Amazon and DHL throttle growth of CMI fleet

In a capacity-restrained environment virtually absent of idled freighters of a suitable condition, express and e-commerce companies with immediate capacity needs have in recent months pounced on used freighters and conversion slots. With lessors holding the majority of conversion slots for both narrowbody and widebody freighter conversions for 2020 and into at least 2022, Amazon, DHL Express and others have found pathways to enable rapid fleet growth through lease deals. Just as conversion slots are limited, airlines too face fleet growth limits, and finding partners with crews to operate the incoming birds has posed a separate set of challenges. Enter the crew, maintenance and insurance, or CMI, arrangement, for which demand has never been higher. Among the three express operators, DHL’s reliance on outsourced ACMI (aircraft, crew, maintenance and insurance) and CMI lift and bellyhold capacity, has been greater compared to FedEx and UPS. This trend has continued during the pandemic. As DHL adjusts capacity and pursues fleet renewal programs for both its narrowbody and widebody fleets, it has demonstrated a willingness to partner with new CMI operators, including Mesa Airlines and iAero Airways on the narrowbody side, and 21 Air and Amerijet on the widebody side. The following table lists all the freighter aircraft that have entered major CMI operations from April 2020 to mid-July 2021. ATSG Amazon has continued to place its 767 freighters with Air Transport Services Group’s (ATSG) Air Transport International (ATI) for CMI operations. This included not only thirteen 767-300BDSFs leased from Cargo Aircraft Management (CAM), but unit 25274 (ex-WestJet), which Amazon purchased at the end of 2020 and converted with Israel Aerospace Industries (IAI). Mike Berger, chief commercial officer of ATSG, told Cargo Facts that the company has adopted a more strategic approach to ACMI and CMI flying in that it has been “pretty diligent” about who it flies for, with the largest customers clearly being Amazon and DHL, even as other potential new arrangements have surfaced in the past twelve to fourteen months. “Our business was performing really well before the pandemic, it performed really well during the pandemic, and as we come out of it, it continues to perform pretty well,” said Berger. “In the next three to five years, our path is going to continue to be as consistent as it has been. So we didn’t want to go start chasing these opportunities that, number one, were not really what we were strategically clearly focused on. But more importantly, when the market normalizes, a lot of this goes away.” Another factor, Berger said, is that the overwhelming majority of these requests had an international component to them which, even without taking into account the extra challenges arising from the pandemic, would make it difficult for ATSG to be competitive given crew costs. ATSG’s other cargo airline, ABX Air, received its first DHL CMI aircraft in July 2021. The 1983-vintage 767-200BDSF (22570) had previously been operated by Atlas Air, which appears to be stepping away from 767-200F operations altogether. “We hope to grow our ABX business from a CMI standpoint,” said Berger. “But it needs to be in line with our larger strategy. So as those opportunities come to us, we will certainly look to continue to further expand the ABX fleet.” Sun Country Airlines Low-cost carrier Sun Country Airlines signed an agreement with Amazon to operate ten 737-800BCFs on its behalf in December 2019, and as of July 2021, operates twelve freighters on a CMI basis for the e-tailer. While the Minneapolis-based carrier found commonality between its 737-800 passenger fleet, which numbers thirty-two, and the freighter variant, the move required significant regulatory legwork and the establishment of new stations outside of Sun Country’s typical scheduled passenger services. [caption id="attachment_414212" align="alignleft" width="560"] Photo/Amazon[/caption] Before adding its first freighter, Sun Country encountered extreme seasonality with its Minneapolis-centric passenger and charter operations. Winter schedules tended to focus on warm weather destinations, COO Greg Mays told Cargo Facts. Schedules were then rejigged in the summer to accommodate inbound travel demand before a slower shoulder season. “We might not see as much business in the back part of the year, and certainly September, October, so we've always looked for ways to kind of balance that out, and make our business more efficient,” Mays said. “When the opportunity came to introduce some passenger-to-freighter conversions into the business it made a lot of sense. We can actually begin to produce a nice set of block hours through the year.” Despite the carrier’s experience with the 737-800 platform, the different configuration required regulatory leg work and proving runs. Sun Country also brought in a third party that “had a playbook that we were able to follow for the regulatory approvals, which is manuals,” Mays said, “and it's everything you could imagine related to the sort of the technical and the regulatory aspects of the airplane.” With freighter maintenance outside of its purview, Sun Country also partnered with Everett-based (PAE) Aviation Technical Services to handle the 737-800BCF fleet. “That [maintenance] operation runs almost exclusively outside of Minneapolis,” Mays said. Sun Country also updated its IT systems to integrate weight and balance with its broader systems operations. The decision to expand into freighter operations in early 2020 would turn out to be a fortuitous move during the pandemic, but not without delays. Sun Country Airlines had originally planned to begin operating its first freighter in April 2020, but encountered minor setbacks related to travel restrictions and other complications. “There were copious amounts of challenges associated with that not only getting the aircraft out of China, but also just getting them outfitted and getting them in service here,” Mays said. Operating the 737-800BCFs according to Amazon-defined schedules and networks led Sun Country to train staff and establish new stations outside of its legacy network. These stations could eventually see Sun Country passenger service added, Mays said. Since Sun Country’s entire operation shares a common pool of pilots, overlapping passenger services would also facilitate crew scheduling through deadheads and other maneuvers that make it easier for crews originating outside its hub. While Sun Country’s priority is getting its 737-800 passenger fleet back in the air, it would not rule out growing the freighter fleet or adding a new type. “If opportunities come along for us to either expand this freighter business, whether it's our own kind of conversions, or if it's a different fleet type, we will be prepared to execute on those opportunities as well,” Mays said. Mesa Airlines Last year saw Mesa Airlines expanding into the 737 segment and entering the freighter market for the first time after DHL Express announced in July 2020 that it would place two of its own 737-400SFs with the Phoenix-based airline. The two aircraft (27157 and 27674) began CMI operations with Mesa in October and November 2020, respectively, adding to its fleet of regional jets that it operates on behalf of American Airlines and United Airlines. Mesa CEO Jonathan Ornstein told Cargo Facts that the carrier had been thinking about diversifying into cargo “for quite some time,” driven primarily by the fact that Mesa knew it would have excess CRJ 900s. “As it happens, the CRJ is an excellent regional passenger aircraft, but without a significant amount of modifications it is not particularly competitive for cargo, when compared to some of the larger-capacity turboprops,” Ornstein said. “Then we started thinking about potentially operating a larger aircraft, which of course for Mesa was very attractive because, particularly at a time when we we’re all fighting to attract pilots, the idea of being able to recruit pilots and say, ‘Hey, you can come to work flying a seventy-six-passenger regional jet, but we're also going to have 737s’ was a really good recruiting tool for us.” Ornstein said that Mesa’s foray into freighters was partly the result of being in the right place at the right time, but he also credited Dan McHugh, who joined the board of directors in May 2020. McHugh previously served as CEO of Southern Air and DHL Express Asia Pacific. “Dan has probably one of the best backgrounds and experience levels in the industry in terms of cargo,” Ornstein said. “Cargo has just exploded and, of course, now that we have the ability to operate 737s, we continue to talk to as many people as we can find who are willing to listen to us to try to expand that, because we've done a really good job in terms of reliability and on-time performance, particularly given the fact that we’re only operating two aircraft and no spares.” That will soon change. In March 2021, Mesa confirmed to Cargo Facts that it will add a 737-400SF of its own by leasing the 1990-vintage unit 24769 (ex-Flair Airlines) from KF Aerospace with the intention of using it as a spare and for ACMI opportunities. Ornstein said he now expects unit 24769, currently still in conversion with Aeronautical Engineers Inc. at the KF facility in Kelowna (YLW), to arrive around September. Mesa is keen to grow its cargo business and has several options in front of it, but Ornstein said the priority now is to get unit 24769 up and running before moving on to other types. “I think that we just have to take our time and do the right thing,” he said. “The question is, do we put an -800 on our certificate? Do we put an Airbus product on our certificate? Do we look at smaller aircraft, which is where we have a fair amount of expertise? Do we look at a turboprop? Those are all the things that we strategically have to make decisions on, and we are willing to speculate. We’re willing to take the risk and put an airplane on certificate without business.” iAero Airways [caption id="attachment_416418" align="alignright" width="560"] Photo/iAero Airways[/caption] Florida-headquartered iAero Airways became a new CMI provider for DHL last year, when the express integrator placed two 737-400SFs (26455, ex-Malaysia Airlines, and 25334, ex-Merpati) and two 737-800BDSFs (28619, ex-Pegasus, and 30498, ex-Transaero Airlines) with iAero to operate. DHL added a third 737-800BDSF (29668, ex-Jet Airways) to iAero in early 2021, but iAero recently took the additional step of leasing its own 737-800SF (32796, ex-Aeromexico) from BlackRock and began flying it in July on behalf of DHL. iAero told Cargo Facts that its plans could take the freighter fleet to at least twelve aircraft. New 767 CMI players enter the picture With narrowbody freighters the recent trend has been for carriers to progress from CMI to ACMI, but the reverse appears to be the case on the widebody front. Multiple widebody freighter operators with commercial or ACMI links to integrators have recently taken on additional CMI aircraft. DHL began transferring its nine 767-200BDSFs in the U.S. away from Atlas Air last year, with the first tranche of four (23017, 23018, 23019 and 23140), all with General Electric CF6-80 engines, being placed with Amerijet, which provides at least some of its own capacity to the integrator. DHL has now also started transferring the second tranche of five 767-200BDSFs, all with Pratt & Whitney PW4000 engines. An additional aircraft (22572) went to Amerijet on June 2. Amerijet recently said it plans to take its operating fleet to around twenty-seven aircraft by the end of next year, and confirmed to Cargo Facts that this includes 757s, 767s, as well as CMI aircraft for DHL. Another new DHL CMI provider is 21 Air, to which the integrator assigned one of the Pratt-powered aircraft (22571) on May 12. Prior to the arrival of unit 22571, 21 Air had also provided ACMI lift to DHL using its own pair of 767-200BDSFs. As of the end of July 2021, DHL has yet to place two inactive 767-200BDSFs (22566 and 23058) with new operators. Meanwhile, in Canada, Cargojet began flying two Amazon-owned 767-300BDSFs (25363 and 25576) in July 2021. Previously, the carrier had operated dedicated charters and provided customer-neural capacity to Amazon on its scheduled networks. U.S.-based Kalitta Air, which added two DHL 777Fs (66087 and 66815) between April 2020 and July 2021, had initially introduced the 777F platform to its own operations in 2019 by way of leasing a used production freighter (35607, ex-Emirates) that it now flies on an ACMI basis for DHL. Kalitta then began receiving DHL-owned 777Fs on a CMI basis in February 2020. While the vast majority of CMI activity in the medium widebody segment has involved 767s, this year saw Qatar Airways dispose of its four remaining A330-200Fs (1584,1594, 1688 and 1708). The aircraft were picked up by French shipping line CMA CGM, which then allocated them to Air Belgium to operate on behalf of newly created division CMA CGM Air Cargo. In July 2021, Elbe Flugzeugwerke (EFW) redelivered an A330-300P2F (713, ex-AirAsia X) to Monaco-based Stratos, which declined to identify the aircraft’s lessee but told Cargo Facts that it will be operated by U.K.-based Titan Airways. As of the end of July, the aircraft was still in Chateauroux (CHR). A321Fs: no CMI yet With the ramping up of A321 conversions by two programs, some operators will likely find themselves eventually flying the Airbus narrowbodies on behalf of others. Now it appears several carriers have added A321Fs of their own to deploy on ACMI services, potentially opening the door to further CMI opportunities. Titan Airways, for example, took delivery of two leased A321P2Fs (1238 and 1250) early this year that it sent to North America to fly Amerijet’s Caribbean network, while SmartLynx Malta received its first-ever freighter in June in the form of an A321-200PCF (891) on lease from Vallair and is operating it on an ACMI basis for DHL. The airline will soon add an A321-200P2F (1017) from Vallair that will also enter service for DHL. In the U.S., new startup Global Crossing Airlines has ambitious ACMI plans and intends to build up a significant Airbus freighter fleet starting with an A321-200P2F (1207) from Vallair, and possibly moving on to A330P2Fs. It remains to be seen which carrier will become the first to CMI operate an A321F, but Cargo Facts would not be surprised to see the CMI field continue to diversify, particularly with new market entrants looking to add different sources of revenue. This story originally appeared in the August 2021 issue of Cargo Facts . Cargo Facts Symposium, taking place LIVE October 25-27 at the Wynn Las Vegas, is the essential event for stakeholders in the air cargo industry. Learn more and register at www.cargofactssymposium.com .

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