Twelve months ago, in Cargo Facts’ last year-end overview of conversion orders and redeliveries, supplemental type certificate (STC) holders were already reporting a marked upturn in demand.
Now, toward the end of 2021, not only has that demand continued to grow — to the extent that the term “explosive” would be no exaggeration — but conversion companies have responded as best they can by ramping up output like never before, with new maintenance, repair and overhaul (MRO) partners, and additional lines at existing ones.
Cargo Facts estimates that there have been orders for a total of at least 280 conversions so far this year, based on public announcements as well as our own reporting and records.
As the table below shows, there were seventeen active freighter conversion programs with approved STCs for ten major jet aircraft types as of the end of November 2021. In the past twelve months, three more programs have surfaced, all for widebodies, while one has gained certification. All programs currently in development are shown with an asterisk.
|Model||321 Precision Conversions||AEI||Boeing||C3||EFW||IAI||Mammoth||NIAR/KMC||PEMCO||Precision Aircraft Solutions||Sine Draco|
An increasingly crowded field of jet converters
321 Precision Conversions/Precision Aircraft Solutions
321 Precision Conversions, a joint venture between Air Transport Services Group and Precision Aircraft Solutions, obtained certification from the Federal Aviation Administration (FAA) for its A321-200PCF program in April 2021, around four years after its formal launch. This was soon followed by validation from the European Union Aviation Safety Agency (EASA), paving the way for launch operator SmartLynx Malta to begin flying the prototype aircraft (891, ex-Air Mediterranee), on lease from Vallair, in ACMI service for DHL Express.
Unit 891 had started its flight test campaign in October 2020, after touch labor was completed at the Avocet facility in Sanford (SFB).
321 Precision Conversions is now also converting A321-200s at the PEMCO facility in Tampa (TPA) and the HAECO Americas in Lake City (LCQ).
In the past twelve months, 321 Precision Conversions has redelivered one A321-200PCF and Precision Aircraft Solutions has redelivered eleven 757-200PCFs, with up to one or two more before the end of the year.
Aeronautical Engineers Inc. (AEI)
AEI started the year with a top-up order from Aero Capital Solutions for ten 737-800SF conversions. The lessor would later add seven more in the summer and thirteen more in November for a total orderbook of thirty-four, by far making Aero Capital Solutions the largest customer of the 737-800SF.
Other lessors holding 737-800SF conversion orders with AEI include GA Telesis, BlackRock, Macquarie AirFinance and Aircastle.
Even as the 737-800SF, which was certified by the European Union Aviation Safety Agency (EASA) earlier this year, experienced unprecedented demand, AEI continued to convert a small number of 737-300s and -400s, notably for Vx Capital, Nauru Airlines, Cargo Air and Aeronaves TSM.
AEI confirmed to Cargo Facts that from December 2020 through November 2021, it redelivered eight 737 Classics, twelve 737-800SFs and four MD-80SFs. The company said it has also completed four other 737-800SFs that it expects to redeliver by yearend.
Even before the conversion line announcements at the Dubai Airshow, Boeing had already announced additional 737-800BCF conversion capacity earlier in the year.
In February, the company said it would add a third line at the GAMECO facility in Guangzhou (CAN) in early 2022. This is particularly impressive given GAMECO completed its first 737-800BCF conversion in late 2020.
2022 will see Boeing’s first 737 conversion site outside China, with two lines starting at the Cooperativa Autogestionaria de Servicios Aeroindustriales (COOPESA) facility in San Jose (SJO), Costa Rica.
In terms of the 767-300BCF program, Boeing announced in September that it had selected GAMECO to also provide touch labor using a new line that will begin in the first quarter of 2022 and a second later in the year.
In response to heightened demand, Boeing added a third line at the ST Engineering facility in Singapore (SIN) this year, complementing two existing lines in the city.
Boeing has now received orders and commitments for more than 100 767-300BCFs. Most recently, in early November, Air Transport Services Group (ATSG) announced a deal with Boeing for at least four 767-300BCFs. ATSG has long been a major IAI customer and still holds around thirty 767-300BDSF conversion slots.
ST Engineering confirmed to Cargo Facts that it has completed seven 767-300BCFs so far this year, with up to two more planned before the year ends.
C Cubed Aerospace
California-based C Cubed Aerospace inducted the conformity aircraft (1523, ex-Sky Airline) for its A320 program in September 2019. The aircraft is undergoing conversion at FMS in Kansas City (MCI) and is expected to emerge from conversion and commence test flights in the near future, sources familiar with the program told Cargo Facts. Once the A320CCF is certified, C Cubed intends to develop an A321-200 freighter conversion that would leverage the design commonality with the A320.
Elbe Flugzeugwerke (EFW)
After redelivering the first A321-200P2F in late 2020, EFW, a joint venture between Airbus and ST Engineering, has gradually ramped up its production capabilities and so far this year has redelivered four units that are now in service with Titan Airways, SmartLynx and Qantas.
In March, EFW inducted its first A320-200 (2737, ex-IndiGo) for conversion at the ST facility in Singapore (XSP) and told Cargo Facts it expects to obtain the STC for the smaller freighter in the first quarter of 2022.
In the final quarter of 2021, EFW also inducted the first A321 at the VT San Antonio Aerospace facility, its first conversion site in the U.S. The aircraft (2903) is a SmartLynx unit on lease from GTLK Europe that will return to the airline in freighter configuration.
As for EFW’s widebody program this year, four A330-300P2Fs were redelivered, including two to DHL Express, one to Stratos and one to MNG Airlines.
EFW said in June that it will open two new A330P2F conversion locations next year. ST has since confirmed to Cargo Facts that these will be at the Shanghai Technologies Aerospace Company Limited (STARCO) facility in China and the VT Mobile Aerospace Engineering facility in the U.S.
Israel Aerospace Industries (IAI)
IAI announced in October that it had secured Avolon as the launch customer for its new A330-300BDSF conversion, with a commitment for thirty slots.
IAI, which has never converted Airbus aircraft before, is targeting a supplemental type certificate for the A330-300BDSF by the end of 2024.
Avolon is the largest manager of A330s and as of the end of September, its A330 portfolio numbered fifty-four, of which thirty were -300s.
IAI has also passed the significant milestone of cutting metal on its prototype 777-300ERSF conversion (32789, ex-Emirates). The company announced earlier this year that it will set up two new lines for the program at the Etihad Engineering facility in Abu Dhabi (AUH) and two other lines at a new Sharp Technics K facility in Seoul (ICN).
Meanwhile, IAI continues to expand its existing conversion programs, with plans to convert 737NGs at the Atitech facility in Naples (NAP) and, eventually, the Aviatic MRO facility in Siauliai (SQQ), Lithuania, as well as 767s at the Ethiopian Airlines Maintenance, Repair and Overhaul facility in Addis Ababa (ADD).
Cargo Facts estimates that IAI has redelivered around seventeen 767-300BDSFs, three 737-800BDSFs and one 737-700BDSF so far this year.
In September, Mammoth Freighters announced a passenger-to-freighter conversion program for the 777-200LR and 777-300ER and intends to become the first company to convert 777-200LRs into full freighters.
Mammoth is backed by Fortress Investment Group, which acquired ten ex-Delta Air Lines 777-200LRs as feedstock earlier this year.
Since then, Mammoth has landed Cargojet as its launch customer, with a deal for two 777-200LRMFs, and options for two more 777-200LRMFs and two 777-300ERMFs.
Mammoth told Cargo Facts that it expects to induct the conformity aircraft (29742) for conversion in mid-2022 at the GDC Technics facility at Fort Worth Alliance Airport (AFW), with certification and delivery to Cargojet expected in the second half of 2023.
Mammoth has also acquired a 50% stake in GDC’s MRO division.
National Institute for Aviation Research (NIAR)/Kansas Modification Center (KMC)
Wichita State University’s National Institute for Aviation Research (NIAR) announced in late 2020 that it would develop a 777-300ER freighter conversion in conjunction with the Kansas Modification Center and Sequoia Aircraft Conversions.
While few details of the program are known, the NIAR did receive the first aircraft (37704, ex-Emirates) at its MRO facility in Wichita (IAB) in September, saying in a statement that after conversion the 777 will be “transferred to an external client to meet the growing needs of the e-commerce and express cargo market.”
The program became embroiled in a legal dispute between Mammoth and Sequoia in May that is still ongoing.
Now an ATSG-owned company, PEMCO built its reputation in the conversion business on the success of its 737-300 freighter conversion programs.
The company continues to convert 737 Classics including both the -300 and -400 variants and is also part of the 737NG space. PEMCO redelivered its first multi-configuration 737-700 Flex Combi in 2020 to Texel Air with another following in 2021 and has just begun converting its third FlexCombi (29645, ex-Delta Air Lines) in Tampa (TPA) for new customer AAR.
PEMCO is still in the process of developing a full-freighter STC for the 737-700, and could later choose to develop a 737-800 P2F program.
The company does not disclose its order books, but aircraft appraisers familiar with PEMCO’s backlog expect six to seven 737 Classic conversions in 2022.
Sine Draco inducted the conformity aircraft (963, ex-AtlasGlobal) for its A321-200SDF passenger-to-freighter conversion program in October and will soon become the third aircraft converter to cut metal on an A321-200 with the intention of developing a freighter STC.
Touch labor for the modification is being done at the Ascent Aviation Services facility in Tucson (TUS) and is anticipated to be completed in the second quarter of 2022.
Keeping the lines supplied
The rise in production output comes at a time when global supply chains are severely constrained, presenting an entirely different set of challenges. Conversion houses and the MRO facilities which handle touch labor for the conversions have generally favored nose-to-tail conversions that fully utilize both hangar space and labor resources within an MRO.
The once commonplace practice of switching suppliers is complicated by travel restrictions that continue to limit the movement of engineers and the aviation authorities needed to certify new products. IAI, which is actively converting 767-300ERs and 737NGs, said it has been working to ramp up conversion kit production at existing facilities in China but has faced delays in certifying new suppliers. VP of Marketing Rafi Matalon told Cargo Facts that IAI has essentially doubled kit production but has encountered bottlenecks onboarding new suppliers because of the difficulty it faces getting representatives from the civil aviation authority into China. As a stopgap measure, IAI has also shifted production of some components from China to Israel at a higher cost.
Additionally, the tightness of commercial freight capacity has made it more challenging to position kits and parts at conversion sites. “We cannot control the big demand for freight. It’s very difficult for us to carry the kits and parts,” said Matalon. Charter flights have provided much-needed capacity, but at a cost. “We are chartering Antonovs, the big freighters — and this is expensive and was not predicted as part of the [conversion] cost.”
Because AEI manufactures many of its parts at its own facilities in the U.S., the company has only experienced a slight slowdown in its supply chain that has not been “catastrophic,” SVP of Sales and Marketing Bob Convey said during the Cargo Facts Symposium.
That is not the case with parts coming from other suppliers, however. “We are seeing extended lead times from Ancra on the cargo loading system; from Ventura on 9G barriers; and smoke detector lead times are now around 45 weeks,” Convey said. “So we’re seeing the overall cycle extend, but that plays right into our backlog that goes out over two-and-a-half years. So as we go out further, we’re able to get parts on order with some guarantee of consumption earlier. We are also starting to see some items, like stainless steel tubes and some smaller parts, that are running short.”
Boeing said it has so far been able to circumnavigate supply chain-related delays for its 737-800BCF and 767-300BCF programs. “We clearly leverage the large Boeing global supply chain to mitigate any effects,” said Director of Freighter Conversions Jens Steinhagen.
“What we’ve seen is that there’s less than 1% of the supply chain in the immediate term is being affected,” said Gary Warner, president of Precision Aircraft Solutions and 321 Precision Conversions, blamed the competitiveness of the labor market, raw materials and travel restrictions.
Even a single missing or delayed part can interrupt the well-tuned rhythm of induction-redelivery-induction. “We’re not experiencing any delays in the conversion process, yet not going to say 2022 won’t bring some surprises to us,” AEI’s Convey said.
The inevitable slowdown
With the influx of conversion lines and added capacity, aircraft converters have been quick to point out that the high redelivery rates currently seen in the market are unlikely to last. Even though many historical norms have been upended by the pandemic, the long-term cyclicality of fleet planning is generally expected to persist.
“I think that if there’s a plateau of demand for a period of time, we’re all planning to increase what we need to,” Warner said. “But as long as we have a sensible, realistic approach to ramping up, then nothing else really matters apart from satisfying our customers in terms of being able to redeliver these aircraft.”
The shape of the demand curve will vary by aircraft type and is subject to influence by the trajectory of the global economy. For newer narrowbody types, such as the 737-800, AEI expects lessors with aircraft in conversion today and into next year to “reap the benefits” of being able to match capacity with market demand.
“The people that are now just getting into it – the [later] adopters – do take some risk putting slots in late 2023 or even 2024,” Convey said. “Our analysis shows [the market] may throttle back or at least stabilize in 2024. I don’t think we’ll be adding additional lines that far out.”
Compared to factory-built freighters, however, output for converted freighters is far more flexible. “In the end, the cost and effort to start up new lines is not very hard to justify,” Steinhagen said, acknowledging that “at some point, we will likely have to reduce that capacity.”
This story originally appeared in the December 2021 issue of Cargo Facts.