CFS: Freighter conversions booking into 2024 as market scrambles to add cargo capacity

LAS VEGAS — The market loss of cargo capacity amid reduced passenger aircraft operations during the COVID-19 pandemic has spurred an influx of freighter conversion orders that is filling order books into 2024, according to panelists at Cargo Facts Symposium. “We just booked our first 2024 slot on Monday, so we’re sold out through about half of 2023 on our 737-800 line,” Robert Convey, SVP of sales and marketing at Aeronautical Engineers Inc., said during the panel discussion “Playing the slots: Freighter conversions forecast.” The backlog for converting older types isn’t quite as long at AEI, with the MD-80, CRJ 200, 737-300 and -400 conversion slots filled through around mid-2022, according to Convey. [caption id="attachment_416882" align="alignright" width="560"] Robert Convey, SVP of sales and marketing at AEI; Jon Olin, vice president of aviation in the Americas at DHL Express; Jens Steinhagen, director of freighter conversions at Boeing; and Gary Warner, president of Precision Aircraft Solutions and 321 Precision Conversions.[/caption] “But it doesn't make people happy,” Convey noted. “We've got a lot of people that get disappointed when I tell them it’s a year and a half or two years out, and a lot of the older aircraft interest goes away.” The situation is similar at Precision Aircraft Solutions and 321 Precision Conversions, according to President Gary Warner. Interest in 757 conversions is in “a resurgence” now with slots booked into 2023, while A321-200 conversion discussions are focusing on 2023 and 2024 — a timeline that Warner noted is “very unusual” in the freighter conversion space. AEI, which currently has 737-800SF conversion centers in Jinan, Xiamen, Miami, Dothan and Kelowna, is considering expanding into Eastern Europe based on customer interest. “I haven't selected a facility yet,” Convey said. “But we are looking to add two more lines, which will bring our -800 product up to eleven lines at a capacity of probably three conversions per line.” Both Precision and Boeing have also been studying that region for additional conversion capacity. “We’re very actively looking at that,” Jens Steinhagen, director of freighter conversions at Boeing, said. “There are not only express operators like DHL in the European market, but also lots of lessors with feedstock and so on. So we’re clearly looking at that area very hard.” Apart from some supply chain issues, securing sufficient labor to add new conversion lines and facilities has grown challenging. “In North America, we are seeing stress on the labor pool and it’s becoming harder and harder to find [people] who want to cut metal and work with [maintenance, repair and overhaul] MROs,” Convey said. “I will also caution that we’re seeing a concentration of conversion centers in the Southeast part of the United States, with Avocet, HAECO, PEMCO and Commercial Jet. It’s putting a strain on the skilled labor we need to do these conversions for all of us.” It remains to be seen whether the influx of newly converted freighters joining the market in the next several years will result in overcapacity or lower margins. “Our task is just ensuring that we’re adding capacity that we can support through projected growth,” Jon Olin, vice president of aviation in the Americas at DHL Express, said. “For now, we see a good peak coming in and we see growth sticking for next year. So we’re still looking at maintaining and adding capacity.” As for the STC holders, they will continue to make adjustments to conversion capacity in line with customer demand. “In the end, we’re unlikely to turn a customer down when they come to us and have belief that they have a demand for conversion,” Steinhagen said. “We don't know their operation as well as they do themselves.”

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