Express growth feeds fleet expansion

As the passenger aviation market attempts to stabilize itself after almost coming to a standstill just a few months ago, the freighter fleets operated by or on behalf of leading express carriers DHL, FedEx and UPS have been kept busier than ever. FedEx, for example, reported a 31% year-on-year growth in its international priority package volumes from June through August. The in-service fleet has been slower to adapt, with a net increase of six aircraft added compared to a year ago, growing the fleet to 949 jet freighters, according to Cargo Facts analysis. While this may seem insignificant compared to previous years, the full impact of the pandemic may become more apparent in years to come. Already there have been changes on a variety of fronts in response to reduced belly capacities and a pandemic-induced rise in e-commerce — two variables that aren’t expected to immediately return to the pre-pandemic normal. Here we focus on the jet freighter fleets of the three major global express integrators, including own-operated aircraft as well as those known to be operated for them on an ACMI or CMI basis. FedEx slows retirements With around 428 aircraft, FedEx Express continues to operate the largest freighter fleet of the three integrators, but its fleet was the only one that shrunk over the course of the past twelve months, with a net decrease of six aircraft. Absent the COVID-19 impact, FedEx’s fleet would have been even smaller. Toward the end of last year, the company had announced its intention to park or retire up to thirty-five MD-10-10Fs, A310-300Fs and MD-11Fs by the end of its next fiscal year. Of course, this decision was well before the pandemic, but FedEx has steadily retired older aircraft as new 767-300F and 777F deliveries replace them. Apart from completing the retirement of all A310-300Fs at the beginning of 2020, FedEx has also removed eleven MD-10-10Fs and several A300-600Fs, MD-11Fs and 757-200Fs since October 2019, but the surge in charters and overall flying during the pandemic meant that six MD-10-10Fs earmarked for retirement by May 31 continued to fly, according to the company. At least one 757 that had been sent to Victorville (VCV) in January was also reactivated. Compared to a year ago, FedEx has added fifteen 767-300Fs and two 777Fs. As of May 31, forty-six 767-300Fs were on the backlog and originally all due to be delivered by the end of FedEx’s fiscal year 2023 but in June, FedEx reached an agreement with Boeing to reschedule its remaining 767F deliveries; four are now postponed until fiscal 2024. Deliveries for fiscal 2021 are expected to remain unchanged at eighteen. UPS balances new-build, second-hand capacity Moving on to UPS , the Atlanta-headquartered integrator grew its fleet to 282, including the addition of four 747-8Fs and seven 767-300Fs. Notably, apart from taking new-build 767Fs, UPS has since late 2019 been adding converted 767s as a faster and lower-risk way of offering more capacity. Under an agreement signed in 2019, UPS now has one 767-300BCF and four 767-300BDSFs dry leased from Cargo Aircraft Management (CAM). In September, UPS received its seventeenth 747-8F (65784), and said it expects three more to be delivered by the end of 2020, leaving the remaining eight on firm order to be delivered in 2021 and 2022. Apart from new 747 and 767 deliveries, UPS also purchased five MD-11Fs in December 2019; two of these aircraft (48805 and 48806, ex-Lufthansa Cargo) were sent to Victorville (VCV) in the last quarter of 2019, but were then brought to San Antonio (SAT) in January for modification work to bring them in line with the rest of the fleet. UPS told Cargo Facts it plans to have both in service in October. Cargo Facts believes the other three MD-11Fs are also aircraft being retired by Lufthansa Cargo; the carrier recently postponed the withdrawal of its six remaining MD-11Fs, but said that three will be removed by the end of this year. Including the five ex-Lufthansa aircraft, UPS’ MD-11F fleet will grow to forty-two. Further fleet growth may be less likely than before, according to new UPS CEO Carol Tome, who took over the reins from David Abney on June 1. Discussing the company’s second-quarter results, Tome said UPS had in the past added capacity in the hope that demand would follow. Noting that UPS had declined Boeing’s offer to sell more 747-8Fs before formally announcing the completion of the 747-8 program in 2022, Tome said her focus is on making UPS “better, not bigger.” DHL grows owned main-deck capacity When it comes to DHL Express , as ever, it is much more difficult to pinpoint exactly the number of freighters flown by or for the integrator, given that it has such a wide-ranging portfolio of own-operated flights, joint venture airlines, charters, and ACMI and CMI arrangements. Examples include DHL’s own airlines like EAT Leipzig, DHL Air UK, DHL Airlines International Middle East, and DHL Aero Expreso; partially owned airlines like AeroLogic, Blue Dart Aviation, Polar Air Cargo, and Tasman Cargo Airlines; and ACMI or CMI carriers like ABX Air, Allied Air, Aviastar-TU, Bluebird Nordic, Cargo Air, Kalitta Air, Raya Airways, Southern Air and Swiftair. It is this complexity and diversity that makes the DHL fleet the most interesting to look at. By our estimates, from October 2019, the total number of freighters flying DHL’s express network grew by around four to 239 aircraft. After taking delivery in 2019 of the first four of at least fourteen new 777Fs, DHL continued adding to its owned fleet and, as of the end of September 2020, had taken four more 777Fs, with two more expected by the end of this year. DHL has divided up the 777Fs among different CMI operators. The first two delivered last year (66079 and 66080) are operated by Southern Air, while the other two (66081 and 66082) went to AeroLogic, DHL’s Germany-based joint venture with Lufthansa Cargo, adding to twelve 777Fs operating at least partially for DHL. Of the four added so far in 2020, two (66083 and 66084) were placed with Kalitta Air and two (66085 and 66086) with AeroLogic. Based on reserved registrations in the Federal Aviation Administration’s records, Cargo Facts believes the next two will be handed over to Kalitta Air. Meanwhile, two more A330-300Fs converted by Elbe Flugzeugwerke (EFW) have been redelivered to DHL. These two aircraft (777, ex-China Eastern Airlines; and 781, ex-Shanghai Airlines) are EFW’s first high-gross-weight conversions, with payload increased from 59 to 62 tonnes, and are now being operated by Air Hong Kong under its own AOC. At the end of March, the Hong Kong-based Cathay Pacific subsidiary also added another production A330-200F (1414) that DHL had acquired from Etihad. Since the end of 2018, unit 1414 had been flown by ASL Airlines Ireland for Air Hong Kong, which had previously told Cargo Facts it would eventually be brought under its own AOC. As it stands, Air Hong Kong now has nine A300-600Fs, one A330-200F and three A330-300Fs in its own-operated fleet, along with one A330-200F (1032, ex-Etihad) and one A330-300F (231) operated by ASL. The sixth and seventh A330-300s (1124 and 1107, both ex-Hong Kong Airlines) for DHL arrived at the EFW facility in Dresden (DRS) in March and July, respectively, to be inducted for conversion. The integrator is committed to eight A330-300Fs, with options for ten more conversions. Even with the A330 backlog, DHL will grow its medium widebody fleet with more 767-300Fs. In June, it ordered three 767-300BDSFs conversions plus one option in a new deal with Israel Aerospace Industries (IAI), which told Cargo Facts the aircraft (33087, 33086 and 33081, all ex-American Airlines) will be converted at the Mexicana MRO Services facility in Mexico City (MEX). Unit 33087 was inducted in July. While DHL said a decision hadn’t been reached yet as to which division the 767s will be flying with, we note the express integrator at the end of 2019 took redelivery of a 767-300BDSF (27686, ex-Royal Air Maroc), which it handed over to U.S.-based Kalitta Air to be operated on a CMI basis. That aircraft was also converted by IAI at the Mexicana MRO facility. Not long after the IAI announcement, DHL followed with a similar deal with Boeing in July, involving four 767-300BCF conversions to be redelivered by the end of 2021. The first aircraft under that order (33083, ex-American Airlines) arrived at the ST Engineering facility in Singapore (QPG) in late September. DHL had clearly taken advantage of the opportunity to pick up the American 767-300ERs at attractive prices; they were all in active passenger service until March, when the airline said it would remove all sixteen remaining 767s from its fleet and accelerate their retirement. While the three other aircraft under the Boeing order have yet to be identified, it would not be surprising if at least one or two of them are also from the same batch of 767s. Diversifying CMI operations With regard to narrowbodies, new to DHL’s network are two 737-800BDSFs (30498, ex-Transaero Airlines, and 28619, ex-Pegasus), which entered service with new CMI operator iAero Airways in May. The two aircraft are the first -800s to be converted by IAI and were purchased by DHL from Spectre Air Capital earlier this year. In the second half of 2020, DHL began diversifying its CMI providers even further by transferring five 737-400Fs previously operated by Southern Air away from the Atlas Air affiliate; one (26316) was given to Ypsilanti-based Kalitta Charters II in June, while two (26455 and 26334) were handed over to iAero Airways in July. In August, DHL appointed Arizona-based Mesa Airlines as the latest airline to operate aircraft on its behalf, under a five-year agreement for the two remaining 737-400Fs (27157 and 27674). Unit 27157 began service in October, with 27674 to follow in November. While discussing Mesa’s second-quarter results, CEO and Chairman Jonathan Ornstein told analysts he had high hopes for the regional express cargo business, saying there is “significant growth opportunity” if Mesa proves its capabilities and that he could see the airline operating as many as ten freighters in late 2021 or early 2022. It is clear the express package market will continue to drive much of the demand for freighter aircraft, particularly conversions. In fact, both Boeing and IAI are increasing their 767 conversion capacity, partly due to DHL’s recent orders, but also because of customers like SF Airlines and Amazon; these two players have the next-largest express freighter fleets — even if not on the same level as FedEx, UPS or DHL — and account for many of the 767-300 conversions being carried out, both currently and in the year ahead. Next month we’ll take a closer look at the growth trajectories of the fleets in service for Amazon and SF Airlines. This story originally appeared in the October 2020 issue of Cargo Facts, accessible here .

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