Widebody freighter fleet analysis 2016 – part IV

Last month Cargo Facts presented a three-part series looking at the widebody freighter fleets of airlines worldwide (you can read Part I here, Part II here, and Part III here).  Today we begin a second series of posts in which we examine the distribution of the fleet in more detail.

Air freight demand increased just 2.2% in 2015. In fact, with only two good years since 2007, the air freight industry has gone through eight years with very little net growth. Not surprisingly, this situation has had a negative impact on the demand for freighters. So too has the rapidly increasing belly capacity offered by cargo-friendly widebody passenger aircraft like the A330, A350, 777 and 787, and, until last year, so have rising fuel prices.

At the end of 2007, the widebody freighter fleet stood at 1,005 units. Since that time, other than a brief spike when carriers returned many parked freighters to temporary service following a surge in air freight demand in 2010, the total gradually fell to 958 at the beginning of 2014. With 4.5% growth in 2014, followed by the modest 2.2% last year, carriers have slowed the rate of retirement of older freighters to below the rate of delivery of new ones, and the fleet is growing again – if only slowly. Since we looked at it at this time last year the fleet it is up by 17 units (1.7%) to 995, but still below its pre-recession high point of over 1,000.

However, while the number of widebody freighters in the fleet rose only slightly, the order backlog jumped substantially. At this time last year Airbus and Boeing had a combined 120 production freighters on firm order. Now that number is 164, a 37% increase. This is largely the result of FedEx’s decision to order another fifty 767-300Fs from Boeing as part of its ongoing fleet modernization program. And not only are orders for production freighters up, so also are orders for passenger-to-freighter conversions.

Comparing the current fleet to the fleet at this time last year on a model-by-model basis shows substantial increases for all of the current production freighter types: 767-300F up 12 to 110 (a 12% increase), A330-200F up 3 to 33 (10%), 777F up 19 to 119 (19%) and 747-8F up 7 to 63 (13%).

This total of 41 new production freighters was more than offset by retirements of 46 early generation types: 747 Classic (down 2), MD-11F (down 11), DC/MD-10 (down 15), 767-200F (down 2), A300B4F (down 1), and A310F (down 16).

However, as mentioned above, the retirement of some newer types that began a few years ago reversed in 2015, and further, after a drought of several years, 2015 saw a resurgence of P-to-F conversion of medium widebody aircraft.

Eight parked freighters were returned to service over the last year, including 747-400ERFs (1), 747-400Fs (4), and 747-400BDSFs (3); and fourteen freighter-converted medium widebodies were redelivered, including 767-300BCFs (1), 767-300BDSFs (10), and A300-600s (3).

The number of narrowbody freighters in the fleet, which had been contracting for several years, began to increase in 2013 and again in 2014 and 2015, but the majority of freighters now flying are still widebodies. Today just under 61% of the jet freighter fleet is comprised of widebody units, very slightly up from last year, and up significantly from just a 50% widebody share as recently as 2005. With demand having slowed for widebodies in recent years, while increasing for narrowbodies, we expect a slow but steady continuing decrease in the percentage of widebodies in the next few years.

New widebody freighters will continue to enter the fleet in increasing numbers over the next few years, but even with the 50-unit 767-300F order from FedEx in 2015, the current backlog of 164 orders is well down from the 203 units on order three years ago.

However, there is a wild card in play, and that is the resurgence of conversion orders. As Cargo Facts has reported, there has been an explosion of demand for express package delivery over the last few years, fueled by the growth in e-commerce. At first, this created a demand for narrowbody freighter conversions, but with the acceleration of the e-commerce boom has come increased demand for medium widebody conversions.

The total number is unclear at this point, but if rumors that either Kalitta or one of the aircraft-management companies is acquiring the nineteen 767-300ERs being disposed of by American Airlines are true, the total 767 P-to-F conversion backlog could soon be as high as thirty-five. Add in the six remaining A300-600s EFW is converting for Uni-Top and the two A330-200s for Egyptair and the total conversion backlog could soon be over forty.

The low growth in air freight demand in 2015 appears to be weakening further in 2016, and already abundant belly capacity will only increase as strong passenger demand brings more cargo-friendly widebodies into service. Therefore, we expect the number of active widebody freighters to grow only slowly, if at all, as new and converted freighters entering the fleet are almost balanced by retirements of older units.

The table below summarizes the composition of the medium and large capacity widebody freighter fleets, reflecting both the 995 units that are in service today, and the 164 additional units now in the order pipeline. Delivery of most of the freighters in this backlog will take place over the next two-to-three years, and this, combined with the increasing belly capacity mentioned above, should mean that we will continue to see more retirements of MD-11Fs, 747-400Fs, and freighter-converted 747-400BCFs and -400BDSFs.