CFA 2020: Idled aircraft to become conversion feedstock

[caption id="attachment_413735" align="alignright" width="450"] Robert Convey, Senior Vice President of Sales & Marketing of Aeronautical Engineers, Inc., Wolfgang Schmid, Vice President of Sales & Marketing at EFW, Jens Steinhagen, Interim Director of Freighter Conversions at Boeing and Zach Young, Director of Sales at 321 Precision Conversions/Precision Aircraft Solutions at Cargo Facts Asia 2020.[/caption] The negative impact of the COVID-19 pandemic on passenger aircraft operations is a surprising boon to operators and lessors searching for suitable feedstock for freighter conversions. This was the consensus at a panel discussion on freighter conversions during this week’s Cargo Facts Asia virtual event. “We’re actually seeing quite a dramatic increase in orders amongst the 737-300s, 737-400s and 737-800s,” said Robert Convey, senior vice president of sales and marketing for Aeronautical Engineers Inc., during the discussion. Despite the pandemic’s severe global economic impact, the decline in passenger operations is freeing up some feedstock, including for conversions programs for the 737 Classics, which have a shrinking portfolio of aircraft suitable for conversion, he said. That has also been the case for 757-200 conversions, according to Zach Young, director of sales at 321 Precision Conversions/Precision Aircraft Solutions, who said during the discussion that “until recently, the 757 feedstock was starting to get a little slim, but I think that picture is about to change.” However, while panelists agreed some older aircraft types are seeing a resurgence due to greater feedstock availability, the fuel efficiency of 737 NGs will likely still drive a transition to the newer types. “Right now, we’re seeing the fuel prices drop, which would help the older types, but I think that might be very short-term just based on the lack of demand for oil,” said Jens Steinhagen, interim director of freighter conversions at Boeing. If prices normalize as expected once COVID passes, fuel efficiency will once again be a concern. “Previously I think the feedstock constraint if anything, was slowing down the newer type conversions and I think we all agree that as we see fleets coming out and retiring now, the feedstock constraint is going to be lifted and that would enable the change to newer types,” Steinhagen added. Wolfgang Schmid, vice president of sales and marketing at Elbe Flugzeugwerke (EFW), which recently obtained the supplemental type certificate (STC) for its A321P2F program, agreed that the widespread parking of passenger aircraft presents an “ideal opportunity to do the next step into the next generation of aircraft in production.” Schmid said he expects most operators who are planning to grow their fleets of converted freighter aircraft to take advantage of the current opportunity and acquire reasonably priced feedstock. On the widebody-conversion front, an audience poll indicated that most in the market expect the 767-300 to be the widebody conversion of choice in the Asia-Pacific region, as it has been in North America. Panelists were divided on the topic, with EFW’s Schmid emphasizing that the 767F was the only freighter available to serve that operational niche for a time. EFW received its STC for its A330-200P2F conversion program in 2018, and began redelivering freighter-converted A330-300Fs in late 2017, but said the main reason the A330 has not broken into Asian markets was that “the hub-and-spoke system is not that common yet.” “It’s growing now and it’s being built up, so we will see more and more of these widebody freighters serving that market. And with all these e-commerce markets, my guess would be the A330-300” due to its greater capacity, Schmid added.

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CFA 2020: Industry nuances to limit new entrants to freighter leasing

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