and I think that was the last real barrier to the entry of airships into the commercial airfreight business. This, of course, comes with the caveat that we need to see an Aeroscraft or similar vehicle actually flying in commercial service before we can be certain, but it looks to me like that is the future of the outsize and heavylift sector of our industry.

  6. @Don: I believe you are right that demand would have already created a market for the TEU-liner concept if demand were really there. However, if proof of market demand is always the existence of the product to fulfill that demand, who would ever build the first of anything? Which came first, the chicken or the egg?

    This discussion reminds me of the famous (to economists, anyway) story of the economist whose colleague points to a $20 bill lying on the sidewalk. He asks his friend, “Didn’t you see that $20 bill back there on the ground? Why didn’t you pick it up?” To which, the economist answers, “Yes I saw it, but I didn’t stoop to pick it up because in market equilibrium it’s not there.”

    @David: I have only one word to say about a re-booted Zeppelin with up to 6,000 km range that operates with a service ceiling of 12,000 ft. – Weather.

  7. @Alan … Proof of market demand does not necessarily need to exist … but when that capacity does exist and isn’t being used … that’s telling. 

    If Maersk thought they could up offer expedited TEU delivery at a high premium with a much larger margin than commodity boat-freight wouldn’t they be going that now?

    There was no commercial demand for oversize cargo transport that drove the An-124 production.   The An-124-100s were off production line modifications of Soviet military counter to the Lockheed Martin C-5 for Aeroflot that never got off the ground before Soviet breakup.  Loss of central Soviet funding to run Antonov Design Bureau and pay the salaries of engineers, production and test center staff and their facilities led Ukrainian ADB’s leaders to capture Mikhail Gorbachev on a visit to Gostmel and made a pitch to allow them to form an airline to pay for running ADB.  When central govenment ministers objected but denied being able to fund ADB … Gorbachev approved the launch of Antonov Airlines.  VDA joined ADB as components of Heavy Lift … and the market was formed.  But it was supply driven … not demand driven.   

  8. http://www.ibtimes.com/zeppelins-making-comeback-aeroscraft-airship-future-air-transportation-says-california-company

    There you go Alan … someone is developing a capability based on some expectation of needing to move real big things.  Notice none of the pictures show moving TEUs. 

  9. Here I’m addressing the various views expressed in favor of Airships … I can clearly envision such a contraption playing an active role somewhen around 2030, in Barcelona, hoisting the finishing golden spire to the top of Sagrada Familia’s highest tower … ie, working as a gigantic CRANE for precision outsized operations, LOCALLY … within a range of 100 km, at speedsof less than 30 kts.

    I don’t see Airships ever used as mass-movers of general purpose AGA over 4,000 nm + ?

  10. Secondly, I’m a firm believer of the causal precedence TOOL (creates) FUNCTION (creates) MARKET ! The tools are created by visionaries, by inspired vanguard forelopers. The examples are innumerable ! Recently you have Internet and SMS. More pertinently, I would point to the First Modal Revolution, civil air transport of passengers (1925-1965). Who created Cathay Pacific, BOAC, British Airways, Hapag Lloyd, UTA, LuftHansa, SAS etc etc ? Answer : international shipping ! When did it happen ? With the venue of tools such as DC-3, DC-6, Super-Constellation etc etc !

    You propose :  there is currently no market for airfreighted AGA ? My response is : are you blind, TEU move by the millions, by Triple E !! Give Shipping the right tool and those boxes will start moving by the thousands, by air ! Shipping control 98 % of the world’s containerized merchandise, the initial impulse towards the Second Modal Revolution will come from Shipping : History is a spiralling repetition of itself !

    The sine-qua-non condition for the flag signalling ‘GO’ is the venue to the market of the right TOOL, ie an AGA-liner capable of costs per FTK competitive with (@ marginal costing) current WB belly-freight, ie somewhere in the vecinity of 18 cents of €/FTK, at current fuel prices.

  11. Obviously, I’m near the Beatles’ happy age of 64 and not anymore a credible “Macher” in the German sense … but I’ve worked in Shipping (we introduced Ro-Ro vessels into regular Line service on WAC, Hamburg – Pointe Noire, ending the docking queues in Nigeria for Leif Höegh & Co). I am aware of what the right tool can do to servicing and developing the market ! My purpose here is to influence Airbus into serious airfreighting involvement, in two main directions : F20QR + F21QR (feeder freighters, quick rotation, based on A32X Series) on the low end, plus the TEU-liner on the high end. If Airbus hears me, I’ll be satisfied ! Today, airfreighters are the fifth wheel of Airbus’ car ?!

  12. If Airbus is going to advance its flagging freighter business, it will need to employ limited engineering resources post-A350 that will be devoted to improving the economics of the passenger A380 and developing an answer to the 77X. I don’t see a clean-sheet freighter on the near horizon.

  13. My timeframe is 2023, based on (resource-extensive) reworking of existing CATIA-seized numerical protocols for either A330/A340 Series or (preferably) A350 Series (programme time saving = 3+ years = 7+ billion $). And btw, the 777X poses no near/medium term threat to Airbus, relax, Alan : that market sector is/will be safely boxed/patched/stitched/framed/covered in due time (2020 ?) !

  14. From your silence, Alan, I am led to presume you are interloqued ? Or that you simply don’t believe the rubbish verbiage of FT ? But let’s take a look around : we have the A333 twin … and we have the A346 quadri, 130 units of those are still up there flying … the production of A34X was stoppped (recently) but the A33X (+A34X, combined) FAL is fully upn’running, spewing out between 11 and 12 units/month. Take a look at the A346 cabin : it is 61 meters long = 2,400 inches/200 feet. In a high-density seating, disregarding EEs, calculate : 2,400/33″ = 72 rows = 576 seats (8-abreast) or 648 seats (9-abreast). Theoretically.

    Realistically, the A346’s current EE seating limit is (4 type A doors) 4 x 110 = 440 pax … add one overwing Type III EE (+ 35 pax, a retrofit job) and you elevate the EE-related capacity to 475. Add one pair of owerwing Type A EE door instead of the referred Type III flip-out EE, and you authorize 550 pax … Alan, do you think Fabrice and John are sitting in their offices in Toulouse spinning thumbs ? This last EE limit upgrade obviously is a PRODUCTION (NEWBUILD) SCN, not retrofittable.

    Why do you think the A333 is suddenly picking up sales numbers ? Because the application to A333 of the fifth overwing Type A EE door (new SCN ?) is just around the corner, together with a NEO decision … and if the same EE modification is applied eventually to a new  A336 NEO, even better :

    The customer asks ? Airbus has the answer ! And there is no need to wait until 2022 for slots …

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