Weekly Wrap: 747s in the spotlight amid slow pax recovery [Video]

As countries around the world continue to grapple with the COVID-19 crisis, international passenger flights are resuming at a plodding pace , leaving this year’s peak season to freighter operators. This week, the Cargo Facts team looked at the status of parked and idled 747 freighter capacity and prospects for the reactivation of these units as airfreight capacity remains at a significant deficit compared to 2019. News out of Southeast Asia brightened prospects for narrowbody fleet growth, with Cardig Air reactivating a freighter, and Pos Malaysia divesting from its freighter operation in a move that could expand the scope of its JV carrier’s network. In this Cargo Facts Connect episode, Caryn Livingston and Charles Kauffman discuss recent 747 freighter transaction volume and other industry highlights for the week ending Aug. 21, 2020. The 747 freighter conversation doesn’t end here. Next week, Cargo Facts will publish a webinar featuring Doug Kelly, senior vice president of asset valuation at Avitas. Kelly will provide an update regarding 747 freighter values, as well as values for other types influenced by the crisis. .embed-container { position: relative; padding-bottom: 56.25%; height: 0; overflow: hidden; max-width: 100%; } .embed-container iframe, .embed-container object, .embed-container embed { position: absolute; top: 0; left: 0; width: 100%; height: 100%; } A transcript is available below. This transcript has been generated by software and is being presented as is. Some transcription errors may remain. Caryn Livingston Hi everyone and welcome to cargo facts connect the podcast and video series of Cargo Facts, the newsletter of record of the air cargo and freighter aircraft industries for over 40 years. I'm your host, deputy editor, Caryn Livingston, and I'm joined today by Cargo Facts senior editor Charles Kauffman. Hi, Charles. Hey, Caryn. Caryn Livingston This is the weekly wrap of what's happening in air cargo for the week of august 18 2020. Today is Friday, August 21 2020. Before I begin our discussion, I want to thank our sponsors, AEI, ATSG, C Cubed Aerospace, IAI Aviation Group and US cargo systems. So for news of the week while orders for the 747 production freighters may have been cut off recently, freighter aircraft transactions involving the 747 have continued To move. First we have US based national airlines which started the process of reactivating a 747 400 BCF, which is its second reactivation for the year. There was also Russia based Sky Gates Airlines, which said it was nearing completion of a deal that would add to its fleet, a third 747 400 freighter. And then also we have one China global Airways, which is a new startup carrier based in Asia. And they outline plans to launch operations with two white body freighters within the next year. And so that's a lot of transactions Charles is this volume of transactions normal? Charles Kauffman Well, Caryn, if we look back at historical 747 transaction volume from year to year, it's hard to define normal. Obviously transaction volume varies in response to market demand and other macro economic factors. Now what we're seeing now, really is carriers with stored freighter converted seven, four sevens and 747 Productions traders, starting to recognize that when it comes to reactivations, it really maybe now or never. So many of the the older conversions have limited cycles remaining and would require maintenance then sometimes costly maintenance ahead of service reentry. And so it's really hard to imagine a scenario in which freighters are more relevant than they are today, given the lack of belly capacity, connecting global markets. recent estimates from airlines for America goldman sachs and in both research, I don't see it returned 2019 passenger volumes until 2023 at the earliest. And it's important to note that domestic air travel recovery is expected. In advance of international aviation recovery, we're starting to see that already in many markets. This is influenced not only by consumer demand but also by travel restrictions. So if we take Qantas, the flag carrier of Australia, which grounded all international flights in March, earlier this week when they released their second quarter results, the carrier stated that it does not expect to resume international flights until July 2021. And even flights to some markets, including the United States could actually follow. Even even later. They mentioned that us flights to the United States may not resume until a vaccine is available. So we're seeing similar skepticism and resuming international flights being in New Zealand and other markets as well. So it's no coincidence that carrier like polar air cargo is planning to launch a new route between New Zealand and Hong Kong, as he reported this week carrying on so with this, and with this reality in mind, we continue to see the reactivation of older 747 freighters and, and even conversions. Caryn Livingston Right, yeah, so it sounds like people are moving forward with the expectation that we'll have a lot of the wide body passenger capacity out of the market for the longer term. So that does make sense while we're seeing this. So what's the current state of idled 747 capacity with all these reactivations happening and what else is like To come back. Charles Kauffman That's a great question. So last week, Jeffrey, Associate Editor of Cargo Facts tallied the the stored 747 freighter fleet. And we counted just about 18 units that are in storage or hadn't flown recently. Among those, many are very likely to come back. So there is a pair of Saudia Cargo 747 dash eights. You know, they're relatively they're pretty young, just over seven years old. It's quite an interesting case that they are not operating today. Many of these are 20 years or or younger in age. So under and some have quite low cycles as is the case with 2747 400 production traders that just came off these from airbridge cargo. So these are these are likely to return to surface with with another operator and as we've reported this week, there are carriers looking to expand their portfolio of 747 freighters. And then there are a couple other freighters that have been parked for some time, as is the case with two China Airlines, seven, four sevens that have been in storage in United States for a few years now. But as we saw last year, one of these are one of the former China Airlines aircraft returned to service with ASL airlines. So it's certainly within the realm of possibilities these aircraft returned to service and the carrier is busy Working to remarket those. So I do anticipate the production freighters returning to service. And then they're also 11 freighter converted 7474 hundreds and storage. And again, some have life limited parts with few cycles remaining. But we do expect to see some of these aircraft reactivated as was the case with the National airlines BCF. Caryn Livingston Well, I'm glad to hear that at the end of 747 production doesn't mean the end of 747 stories on cargo bags. Certainly not. Aside from the 747 News. This week, Carfax also reported on a flurry of activity from carriers based in Southeast Asia. That includes a POS Malaysia which is divesting from its loss making cargo airline POS Asia cargo Express and will enter into A share sale and subscription agreement that will see Asia cargo network assume a 51% stake in that airline valued at about 9.6 million. And then in Indonesia Cardig Air announced plans to resume operating as 737 300 freighter by the end of August, which will increase its narrowbody freighter fleet to two units. So Charles, what's driving demand for freighter lift in Southeast Asia. Charles Kauffman So some of the drivers that exist in other markets are, are present in in Southeast Asia, growing consumer class and the rise in e commerce transactions for example, I think in the case of Indonesia, where we're creditors based, you know, it's important to note that the freighter fleet is modest in size. And yet, the country is inhabited by more than 250 million people spread across 6000 inhabited islands. And so there are limitations to the connectivity that currently exists in the country. And another reality that we're finding is that some of the older 737 Classics in the region are our carrying food and other forms of humanitarian aid. So cardiac air, for example, currently operates and 77 400. And the carrier has a contract with Harmoni, which is an organization sponsored by USAID that promotes resilience of key Indonesian institutions and segments of society against the rise of violent extremism. So that's certainly a unique use for 40 737 Classic in the region. And then Looking at some of the other aircraft that are in service with Indonesia and December of last year, cargo charter operator, Jaya, which I did, and Tara acquired a 737 300 that was actually previously operated by Cardig Air. And they utilize the aircraft to charter a variety of commodities such as rice and other food staples. So the fleet is utilized in a variety of manners. Caryn Livingston So a lot of food moving in the region right now and by air, which is always an important element in responding to humanitarian crises around the world. So what do we have to look forward on current effects next week. Charles Kauffman So, next week, we'll actually publish a webinar that you'd probably be interested in Caryn, featuring Doug Kelly, who's a senior Vice President of asset valuation at us, and he'll provide an update regarding 747 freighter values in light of COVID-19. And Boeing's decision to formally End production of the 747 in 2022. And we'll also be revisiting the feedstock situation for 77 NGS and an 8320 family conversion. So, quite a lot to look forward to next week. Caryn Livingston Great, I'll be sure to check out the webinar. Well, that's all we have time for today. But thank you, everyone, for joining us today. For the latest updates or to check out the freighter aircraft transaction database you can visit www.cargofacts.com Thank you, Charles. Charles Kauffman Thanks, Caryn. While Cargo Facts Symposium 2020 will be presented as a virtual event, the unparalleled networking and continuing education opportunities remain, with the best and brightest minds addressing the most pressing industry issues for air cargo — including those around COVID-19. To register and for more information, visit www.cargofactssymposium.com .

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