The future of aircraft conversions and feedstock

As outlined on our 2023 Freighter Forecast dashboard, there is demand for an additional 2,750 jet freighter aircraft over the next twenty years. We estimate that 1,883 will be added via passenger-to-freighter conversions. Of those, 1,208 will be narrowbody conversions, since we do not foresee a narrowbody production freighter. To meet this demand, a significant number of feedstock aircraft will be needed. We take a deep dive into the status of this supply for specific aircraft. Why convert aircraft rather than build new freighters? The simple answer is cost. Feedstock can be purchased and converted into a freighter aircraft at a fraction of the cost of a new production freighter. According to IBA, a passenger-to-freighter (P2F) conversion could cost just shy of $15 million for a Boeing 767-300ER, while a new Boeing 767F would cost north of $220 million. The approval of a Supplemental Type Certificate (STC), the required certification to complete the major alternations required to convert a passenger aircraft into a freighter, will likely be significantly faster than the design of a production freighter and the approval of a full-type certificate. Although large capital investments in freighters are seen as a long-term decision, putting an aircraft into operation quickly can help airlines capitalize on temporarily inflated air cargo rates, as we have seen since 2020. Finally, there are not currently any offerings of a narrowbody production freighter nor do there seem to be plans from Boeing or Airbus for future offerings. In these cases, conversion is the only option. What is feedstock? Feedstock aircraft are the inputs to the conversion process, generally nearing the end of their useful lives as passenger aircraft, to their remaining useful life as freighters. The extended life is due to the lower daily utilization and longer segment times of cargo aircraft. One notable example from the pandemic era is the decrease in the price of 737NG feedstock, stealing demand from the legacy 737s. Once airlines have narrowed down the aircraft type that will work best for their operation, there are a few factors that will make certain aircraft stand out over others of the same type: age, total hours, total cycles and engine type. Total hours and total cycles follow a predictable trajectory as a factor of age. As a result, we have historically used two age ranges — sixteen to twenty years and twenty-one to twenty-five years — as a rough indicator of optimal conversion ranges. We refer to this range as the optimal conversion range. However, in November 2020, we saw the first hint of airlines deviating from these norms, when a ten -year-old 737-800 entered conversion at the Guangzhou Aircraft Maintenance Engineering Co. (GAMECO) facility in Guangzhou (CAN). In 2021, we also saw DHL converting younger and younger aircraft due to airlines rushing to take advantage of the falling prices of feedstock in the post-pandemic markets. 737 The 737-800F has emerged as the in-demand 737, dethroning its predecessor, the 737-400F, because of falling feedstock costs of 737NGs. There are three established conversion programs for the 737-800: 737-800BCF, 737-800BDSF and 737-800SF. With the last 737-800 being delivered in 2020, feedstock in the optimal range will reach a peak in 2034, with more than 3,500 units available, far exceeding the demand over the next twenty years. We speculate that eventually, the 737-8 will replace the 737-800Fs in a similar dynamic to what we are currently seeing between the -400 and -800. There are not currently any conversion programs for the 737-900ER. However, there is speculation that there may one day be a program, as the aircraft matches the range and capacity of the 757-200 and competes with the A321. Delivery has been completed for 505 units of the 900ER and they would be available as feedstock. 757-200 The 757 has long been one of the workhorses of the air cargo industry. Demand remains high but the supply of feedstock is dwindling. Based on our assessment, the last 757 will age out of the optimal conversion range in 2030. Precision Aircraft Solutions' decision to open an additional conversion line in October 2022 indicates that it feels there will still be demand for these aircraft in the coming years. 767-300ER The 767-300ER is currently the most popular freighter in the medium widebody category, but feedstock is declining. There are 111 aircraft in the optimal conversion range, but this will decline, with the last aircraft aging out of the optimal range in 2039. Unfortunately, many of these 767s will not see conversion as they will be required to be phased out prior to then. The 767-300F production freighter program is required to end by 2027 due to ICAO noise and emissions requirements for new aircraft and the 767-300P2F programs expected within the next ten years. No replacement for the 767-300F has been announced, and the A330-200 will fill the void left by the 767-300. 777-200LR Boeing launched a production 777 freighter program in 2005 based on the 777-200LR passenger model and, to date, 247 have been delivered. The program has been viewed as a success. With the value of feedstock starting to fall, 777-200LRP2F conversions are gaining momentum. In August 2022 , Mammoth Freighters began work on its first 777-200LRMF at Aspire MRO's facility at Fort Worth Alliance Airport (AFW). An STC is expected to be issued by the FAA in late 2023. Feedstock for the 777-200LR may be an issue: only sixty-one units were built and of those, only fifty-one can be converted. It raises the question of why Mammoth did not look at converting the 777-200ER. We believe that with a range of 1,490 nautical miles less than the 777F, it would be a hard sell. 777-300ER In late 2019, AerCap (formerly GE Capital Aviation Services) and Israel Aerospace Industries (IAI) partnered to announce the launch of a 777-300ERP2F program. Originally scheduled to enter service in 2023, Kalitta Air will be the launch operator for this freighter-converted 777-300ERSF. IAI expects they will receive their STC by the end of 2023, after the first flight took place on March 24. In late 2020, The National Institute for Aviation Research (NIAR) at Wichita State University partnered with Sequoia Aircraft Conversions and the Kansas Modification Center to launch a 777-300ERP2F program. In May 2023, the FAA accepted the Project Specific Certification Plan for the 777-300ERCF conversion program , with an STC expected to be issued in 2024. There is a third 777-300ER program currently seeking approval; in January, Mammoth Freighters inducted its first 777-300ER , which will be utilized in the certification process for its 777-300ERMF program. Mammoth is seeking FAA approval for its 777-300ERMF program alongside its 777-200LRMF program. The STC approval is expected in mid- to late 2024. With the final 747-8F being delivered on Jan. 31, the new regulations surrounding the 767F and the previous end of the A300F program, there is a void in the large-widebody market, the 777-300Fs are primed to succeed. Feedstock for the 777-300ER is strong in the next twenty years, based on the aircraft currently in service. Feedstock within the optimal range will reach a peak of 247 units in 2033. A320 Elbe Flugzeugwerke (EFW) had originally expected to develop a supplemental type certificate (STC) for its A320 conversion by 2021, but it chose to prioritize the more popular A321 program. The A320P2F program received STC approval from the European Union Aviation Safety Agency (EASA) in March 2022. A second A320-200 passenger-to-freighter conversion program is being developed by United States-based C Cubed Aerospace with engineering partner Structural Integrity Engineering. C Cubed inducted its first A320 airframe for conversion at FMS in Kansas City (MCI) in September 2019, but as of writing it has still not flown. Its first flight is expected this summer. There will be an abundance of feedstock for the A320 over the next twenty years. A321 EFW received STC approval from EASA for its A321P2F conversion program on Feb. 20, 2020. A second A321-200F program is preparing its first redelivery. 321 Precision Conversions is a joint venture of ATSG and Precision Aircraft Solutions. The A321-200PCF received STC approval from the FAA in April 2021. There will be an abundance of feedstock for the A321 over the next twenty years. A330 The A330-200F first flew on Nov. 5, 2009. The first aircraft was delivered to Etihad Cargo in July 2010 and only thirty-eight units were built. In December 2020, the A330-200F program effectively ended when Turkey-based MNG Airlines canceled a long-stagnant order for three A330-200Fs — the only order remaining on the backlog after Synergy Aerospace Corp., the Colombia-based majority shareholder of Avianca, canceled its order for a single unit in December 2019. The A330P2F conversion program, launched in 2012, is a collaboration between ST Aerospace, Airbus and their joint venture, EFW. There are currently only nine A330-200P2F aircraft in service, while the larger A330-300P2F has seen slightly higher success with seventeen aircraft delivered. The A330P2F program will receive a boost in the coming years when the 767 programs are shut down due to new emissions requirements that the A330 meets. Feedstock for both the -200 and -300 will not be an issue in the next twenty years. A350 In July 2021, Airbus announced the launch of its A350F Production Freighter. The aircraft will be derived from the A350-1000 and would be manufactured alongside the passenger variant. The A350F has already amassed more orders than the A330F program and is expected to enter service in 2025. At the time of writing, there have not been any A350 conversion programs announced. However, we feel that this will be a popular conversion program in the future as the price of feedstock declines. Only 74 A350-1000s have been delivered, but this number will grow significantly in the coming years. With demand for conversions still sitting near record highs, it will be interesting to see how long this surge remains. Over the next twenty years, we expect the air cargo market to continue to grow. Feedstock is there to fulfill the nearly 1,900 conversions that we expect to see over the next twenty years. It will be interesting to see if feedstock conversion trends continue to play out as they have in the past, or if industry pressures and factors will impact the age at which these aircraft say goodbye to passengers and hello to cargo.

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