November may be the peak season for air freight, but July is the peak season for freighter aircraft orders.
The big European air show that takes place every year in July (alternating between Paris and Farnborough) has long been used as a venue for showcasing major aircraft orders. Last year, in Paris, Boeing and Russia-based Volga-Dnepr Group announced a Memorandum of Understanding for up to twenty 747-8 freighters. Of course, history is littered with MoUs that were never firmed, but Cargo Facts has said from the beginning that we believed Volga-Dnepr would convert all, or almost all, of the twenty into firm orders.
And it looks like, once again, the big air show will be the venue for the announcement.
Volga-Dnepr, through its AirBridgeCargo and CargoLogicAir subsidiaries, has already firmed three orders, and if a report in Bloomberg is correct, will soon announce the firming of at least ten more. According to Bloomberg: “The agreement could be announced as soon as the Farnborough Airshow next month in England, according to four people briefed on the deal, who asked not to be identified because the talks are confidential.” The report went on to say that neither Boeing nor Volga-Dnepr would comment on the deal, but that “a representative of Volga-Dnepr… said the airline plans to take all 20 jumbos it committed to last year.”
Given the lack of growth in air freight demand in recent years, and the pressure put on yields by the ever-increasing supply of belly capacity, why would anybody even think about ordering twenty 747-8Fs? Why? Because, while the overall airfreight market may be in the doldrums, AirBridgeCargo Airlines, Volga-Dnepr’s scheduled-service subsidiary carrier, is reporting strong double-digit volume growth – month after month after month.
May was no exception, as AirBridge reported cargo volume up 31% y-o-y, to 50,482 tonnes. And while a 31% increase may seem exceptional when many competing carriers’ loads are declining, it was just business as usual for AirBridge, which reported cargo volume for the first five months of this year up by the same 31%, to 238,154 tonnes.
You don’t have to be a mathematical genius to know that kind of growth cannot go on indefinitely. But Volga-Dnepr clearly believes it will go on for at least some time into the future, and that more capacity will be needed to support it. Likewise, the Group expects its recently launched UK-based subsidiary CargoLogicAir (CLA) will also see strong volume growth, and one of the three already-firmed 747-8F orders is for a freighter (60119) about to be delivered to CLA. In fact, we would not be surprised to see that delivery take place at Farnborough, as part of the big announcement.
Also potentially related to the deal, last week Russia’s Sberbank signed a strategic cooperation agreement with Volga-Dnepr Group “for financing future projects.” Whether these future projects will include acquisition of the 747-8Fs was not announced. The agreement appears to be centered on Volga’s investment banking activities, and aircraft leasing activities, but Sberbank has worked with Volga-Dnepr for over twenty years, so financing aircraft acquisitions would not be surprising.
AirBridgeCargo currently operates eight 747-8Fs, five 747-400ERFs, two 747-400Fs, and three 737-300Fs. It also ACMI-leases two 747-400BCFs from Air Atlanta Icelandic. CargoLogicAir currently operates one 747-400F.
Those interested in future demand for jet freighters of all sizes should consider the Twenty Year Freighter Aircraft Forecast published by Air Cargo Management Group (ACMG, Cargo Facts’ parent).