PODCAST: The Paris Air Show, plus Embraer in China

Andrew Crider
Hello and welcome to this episode of cargo facts connect the podcast of cargo facts, the newsletter of record for the air cargo and freighter aircraft industries for over 40 years. I’m your host Andrew Crider, associate editor of Cargo Facts.

Robert Luke
And I’m your co host, Senior Associate Editor of cargo Facts, Robert Luke.

Jeff Lee
And I’m Jeff Lee, editor of cargo Facts.

Andrew Crider
It wouldn’t be a romantic summer night in June if we didn’t talk about Paris and how much we want to go on all day. We have a lot of breaking news from the Paris Air Show. Starting with there was Air Algerie, the first customer of the 737 BCF placing an order for that was there was too Jeff, wasn’t it?

Jeff Lee
Yes, it was two. And they were actually one of the earliest customers and operators of the 737 800 BCF program. But this was slightly surprising I guess. But overall, the there wasn’t the same amount of freighter orders and announcements as the Farnborough Airshow last year, of course. So and this was one of the only ones and it was for two BCFs. They currently have one BCF so this in terms of the growth, you know this is pretty significant for them. We’ll see whether they, I would think that they’re going to use some of their own passenger 737 8 Hundreds, they do have some that are around the right age. What we don’t know is when when these conversions are scheduled to take place, and where. We we’ve tried to find out, but so far we haven’t heard back yet. But you know, on the topic of the Paris Air Show and BCF orders, we also had a maybe also a surprising order from Nordic aviation capital for one conversion. What’s interesting about this one is that the induction is taking place in 2026, which is quite a long time way. And we had a story about them buying their first 737 8 Hundreds, because of course this this is a new type for this lessor. And they told us that they were thinking about converting them into freighters. I guess what we didn’t expect was for the announcement to come so soon. But for now, it’s only one, which might mean that they’re just testing that platform out. Or it could be for other reasons. I don’t know I’m not sure. But

Andrew Crider
Nordic aviation capital was the first to order the Embraer conversions, weren’t they?

Jeff Lee
They one of them Yes. One of the first either the first or the second.

Andrew Crider
Robert, don’t you have some more information about that program?

Robert Luke
Yeah, we’re gonna sidestep for a minute and then Jeff, you can come back in but Embraer has made an official announcement that they’ve reached an agreement with lanzhou aviation industry development group for 20, e 190, F and e 195. E jets. So kudos to the Embraer team. This is a order that will launch at least 20 of the conversion P two F’s in China, which is something we knew Embraer has been working on quite extensively for some time now as of course China is developing a firmly good reputation for being not only a good place to convert your aircraft, but they are becoming very quick with their efficiency and delivering aircraft in a timely manner as well. So we look forward to seeing how that further develops. And I do want to say that, you know, I’m a strong supporter of the Embraer program and I believe that the aircraft is going to make quite a nice little niche freighter type in the industry and I think it will thrive as it continues to build up more momentum. And the first prototype nears its certification, completion approvals and things of that sort. So what I would like to say, you know, from the parishes show, not to kind of compare it to last year’s Farnborough. I think it is kind of exciting to see that is still some movement despite the downturn in the industry, as many are predicting or experiencing or forecasting to continue going forward. I think it shows that there is still some life left in the industry. And I look forward to seeing more vital signs of life versus flatline continuing to develop as we progress through to 2023. Year. Jeff, kind of switching it back to you do you want to share some thoughts on the barrier program and groundbreaking news announcement that we just saw at the Paris Air Show, in addition to what you were previously discussing?

Andrew Crider
Well, hold on, don’t pass it back to Jeff quite yet to get off off the train. Because you just mentioned the market outlook and both Boeing and Airbus produce to the market outlook. And I want Jeff to be able to speak about that, because these are updated numbers from last year. But there’s so many highlights in the things that you just said, I really want to give our opportunities to opportunity to chew on them. Because you mentioned Oregon aviation capital, you mentioned Embraer them having a line in China is huge. And you know what, as far as getting into the freighter industry, you know, who else has lines and China? You have Boeing decisions everybody else has as airlines and China for some very serious market capping capital type. So this is a it’s not a surprising move. And then it doesn’t make sense, but it’s it. I think it shows a lot of the program. And it’s interesting that Nordic aviation capital has such close ties with both Embraer and Boeing, given the nuance of the relationship that Embraer and Boeing share. So I wonder where exactly this line in China will end up. And if maybe, zoom out. There might be some cooperation down down the road.

Robert Luke
How does this also impact the Comac? Arj 121? You know, you know, you’re going right into their backyard, and they just released this to how does that impact their potential recognition, interest in growth going forward? But Jeff, I’m sorry, I’ll let you continue forward.

Jeff Lee
Yeah, so the this deal is with an entity in Lanzhou, which is in Gansu Province, but, and it kind of reminds me of the deal that precision had with the Sichuan group for the 321 PCF program. And, and I wonder if we’re going to see more of these kinds of deals, you know, basically teaming up with an entity, kind of a provincial entity in China, to set up a conversion line that is going to be initially at least producing these freighter conversions for that entity. And, you know, like, so, obviously, these kinds of relationships and provincial bodies in China are very complex and the their various interrelationships are also very complicated. So, I mean, I have to wonder where these I mean, if this deal is firmed up, where these conversions are going to end up, you know, is that is the Lanzhou group going to lease them to other carriers in China? Or is this for a potential new airline in within that province that is in the works? I mean, we don’t know, there are a lot of uncertainties of course, but it does remind me of the deal between precision and the Sichuan aviation group. And I think overall, it just represents a growing interest and willingness on the part of these various state or provincial entities in China to invest in the freighter business freighter orders and conversion facilities.

Andrew Crider
Now one thing and Robert stop me right now if you had something more that you wanted to say on the Embraer because I’m about to switch our gears, or no, you can proceed. One thing that you also said Robert was about the market conditions and I know we have an update of our market outlook. But if you want to compare Paris to Farnborough this year and last year, then I think the biggest comparison would be how orders from Indian Airlines stole the show as far as driving success now, particularly that I’m referring to this year it was it was split less evenly between Boeing and Airbus on passenger orders, and Airbus taking a massive order for 500, a 320 neos. Alongside number of a 320 ones, we don’t exactly have the exact figures there, but he truly incredible order again coming from Indian Airlines. Now to put that in perspective, every day, American Airlines flies around 700,000 pounds of cargo a little bit over that. And that’s according to Business Insider. Now we know the American Airlines fleet is a variety of aircraft that they operated a number of them. So to break that you have to compare that figure to 715,000, with the with what would be in the American Airlines fleet and what you could get out of the Indigo fleet. And obviously, I think the Indigo fleet is going to be even after this order, slightly less because because of the change in types. That’s hard to tell. Because every year when you’re dealing with belly capacity alone, for these aircrafts, every airline is going to do it a little bit differently. You can say the same thing more about Southwest opera operation losing cargo volumes on their belly capacity is as as been increasing dramatically over the last couple of years. But we want to take note of that the potential increase in belly capacity from Indigo. Jeff, Robert, did you have anything you wanted to say on that?

Robert Luke
I’ll just say this, I think it’s going to create an enormous feedstock supply with this order that air Indigos is in the gods placing excuse me, if you look at their current field is primarily a 320s and 320 ones as it is. So my only question, because I like to try to dig a little deeper in analyzes, does this strengthen? We know it’s going to strengthen the 321 conversion market passenger freight conversion market. But does this give new life or resuscitate the slow momentum that’s been happening with the A320? freighter? Or are we still under the same expectations as far as the growth capabilities of that freighter type?

Jeff Lee
Well I mean, the Indigo fleet is almost all of their a 320 family aircraft are already NEOs. So I mean, that the in the immediate effect based on this alone on the in terms of feedstock, you know, not so sure about that, although you could argue that, with them, possibly removing some of the older NEOs and there’s a general basically a cascade effect of these Neos then making their way to other carriers that do not have NEOs and then those carriers retiring, their a320s or a 320 ones. But I think in terms of the effect this has on A320 freighter conversion program, not sure. It’s not like there aren’t already a bunch of other 320 CEOs, you know, that could serve as feedstock right now, I think it’s not as much a feedstock problem, as you know, just the, the demand right now, at least, for that type. But I mean, we’ll see.

Robert Luke
The only reason I say that is because if I’m looking at it from Indigos perspective, these airplanes that are coming in, and I replaced the ones that they have, and the ones they have, they already know. So with this, and I’m not saying this is the direction it’s going but could have potentially encouraged them to take some of their own aircraft that they’re that they’re going to be replacing with the newer ones, and transition them to freighters because there’s a lot of elements involved here. One, the surplus order that they just placed is large and basically is like a complete fleet overhaul if you think about it just on the sheer number alone. And once the final numbers are identified, that will determine how you know what the actual events that will take place will happen or occur. But too we know India is the new breeding ground for current for air cargo growth and development. You know, that’s the focal point that everyone from what we’ve been talking to has been saying is the place to be right now as far as that region of the world is concerned. So I’m looking at those factors and again, I’m not promising They are putting my stamp of firmness on it to say that this is what’s going to happen. But I’ve got an open I got one, I opened looking to see how this is going to translate going forward now that this deal has been announced.

Jeff Lee
Yeah, I mean, what we don’t know how many of these 500 aircraft I’m going to serve as replacements or for growth, but we know that they they’ve actually already retired some of their older NEOs. So we know when we don’t we don’t know how whether this waters off growth or for a basement. But on the freighter side, I will say that they I mean, they obviously have two A321 P two F’s right now. And we invite them in. But he told us recently that they expect a third one in the not too distant future. In fact, that aircraft we believe, as the first AerCap A321. P two f that is currently undergoing conversion went to Singapore, a month or two ago. And they might take a fourth one. But they did say that, you know, even with their massive passenger fleet, they probably won’t, you know, take their freighter fleet to anything much bigger than that. Which is, yeah, it is interesting. Because, as you say, India is such a big market, but we’re not seeing for now the same kind of numbers and growth on the Freighter side, as in China, for example. So maybe that’s just just, you know, market isn’t quite there yet. Will it ever reach the same nature and scale as China? We don’t know.

Robert Luke
Interesting perspective. I would say real briefly. Congratulations to ASL UK, they just placed their first 737 800 BCF into operation earlier. And FedEx also is retiring additional older, wide body and narrowbody furthest from his feet as it continues to do its restructuring and realigning of his operational overhead and to integrate its air and ground services to be more efficient. And just wanted to acknowledge those two key pieces of items that we covered this week, as part of the cargo Facts effort to keep you aware of what’s happening in the industry. Andrew?

Andrew Crider
Well, you get back to me, but that is quite very literally all of the time that we have for today. So for more multimedia coverage like this, search cargo facts connect on iTunes and Spotify and search cargo facts.com. Thank you very much for tuning in and join us again next time.