Listen: Lessors strengthen control over 737-800 freighter conversion slots

Lessors and investment funds further strengthened their control over 737-800 freighter conversion slots following new orders in recent weeks from BBAM and Aero Capital Solutions . With the majority of 737-800 conversion slots from the three STC holders, Aeronautical Engineers Inc., Boeing and Israel Aerospace Industries, now accounted for through 2023, the focus now shifts to operator agreements. In this episode of Cargo Facts Connect, Senior Editor Charles Kauffman and Associate Editor Jeff Lee take a look at incoming 737-800 freighters and discuss fleet trends in what is currently the second-largest market for 737NG freighters: Mainland China. A transcript is available below. This transcript has been generated by software and is being presented as is. Some transcription errors may remain. Charles Kauffman Hello and welcome to this episode of cargo facts connect the podcast and video series of cargo facts, the newsletter record for the air cargo and freighter aircraft industries for over 40 years. I'm Charles Kauffman, Senior Editor of cargo facts. Jeff Lee And I'm Jeff Lee, Associate Editor of cargo facts. Charles Kauffman It's Friday, July 16th. And once again, this week has been an active one for narrowbody freighter aircraft transactions, Jeff less or Bbam firmed up an order for 12 more 77 800 BCF conversions with Boeing growing total program orders and commitments for the type 231 units. And This comes just days after aero capital solutions increased his orders for 737 800 sf conversions with aeronautical engineers Inc. 221 aircraft. Combined with existing orders from less wars and operators. We're going to see a lot of 737 NGS go through conversion. So both B BAM and arrow capital solutions have taken redelivery of some of these aircraft and some of these Raiders on order. Jeff, what do we know so far about the operators taking up the freighters from these last orders? Jeff Lee Well, bbam delivered two on lease to China postal airlines in 2019. By the way, those two aircraft, it has now sold those two aircraft to ICBC aviation leasing. But then, in 2020, they ordered three conversions, the first of which was the first to go through conversion at gamma Co. and in Guangzhou. That aircraft went to world cargo airlines in Malaysia. The second one went to China Central longhao airlines. And so the third one that I think they're converting this year, but in January this year, they announced another order for six firm conversions and six options. And now, they have this new order, so they haven't even completed the previous order set. And they're already placing more and I think that just speaks to the slot issues that we have been discussing for a while now. And same thing with aero capital solutions, I mean, they ordered. They placed orders last year, and they only have one in service so far with Georgian Airways, but we know that they have a couple more in the way that have either completed or are nearing completion. But yes, they they big vessels just keep adding more and more orders to the pipeline. And I'm sure you know, China is very much on their minds. After the US it's the second largest market so far with 737 800 freighters what 737 mg freighters in service, but this week, we looked at the fleet that is currently in service with operators based in China. And there are only 11 737 ng freighters in service with three Chinese carriers. And that does seem a bit on the low side, doesn't it? Charles Kauffman Yeah, it really does for for this point in time, especially if we go back to February 2016. Around that time when Boeing first launched its 77 800 ECF program really seemed like at the time there was a great interest from from Chinese operators and I'm not saying that his that has necessarily changed but But the timing certainly is not what I would have expected. I actually attended Boeing's launch event for for this and there's an 800 BCF program at their Shanghai Aviation Services facility in Shanghai. And, you know, this was an event attended by the major Express carriers in China. Why to try to postal airlines and SF Express with each of those operators, placing orders and an options with 10. Each 10 orders each from why to and trying to poach airlines and then an order for an unknown quantity from SF Express, which the airline component of which does operate China's largest freighter fleet at the moment and by by a significant margin. And in the three years since the the first 77 800 BCF has been certified and delivered, China postal Airlines has been the only carrier among the three launch operators based in China to add the type. Jeff Lee That's interesting. And I think even, it's not just China, I think, for example, las cargo in Colombia, they were one of the earlier or they were one of the launch customers, but they also haven't yet sent any aircraft for, for conversion. And they, they I think, recently, they said they would postpone that to next year. But, you know, why are we seeing this? Charles Kauffman Yeah, so I mean, I think he, the last example is maybe a bit different there. It's certainly, I mean, the common factor is that, you know, I expect many of these operators will eventually take, take the type. When I look at China, they're really, and the operators in the market are really a combination of factors at play here. I think the obvious being that 7070 100 feedstock was pricey and difficult to find, when 70 to 70 100 conversions first hit the market. Obviously, the passenger replacement type for this aircraft is 737. Max was grounded for more than a year between March 2019 and November 2020. And then we've also seen a shift in the development and trajectory of Express networks operated by Chinese carriers. And so initially, there was a focus on on short haul domestic routes. And the nine pallets and 373 100 Classic freighter with a range of 1700 nautical miles or so was, was extremely popular for many of those, there's domestic routes. So if we look back at just as recently as 2018, there were 54 7373 hundreds in service with Chinese operators. So it was very, it was the most popular type. And increasingly over the past four years or so, we've seen carriers and express networks look beyond domestic China to nearby mostly nearby international destinations. And so this is this is partially why we've seen there are many operators take interest in the 15 pallet 757 200 traders with a slightly longer range of 2400 nautical miles or so which which has been suitable for opening up some of these longer routes. The 757 200 is now the country's most widely utilized freighter. And you know while while feedstock for the 757 is available, carriers like yto and SF continue to add the type of course that's that's not going to continue indefinitely there will be a transition. But really compared to the 737 300. The The 800 does narrow the gap with the 757 in terms of range and and capacity, with 11 main deck positions in a range of 2000 nautical miles. And since there are a total of 5777 classics rigging mostly the three hundreds operating within the fleet's based in mainland China. We do expect many of those to be replaced and operators have told us that they will likely be replaced by 70 or 70 hundreds However, NSF and yto, for now at least, are prioritizing the addition of 757 and 767 freighters. So, again, I don't think it's a matter of if as much as it's a matter of when we're going to see the adoption of the 77 mg freighters accelerate in China. And for now, you're trying to postal and long How are on that path? And, you know, eventually we'll see. I expect we'll see. We'll see others make the move. Jeff Lee I think that's right. I mean, with the large classic lead, like you were saying, we will eventually see energies moving in or energies moving in, but it's interesting, the different carriers and their strategies, and what that means for both seven to be seven freighters and 757, and 7672. But definitely an interesting and fast moving market when it comes to freighters both production and conversions. Thank you so much for tuning into this episode of cog effects Connect. For more multimedia content like this check out cargo facts.com and search cargo facts connect on iTunes and Spotify. Join us again next time. Subscribe to Cargo Facts Connect on iTunes or Spotify , or download the episode on Transistor . Cargo Facts Symposium, taking place LIVE October 25-27 at the Wynn Las Vegas, is the essential event for stakeholders in the air cargo industry. Learn more and register at www.cargofactssymposium.com .

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