CFS: Prospects for narrowbody freighter conversions

This is a recording of the narrowbody conversion panel at this year’s virtual Cargo Facts Symposium, featuring speakers from ASL Aviation Holdings, GECAS, Vx Capital, and KF Aerospace. A transcript is available below. This transcript has been generated by software and is being presented as is. Some transcription errors may remain. JJ Hornblass Good day to you all and welcome to day two of our 26th annual cargo facts symposium. I'm JJ Hornblass, and I hope you enjoyed day one of our sessions. a hearty thanks to all the speakers and moderators yesterday and certainly to you for your participation. We've got great sessions today plan first off on narrowbody freighters. And then on e commerce Boeing will be giving a presentation and we'll have a panel on aircraft valuations should be a great day of sessions. Once again, I want to encourage you to join us in supporting airlink which provides air logistics for global disaster relief, please be sure to visit them at airline flight.org You can learn more about this crucial, crucial organization there. We are, again, greatly appreciative, particularly this year of our sponsors. And we just want to thank them each by name and do so sincerely are our diamond sponsors Boeing and DFW our Platinum sponsors 321, precision conversions and Collins aerospace and sponsors a ankura International Atlas air atsg MMB conversions, Pratt and Whitney signed Draco, tell air international and us cargo systems Great thanks to them. Again, I want to encourage you to use the event platform to submit questions and comments to our speakers, as well as to network and network with your fellow attendees. Reach out reach out to your other attendees to promote proposed virtual meetings, it will be worth your while. Before we get to our first session of the day, I wanted to mention that we're going to be posting video and editorial coverage from karbo facts Symposium on kurgo facts.com. Don't forget to head on over there to check out all posts as well as additional insights analysis and news both from the symposium and elsewhere around the air cargo sector. And now, it is my pleasure to introduce Charles Calvin, who is responsible for a lot of that content on cargo facts.com as senior editor of cargo facts, he's going to moderate this panel and it is my pleasure to welcome in Charles take it away. Charles Kauffman Thank you JJ and thank you AEI for sponsoring this session. Good day everyone and welcome back to day two of Cargo Facts Symposium. Normally there's a great deal of enthusiasm for this session, even when it occurs first thing in the morning after a convivial harbor cruise the night before. Some of us may have had fewer cocktails last night or not, but we're expecting an equally riveting session after for message from our sponsor. In recent years discussion of narrowbody conversion has focused on expectations around the transition from the 737 classics and five seven, which currently dominate the global narrowbody fleet to the newer type. And while discussion of the transition is still relevant, we've seen the floodgates really open for conversions of most narrow body types in the wake of the crisis with a number of new orders, and we have with us today, representatives from leading leftward and narrowbody freighter operators to look at current feedstock availability, for how the pandemic will steer narrowbody fleet planning decisions now and as aviation recovers. So I'd like to now introduce my panelists, please welcome in alphabetical order. Dave Andrew, CEO of ASL Aviation Holdings. Richard, Greener, Senior Vice President and manager of cargo, GECAS. Stephen Kageman, senior vice president marketing of Vx Capital Partners, and Tracy may be president of the Kf aerospace group of companies. Welcome to all of you. Thank you. Start, I'd like to give each of you an opportunity to briefly introduce yourself and your exposure to the narrowbody freighter space as we do have a number of new participants in our virtual audience this year. With this first question, let's go in alphabetical order and then moving forward we can we can move around a bit more freely. So we'll start with you. Dave Andrew Thanks, Charles. And again, thank you for the opportunity, ourselves a long standing Aviation Service Provider. Some of our companies having been in business for more than 50 years. We operate six different airlines for European airlines predominantly freight focused and then a South African shedule passenger operation and then similarly a joint venture operation in Thailand. But more to your question, we operate about 140 aircraft as an operating fleet, of which 107 of those roughly are freighters, and of that 97 of them are narrowbody freighters of which our largest portfolio obviously is our 737 65 of those and they vary in all various derivatives 300 408 hundreds, the moment also sorry, a large ATR operation, so 40 twos and 70 twos, and then some seven five sevens. To the point of this discussion that I mean of that whole feat of 97 narrowbody freighters only one is a factory freighter, all the rest of them have been converted from passenger aircraft sometime during the last thing for us going forward for 2021. In particular, it's the focus to upgrade our cast ik freighters. Hopefully more tune NGS, the program we kicked off this year, and hopefully we can get that up and running more successfully next year. Thanks. Charles Kauffman Thank you, David. We'll revisit that topic in a bit that regard. Rich Greener Yeah, hi, my name is Rich, greener. I run GECAS cargo we currently have around 100 aircraft in the portfolio, that's about $2 billion worth of assets. And that's going to probably rise to around 150 over the next five years. Then, in terms of the actual 737 800, we were the launch customer with AI and Boeing, and more recently with a co investor with AI on the 777-300ERSF program. So in terms of narrowbodies we've been in this market since about 2001. we've converted over 60 aircraft within our bodies. We currently have around 40 aircraft in the portfolio. And as I said that will probably rise to around 80 over the over the next five years. And with the additional aircraft of the triple sevens, the seven four sevens and Seven, six sevens that will bring it up to around 150. So we are kind of one of the leading leasing companies within the sector. Charles Kauffman Thank you for your interest in seven. Stefan Kageman Yes, hello. Thank you for the opportunity to participate. My name is Stephan cognomen. I am the Senior Vice President for marketing at V x Capital Partners. We are a relatively Small, privately owned, leasing company based in San Francisco. In about the 2013 2014 timeframe, we began to shift our focus from a wide variety of opportunistic aircraft investments to solely focus on 737, primarily narrowbody cargo conversions and in the five or six years that that passed since we have become, I think the largest owner of 737 400 Classic freighters at least. We currently have a fleet of about 47 aircraft, the majority of which we have converted ourselves, I believe we are AI's single largest customer. Having converted most of our four hundreds at AI. We are again solely focused on the freighter space. looking to expand this portfolio with the next generation of aircraft be at the seven, three sevens and Airbus families with a primary focus on narrow body, aircraft continuing. In the meantime, we're going to continue competing competing hard with our old classics. But we're excited about the cargo growth here that we foresee coming in the in the years to come. And looking forward to the panel here. Thank you. Tracy Medve Thank you. Good morning, everyone. Thank you for the opportunity to be here. A Kf aerospace is a privately owned, multifaceted aviation and aerospace company founded in 1970. We're based in Canada. Amongst the things that we do include military pilot training, we are a cargo flight operations company. And I guess most pertinent to this discussion today. We also have a narrow body wide body, large MRO and engineering company. And we are also a leasing company. Last year, we focused a lot on the 737 400, doing conversions, including AI conversions for customer airplanes, as well as our own fleet. And also then looking at 737 400 leasing, for next year, more of the same, but also we're going to see our first 800 come in for conversion. And we also are looking at the ATR 72 market as well. Thanks. Charles Kauffman All right. Thank you to all of you for those introductions. No, it seems like I'm hearing transition continue to surface but as it stands now, and based on recent orders, we continue to see conversions for for both the the classic types and some of these newer models as well. So I'd like to take a step back and just ask you, you know, in today's market, what are the deciding factors, steering operators towards either previous generation conversions or for the newer types? Tracy Medve I would say, I don't think that anything is different than then, in the past, it's you know, a lot of it is about price and about the cost on ramp when you when you have an aircraft converted, but I think at this, at this moment, based on the results of the pandemic, lease rates are also important. And that cost on the ramp, and the lease rates need to be to make sure that they're married up. And I think that the lease rates are sort of the biggest question right now, because they're in flux. But I don't think any of those, any of those considerations have changed. Stefan Kageman I would echo that, in speaking with our lessee operators. Cost is always I would say, the key factor in deciding on which aircraft to to select, obviously, cargo aircraft tend to be a bit older than packs, you know, parcels and packages. And containers don't don't care as much of what the aircraft looks like, as the passenger experience does. So, obviously, that's why you know, mid life end of life aircraft become you know, converted to cargo. So cost is always the the key based on feedback from our customers as well. I'd echo that. Charles Kauffman Right. Then, during your introduction, you you mentioned that ASL These are places moving forward with the modernization strategy, and we'll be adding newer types. Did you see growth opportunities in parallel for some of the classic type and maybe classics and five sevens? Or is it really a transition for yourself? Dave Andrew Well, it certainly is a transition for us type wise so you know, more close, exiting some of the classics moving more into the NGS but we don't see the classics disappearing just yet. You know, the clouds Benji certainly is bigger. So unless you're filling it, and to Tracy's point, you know, the higher risk wrinkles and costs of the airplane doesn't really make sense to just replace it for the sake of replacement. So the smaller, cheaper 400 is certainly good for route developments and some of the other things that we've seen. So I wouldn't say that the classics are just going to fall off a cliff just yet. We certainly see them operating for a while store while we transition to the NGS Charles Kauffman Alright, and we do have a question that came in from from the audience. You know, for for either Stephen or Tracy, you mentioned that the release rates are in flux. What are the bottom line implications there? Tracy Medve Well, if you spent too much money, converting your aircraft and putting it onto the ramp, at least rates are soft, that's not going to be a very good economic picture for you for the foreseeable future. So you know, that's why i think i think that the steps 37 400 still do have a life, for that reason that the feedstock prices, relatively low, the, the door itself is a known entity. And you can put an airplane out at a fairly competitive rate, that's still an excellent, excellent asset, I think the only stretch there might be that the engines are becoming a bit more expensive. recently, in the last year or so, cost is higher, but there's a greater because you can put them in at a at a Rich Greener I also think that you look at the performance of the aircraft, and you know, the succession is that is the 800 or the 321. So, in respect to you know, the fuel efficiency, the more payload and then the inherent maintenance costs, which are cheaper, then, you know, you are seeing this transition from 737 classics into NGS and an A 321. Stefan Kageman Yeah, as the as the 737 400. In particular, you know, as aging, it becomes more labor intensive and costly to maintain. Obviously, for for the airlines that, especially operate on the large for the large integrators, the the FedEx isn't DHL and UPS is of the world. Dispatch, reliability is a very important factor. And so clearly the classics are getting older, there's no no getting around that. So there's a case to be made for transitioning into younger aircraft, at any cost, I guess you could say. But in the meantime, you know, we're still seeing the 400 I echo what Dave was saying a moment ago that it remains a competitive product, you know, it is becoming a little more expensive to maintain, but the capital cost is significantly lower. So those offset each other. Clearly, like on NGS and a 320 family aircraft, the engines are more fuel efficient, higher reliability on wing time, in longer intervals between between maintenance. However, in this environment that we're in now, with fuel costs being relatively low, it isn't maybe quite as much of a factor. So the classics are remaining competitive, but it's inevitable that there is a transition, which has clearly begun. And, you know, we expect that to accelerate over the coming in the near term, frankly. But in the meantime, you know, for us as an investor and went back to the lease rates, you know, we look at lease rate factors. And so, you know, as an investor, third party investor, who's not an operator, of course, we want to serve our customers needs, but we also have to serve our investors needs. And so we tend to gravitate towards where we sort of get the biggest bang for the buck. And for the time being, at least, that still seems to remain in the classic space, if nothing else, just because of significantly lower feedstock prices, of course, that's an that's in transition. Now, in this environment. Tracy Medve I make my comments from the perspective of operating 60 year old Condor 580s, and the stretch version of that airplane. And I guess, because we have our own MRO, we've seen that you can maintain the kind of reliability that you need it at an affordable cost, but I suppose for an airline that maybe doesn't have access to that MRO capability, it's a bit of a different economic story. Charles Kauffman Alright, so maybe to try and sum it up a bit, you know, we, we have seen in taking orders for these classic types and, you know, the feedstock dynamic has been a bit affected by, by by the crisis. So, you know, how have your expectations changed, least in the near term, you know, five years or so for the classic types and in terms of the number that we're not going to see converted you know, before these these different Programs start to really wind down Tracy Medve I think availability of the of the suitable airframe on the four hundreds have certainly declining. I don't think it's totally dead. But certainly from our MRO perspective, you know, we, we have for hundreds that we will, we will complete. So we're doing a combination of 408 hundreds, and, you know, looking forward to the ability to be able to do Airbus aircraft as well. And, and also, as I mentioned, the turboprop fleets, we can't lose sight of about from an MRO perspective, we're all in on doing turbo conversions for them. Stefan Kageman Yeah, we would say that that the feedstock on the on the classics has more or less been depleted, depending on what your criteria are for finding suitable airframes to convert. But it's become increasingly difficult. There was a limited number, you know, produced to begin with, of course, less than 500 airframes to begin with. But at this stage of the game, you know, we have VX we have three, three more classics, which are in conversion, currently, and those will probably be the last classics, I'm guessing that that'd be a capital lead in the market for eight hundreds we have one in the pipeline. So far, just one we've been a little bit cautious about, you're waiting for the market to settle down in this COVID environment. But I agree with what Tracy was saying that, that the 400 the classics are at the very end of their run, I would say. Right, like, of course, that means they still have, you know, another 1015 years to operate the ones that are converted today, hopefully. So they'll still be in operation for a while. Charles Kauffman You know, I think that's a that's a great segue into our next topic of discussion of some of the these newer types. And, you know, certainly when we speak of additions, we're referring to both growth and replacement for the people there types. And during in recent months, we've seen converting houses and OEMs, add add nificant capacity. Richard, I'm curious, he, you know, what is what is your forecast over the next five, five years or so in terms of the number of narrowbody conversions, they will see market wide terms of growth and replacement? Rich Greener Okay, well, look, I'm gonna be quite controversial here, I think there's too much capacity built into the into all the MRIs going forward, I don't think there's enough demand to meet every conversion line. And that will probably mean that some conversion lines will will stop, you know, basically, they cannot fund the the line because there's lack of feedstock or the, you know, the engineering is not there, whereby the can't get the kits, etc. So I think that at the moment, it's just about rights, I think there's there's around capacity for about 70 conversions per year. If that rises to around kind of 90, I think it's too much. And, and as I said, there's going to be some conversion lines, which which will not sustain the viability of of commercially converting an aircraft. And then if you if you're going out to multiple lines, you degrade the quality of the conversion as well, you could do that. And you have to do a conversion line takes a lot of planning, and a lot of investment for a commercial MRI, and you've got the kits as well. So to you know, put a line a conversion line live is is hugely expensive for these guys. And I just don't want everyone to rushing in to see that. Yeah, there's this huge, huge demand, because it's an extremely small market. And it won't sustain all the conversion candidates that are currently on offer. Dave Andrew Rich, I would I would certainly agree with you. And I think you touched on a very vital point there. I think if we go back to the earliest sort of 2010 2012 kind of era, when we had a similar sort of spurt in conversion of the classics, that's exactly what happened. we scaled up on a number of additional lines, and the quality issues that resulted were quite significant, particularly for the operator and wanted online to have some of the funding. So I agree needs to be carefully managed. Tracy Medve As an MRI as a conversion center. It's part of what we do. And I think that you know, we've got good capability. We've been doing this for decades, doing heavy maintenance checks on airplanes for decades, and doing cargo doors for a long time. So you know, those MRO such as ourselves that have a good balance, not just focusing on conversions, but on on others. Heavy maintenance requirements for the aircraft. It's certainly a sustainable business model. And we've demonstrated that for a long time. And because we I think, because we have that diversity, the quality of the product that we put out is not in not in jeopardy and not in question. Stefan Kageman The quality aspect certainly is a key a key factor I completely agree with Dave there we, you know, the skilled workers sheetmetal workers are in short supply. And as these conversion lines are expanding, Now, the question is, if there's enough skilled labor really to go around to support them, we we have ourselves suffered, as Dave Well knows, we've suffered some some issues with quality. And so hence, we, you know, I, I believe we have to be quite selective about which Camaros to choose to use for the the cargo conversions, they're not all created equal. And with this, I'll call it a mad rush to, to scale up in this current environment, something that we are very much focused on. It's a big concern. We like I said, we've we've suffered some some issues in the past, directly related to workmanship issues. And of course, that translates back to, on the operator side dispatcher liability issues and regulatory issues as well. So it's a key factor. Charles Kauffman Right? And then, to reflect that we see not only new conversion lines, but a number of new programs in the works or, you know, on on the horizon, Richie, you mentioned that you expect me to have over capacity is that today or is that further and further down the line them and bye, bye, what? When? Rich Greener It's not today, and the the market is very buoyant for the nabati market, you know, the rents are holding, if not increasing, despite everyone's saying that there's a lot of feedstock, like rich Corrado said yesterday, about some six sevens weren't we're not seeing that much availability, or the NGS Yes, there are some that are pop ups. But you know, you got to remember that we baked into this program around eight months ago for delivering now. And we've already baked in the conversion lines for 21, and almost 22. So we've got all the MS ends. So if there's a big bit or you know, over capacity, then you know, the MRIs need the MS ends were way in advance. So you could miss this kind of dip, and then come out when the recovery and you know, all the vessels or airlines that have availability, you know, bring back the aircraft back into the passenger. So, I don't think you can be that up to the opportunistic with it with this pandemic, because it just needs a lot of planning with the conversion. So that's, I think capacity is okay at the moment, and, and demand is okay. But again, you got to remember that, you know, the narrowbody market covers the 320, the 321, the 77 700, the 738, and the H 321 200. As well as the classics, so that there's a menagerie of aircraft out there that people can convert, and there's gonna be some winners, and there's gonna be some losers. Yeah, it's inevitable. Charles Kauffman Right, definitely. And I do want to use that as kind of a, you mentioned the, the number of types that we have at our options. Today, I'd like to launch a poll question and kind of get some of these these new types and what the market might look like in terms of composure in a few years. So, our question for our audience here Rico when evaluating multiple fgcs for the same conversion program, what is the single most important factor on RAM cost maximizing volume crew comfort, spot availability or OEM involvement? so well that are waiting for responses here you know, it really looks quite quite spread any initial thoughts Stefan or Rich Greener I feel sorry for the crew. Stefan Kageman Yeah, I mean, it depends on who this question is, is directed towards right whether it's for the aircraft owner, you know, investor like a lessor or if it is the, you know, the operator themselves, you know, so it kind of depends a little bit but yeah, As we see here in the results, and as we talked about the very beginning, the on ramp cost is key, the all and delivered cost and whether that's from the owner of the aircraft being an airline themselves what their full investment is into the aircraft or whether it's less or, as I talked about, you know, from from an investor standpoint as a lessor, the lease rates that we that we offer are directly impacted by the all in cost of delivering the aircraft. So, on a on a basis of looking at a lease rate factor, again, we owe our investors a certain return on their capital. And, and so obviously, the higher the delivered on ramp cost is the the will at least in theory, the higher the the lease rate goes. Or set another way, you could also say vice versa, that the higher the delivered, you know, on ramp cost is, but if we're not able to move the needle on lease rates, then that translates into a lower lease rate factor and lower return. So, so cost is is key, especially here in the in the cargo space. slot availability is very important as well, because, as Richard said, there's a lot of planning going into this, you know, staring into our crystal balls looking into the future, what the demand will be when these aircraft are delivered. And that's anywhere from, you know, six 912 months in the future. So it's it's a bit of a speculative exercise, at least the way that we Vieques has been doing it, we have not been converting aircraft only on the basis of having signed leases, we've been doing it on a speculative basis. So it does require, you know, we got a crystal ball. Charles Kauffman Right. And, you know, looking at Looking ahead, there are currently four sec, as you mentioned created for the thunders have an mg family, and, and lead for in development for increased money family conversions as well, you know, looking ahead, will this be to a narrowbody fleet that is more diverse than, obviously more diverse than coloration? repeating it with under seven classics and five, seven. But can you expect a few STC holders to really dominate the market? Rich Greener I think it's going to gravitate around the 737 883 2200. And then the market will dictate who the conversion MRO and the SEC order is, who the winner and the losers? You know, it's not for me to judge that it's down to the operators, and eventually the market. So, you know, there are some clear leaders that at the moment, whether that will hold out over the, you know, the life of the 737 800 and the a 321 we just don't know, but it certainly the market will dictate who who has the better conversion or the attributes of each conversion, etc. So you know, that there are there are some differences and some similarities, and each operator will find its way. Tracy Medve We had at this very conference, some interesting debate about the suitability of the Airbus for freight for for freighter conversion. And I think it will be interesting to see as those aircraft are just coming online now and have not really had their first heavy maintenance checks following conversion, that will be an interesting thing to see how they you know what, what you find when you when you bring them in for their first heavy maintenance checks, that could dictate the predominance of the STC that's going to hold the market. I think also availability of the kits and this and the surrounding parts and so on that availability also, I think, would make a difference and post conversion, some support from the STC holder. We've run as the MRO and as the conversion center, we've run into some interesting issues on on support in the past. And, you know, we've we've worked through that, but all those factors are important in in the choice of the conversion for the customer. Charles Kauffman Thank you for mentioning the 321 we could see that the first day 321 going to PDF flew yesterday. Yeah, that's an interesting point regarding you know, maintenance, what are some of the other variables that you are going to be watching as these aircraft enter service and in terms of trying to make fleet planning or portfolio planning decision? Rich Greener Moving for reliability, reliability is key for nobody, because predominantly, it's the express in the e commerce market. And if you don't get the reliability, right, this is gonna be you know, a problem aircraft for you. So, you can build in reliability of course. And, you know, but we have seen that over time, you know, the older the aircraft, the there is an issue with reliability, hence the transition that's happening now into the classics into the 738. So I think that's Yeah, if you Had a poll too for the operators, reliability would be, you know, 75%, the rest would be, you know, less. That's really key for every operator that I come across. Charles Kauffman And in terms of days, Dave Andrew now, it's gonna say I would fully agree with rich operations. You know, reliability is very important, but at the same time commonality also becomes an issue, particularly as you get into larger fleets, I think that's going to be one of the challenges, particularly on a 321, we've got not just multiple sdcs, but also different engine variants, different weight variants on airplanes. So that commonality becomes a bit of a challenge for an operator. Charles Kauffman And obviously, that degree of reliability varies across platforms. But is there a historically is there there quite. Is there a significant difference among the various stps as well, that you've Dave Andrew chosen? Generally, this disease have been seen if we just talk about the classics, I think generally have been fairly good in providing or doing what I should do. As I said, we had the club in early 20 1012, sort of era, which was resolved when one sec was resolved. That has been pretty good post that so that the big issue, you know, you're taking a, an airplane new into service, it's an expensive asset, if you've invested yourself expensive from a lease point of view. And then you have issues where the airplane is not available to fly. You've got customer issues, that becomes significant. So yeah. Charles Kauffman All right. So I do want to talk about growth opportunities for for narrowbody freighters. Since I've certainly spoken to carriers and shippers who are interested in moving into the space of use for our lessons on the panel. Are you also starting to see interest from from New entities looking to enter the freighter market by by using narrowbody freighters as an entry point? And is it your sense that we'll start to see an influx of new operators next, one or two years. Stefan Kageman So from our perspective, we're seeing an increase in call it startups, I would say, a definite pattern there. The factors behind that are varied, you know, in this COVID environment, with passenger aircraft being parked, of course, the belly space being gone, that naturally has driven a greater demand for for dedicated freighters. And also, with everybody locked up at home and tending to shop from home, the e commerce growth has accelerated over the past year here during COVID. And that, of course, is attracting even greater demand and and also written or additional interest from parties that are currently in the space to get into the dedicated cargo operations. And even some of the you know, call it passenger smaller passenger operators who have have their packs fleets grounded, have a revenue opportunity to get into the cargo space. I would say we're getting inquiries from startups on a significantly increased basis compared to a year ago. Absolutely. Rich Greener I think we're seeing a lot of activity in the combination carriers, such as s seven that recently took 78 Yeah, that they wouldn't have considered that, you know, four or five years ago, and that's predominantly with the Russia, China ecommerce happening, that phenomenon there. And also what we're seeing in the states are, you know, operators, like some country operating on behalf of Amazon, you know, taking advantage of the economies of scale with their existing 737 800 passenger fleets. So, there's that dynamic going on as well. So we're seeing those two things, which will probably multiply over time, not necessarily in the States, but around the world. Charles Kauffman And it's an interesting point, there have been a few new CMI operators in recent months with with country and a few others, is your expectation that this trend will will continue with, with the combination carriers having a pilot and resources to explore that space, Rich Greener I think it's down to the actual network who wants it, but they can see an advantage of the operation that they already have the crew economies of scale. So it's really down to the network's to decide there is obviously advantages of having a place fleet as well. So I think a combination of both would be would be a happier MCs Dave Andrew the other big benefit to obviously the big customers is that they own the capacity and can they manage the operators? Charles Kauffman The key differentiator there and, you know, I think we've made a case for for narrowbody freighters for for use in in carrying low density e commerce and expressman ECM curious you know, what is what is the case for for narrowbody freighters and internal cargo roll? Tracy Medve So, can you just repeat the questions? Charles Kauffman Of course, so, you know, the vast majority of of narrowbody freighters are interpolated and expressed or e commerce role. There are a smaller number deployed in a general cargo roll. But what is what is their use case? Where's the use case for for narrowbody freighters? Oh, Tracy Medve well, you know, that's, that's not really this space that we're operating in. I mean, we operate relatively small, small network now. And we're, you know, we were using turboprop airplanes to do that. So I don't know if I'm the best way, best one to say what that what that might look like. Maybe some of the other panelists would have a better perspective on things maybe. Charles Kauffman Dave, Would you have an opinion? Dave Andrew child? Yeah, I think you know, the big issue is with a narrow body freighter is something which alluded to earlier, it's predominantly operated overnight for Express operators and ecommerce top customers. The challenge with it when you're running your own sheduled network, is that because of the range in size, you are largely competing with belly hauls capacity on passenger jets. And that makes the biggest challenge. So you know, there will certainly be I think some opportunities may be short term opportunities until the passenger networks recover. But thereafter, I'm sure you know, you just can't compete running your own whole airplane versus somebody who's giving away the space basically, just to try and keep it full. So it becomes a big challenge. Charles Kauffman There are a few questions from the audience. I want to make sure we get to those. Rich. Well, congratulations on the clear announcement for the triple seven 300 vrsf was one thing. You You mentioned great expansion of your your lease portfolio. What would the composition of that increase likely include, in terms of narrowbody terms? Rich Greener In terms of the? Well, look, I think that in terms of where the portfolio lies within GE cars, I can see it's eventually going into a 321 200 to replace the 757 market, but I don't think it's currently there at the moment, because it seems that the 757 has its day in the sun still. And there's still a lot of availability, and it's, you know, the conversion suppliers are very good, they produce a good product, and it's a stable line. So I think that, you know, over over the next kind of couple of years, it'll be the a 321 possibly Charles Kauffman is your airline started to evaluate additional types or in the near term is the focus going to remain on the vCenter 1700 Dave Andrew josina as being a service provider, we're very driven by what our customers need. So now it's really a case of focusing on the replacement of the classics of the eight hundreds, but we will certainly evaluate the 320 ones as well. And again, whatever the customers need, we'll certainly take a look at a grocery 21 is going to be a good frightening because rich said good replacement for seven five but the same father still got some good legs lifting them so it seems Charles Kauffman alright, and unfortunately, we're running low on time. I would like to conclude by giving each of you an opportunity to perhaps revisit a point that you may have missed in our earlier discussion. Or if not, I think given that we have a number of of narrowbody operators in the audience potentially considering freighters maybe close with a piece of advice. You know for for an operator considering Getting into narrow money freighter operations either owned controlled or on a PMI basis. Stefan Kageman pedigree have the pedigree of the aircraft, I would say, your maintenance history and so forth is key, both in terms of cost, because that directly relates to the maintenance requirements of the aircraft, but also reliability, especially if an operator will be operating on behalf of one of the large networks, if you will, with stringent dispatch reliability requirements, and it goes are the two keys primary. Tracy Medve I would say to that, you know, we talked about slot availability and the relative importance of that. And so planning out your version well in advance of as far in advance as you can, and, and choosing a good conversion factor, such as aerospace, for example. Rich Greener But to jika, first, I guess, we're in this market. So we know what we're doing. But But apart from that, you look, it's really down to the operator to decide, you know, what were led by the operator in the majority of the cases. So the operators got to be comfortable with the asset that they're going to operate and lease, if it doesn't work for them, then you know, it's not going to be profitable for them. So it really is plan the actual operation plan the routes and all the analysis, etc. that goes into it. So preparation, I would say is key. And I Stephen said, you know, finding the right pedigree sisterships is always good, it makes the operation a lot cheaper, and ultimately, a better reliable aircraft. My view is that there are a number of aircraft out there at the moment, which are quite old, to old in some cases for G cast. We see we've seen that in the past that it doesn't give you good reliability. And we're converting Yes, slightly younger aircraft than than the cluster of aircraft at the moment. So that's another key to consideration is age and especially in Asia when there's age importation rules that are that are that are that are around so majority of the aircraft that are available at the moment would not go into China whether all stand today so that's another thing to think about. Charles Kauffman Definitely any Dave Andrew agree with everything that everybody said I think it's a you know, it's a it's a difficult, tough business. You need to go in with your eyes open and be careful, you know, choosing the right conversion, the right airplane, and then specifically the right actual aircraft, very important. Charles Kauffman All right. Well, thank you again, panelists, that does conclude our session and thank you again to AI for sponsoring session. At this time, we will take a break. So please use this time to continue to have one on one meeting visit with our sponsors. And to join us at 12pm. Eastern for a live presentation from credit course our Managing Director of Corporate Tax consulting. his presentation is titled e commerce unleashed a very search for the new normal.

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