Freighter lease rates decline as feedstock prices increase

Freighter lease rates continue to dip as prices for conversion feedstock increase with growing passenger demand. Elevated labor and supply costs alongside inflation have contributed to the rise in conversion feedstock prices, IBA Manager of Classic and Cargo Aircraft Jonathan McDonald said during a June 26 webinar on the cargo market. Supply shortages have delayed new Airbus and Boeing deliveries to passenger operators, driving up demand for conversion feedstock, which has the operators extending the leases of older aircraft in their fleets. New production delays could hinder conversion feedstock supply for up to four years, McDonald said. While lease rates have been amortized at a lower rate to offset higher acquisition costs, an oversupply of 737-800Fs has also contributed to the drop in lease rates of all freighter types, McDonald said. [caption id="attachment_56868741" align="aligncenter" width="964"] Market values and lease rates for narrowbody freighters. (Courtesy/IBA)[/caption] Higher conversion costs have raised the average half-life value of a twenty-one-year-old A321-200F to just above $20 million, while a 737-800F of similar vintage sits at about $19 million, according to IBA. The lease rate for an A321-200F started above $200,000 per month at the beginning of 2024 but has dipped slightly to around $195,000 per month. Meanwhile, despite the surplus of 737-800Fs in the market, the type’s average monthly lease rate has stayed relatively stable at about $180,000 per month, according to IBA. The appraiser’s analysis of the 757-200F and the 737-400F indicated both types are on the decline in both value and lease rates due to their age. The 757-200F has consistently retained its value of around $15 million even as lease rates for the type have begun to decline. The market value of the 737-400F has been on a gradual decline for four years, which is also reflected in its lease rates, although there was a slight resurgence in 2023 and early 2024, according to IBA. [caption id="attachment_56868742" align="aligncenter" width="961"] Market values and lease rates for widebody freighters. (Courtesy/IBA)[/caption] In the widebody segment, the latest half-life market values for the A330-300P2F and -200F are $38 million and $34 million, respectively, with lease rates showing signs of growth for both types after dipping in 2023, according to IBA. IBA values a twenty-three-year-old 747-400F at about $28 million. The quad-engine freighter has nearly doubled in value over the past five years, but lease rates remain cyclical and dependent on market conditions. The appraised value of the 767-300F has hovered around $25 million over the past few years, while lease rates for the type have fluctuated between $240,000 and $310,000 per month. As the leasing market continues its downturn, the industry may see an increase in rates over the long term once the market settles, McDonald said. The 30th Cargo Facts Symposium will take place Oct. 14-16 at the Omni Hotel in San Diego. Gain valuable insights, success strategies, and networking opportunities at this special anniversary event. Learn more and register today to take advantage of our early-bird sale.

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