China Southern inks deal with Boeing for 737-800BCF conversion line

Last week, Boeing and China Southern Airlines Group quietly inked a strategic cooperative agreement that will dramatically expand the capabilities of China Southern’s Guangdong-area MRO facilities. In addition to a number of technology transfers related to repair and maintenance projects across Boeing’s widebody aircraft platforms, Boeing has also agreed to establish a 737-800 conversion line in Guangdong in partnership with China Southern Airlines Group.

In recent years, the rapid ascent of China’s domestic air freight express market has made the demand for narrowbody passenger aircraft coming out of Guangzhou-based China Southern Airlines’ passenger fleet nearly insatiable. After all, many of the freighter-converted 737 classics and 757s in the fleets of domestic express carriers such as SF Airlines and YTO Airlines were ex-China Southern aircraft.

With 737-800 freighter conversions, China Southern is expected to once again be a major source for conversion feedstock – the carrier has 154 active 737-800s in its fleet. This time around, however, China Southern will be more directly involved with the conversions. Yesterday, China Southern confirmed to Cargo Facts that the 737-800BCF conversion line will be established at Guangzhou Aircraft Maintenance Engineering Co, Ltd (GAMECO), a 50/50 joint-venture between China Southern and Hong Kong-based Hutchison Whampoa. This follows US-based 737 conversion specialist PEMCO World Air Services designation of GAMECO as its third conversion center for its own 737 NG conversion programs, last July.

Given its large portfolio of 737-800s, and an MRO facility that will soon be capable of performing touch labor for the conversions, many wonder if this could mean China Southern is considering a foray into narrowbody freighter operations.  Sources familiar with the project confirmed to Cargo Facts that the carrier has no such plans. Instead, most of the 737800BCF freighter conversions performed at GAMECO will likely end up in the fleets of existing express carriers like SF Airlines, China Postal Airlines, and YTO Airlines. Additionally, GAMECO will not be confined to converting only 737-800s coming out of CZ’s fleet, but will also convert aircraft for third-parties.

One thing that remains unclear, however, is the extent to which the carrier’s leasing subsidiary, China Southern International Leasing Co., Ltd, will be involved in this endeavor. It is conceivable that off-lease 737-800s could be returned to CSN Leasing who would then have them converted by Boeing to freighter configuration at GAMECO before selling or leasing the freighters back to express carriers.

Those interested in learning more about China’s appetite for narrowbody freighter conversions are invited to join us at this year’s Cargo Facts Asia, to be held 23-25 April at the Mandarin Oriental Pudong in Shanghai. To check out this year’s exciting agenda, or to register, visit www.cargofactsasia.com.