Destination Unknown: What the future may hold for freighters

The growing influence of express

Another aspect of the freighter market that cannot be ignored is the continuing explosion in interest in express services. Today, 46 percent of all narrowbody freighters are operated by express companies, said ACMG, as are 65 percent of all medium-capacity widebody freighters and 32 percent of the large freighters.

ACMG also estimates that about 55 percent of all freighters are operated in express networks – a share that is expected to grow even larger, as well over half of the order backlog for widebody freighters is made up of 767-300Fs and 777Fs for FedEx. ACMG’s Hedge added, however, that while 117 freighters on order for FedEx will be delivered between now and the end of 2023, the additions will be balanced by retirements of older freighters. “We estimate that the FedEx fleet will have almost the same number of freighters in 2023 as it does now, and, the total maximum payload of the fleet will be almost identical,” he said.

International express traffic is expected to continue growing faster than the average world air cargo growth rate. “The distinction between express and general air cargo continues to blur,” said the Boeing WACF forecast. “Traditional providers are expanding their time-definite offerings, and express carriers, freight airlines, and postal authorities are consolidating.”

Unknown unknowns

To paraphrase a certain former U.S. defense secretary, there are things we know we don’t know about the future of freighter demand, and then there are factors we don’t know that we don’t know.

For instance, the cost of fuel is a major question mark in the 20-year outlook. At the beginning of 2015 oil prices had reached an eight year low at roughly US$50 per barrel and since then have fluctuated in a small range around that price. This is good news for the industry this year, but is it a long-term trend that carriers can count on? That remains to be seen.

ACMG said it’s important to realize that increased demand for airfreight services “may not translate directly into demand for freighters.” The competition from belly space is a significant threat, especially if passenger demand outpaces growth in air freight demand for a significant period, as it did in 2011-2013, and is doing again in 2015. Freight yield (revenue taken in by airlines for each kilogram carried) has been trending down. “This situation is the primary reason that some airlines in the top echelon of air freight suppliers are switching to a belly-first strategy for their cargo operations,” ACMG’s report noted.

As was mentioned earlier, the recent orders of freighters by AirBridgeCargo represent “a massive influx of capacity and a real vote of confidence in the future,” said ACMG’s Hedge. “But before Boeing breaks out the champagne and caviar, it should be noted that ABC’s twenty ‘new’ 747 8Fs orders may include units ‘deferred’ (sometimes indefinitely) by other buyers, or, in the case of Nippon Cargo Airlines, canceled outright,” he added, referring to NCA’s cancellation of four of its remaining six 747-8F orders with Boeing. “While Boeing would obviously prefer the AirBridge order to be firm, the MoU is a positive sign. ACMG will continue to watch 747-8 developments carefully.”

NOTE: A new feature of ACMG’s forecast is an interactive Freighter Forecast Analysis Tool, in the form of an Excel spreadsheet provided to purchasers of the report. This new Analysis Tool allows purchasers to specify their own combination of the key three input variables – demand growth rate, freighter productivity improvements and shifts in the freighter:belly space ratio – and determine how the size of the future freighter fleet will be impacted under various user-defined scenarios. For more information on ordering the report, please visit acmg.aero/freighter-forecast-report.

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