Freighter order backlog surges, prompting fears of a bubble

The known order backlog for conversions and production freighters currently stands at around 33% of the active freighter fleet, but considering options and unannounced orders this number could be as high as 50%.

This is a large increase from one year ago when the backlog stood at about 25%. Most narrowbody and nearly half of widebody orders were made over the last twelve months. This raises serious questions about whether all this capacity will find a home.

Figure 1 (below) provides an overview of the known freighter backlog at the beginning of July. The panel on the left shows orders and options by category while the remaining panels break down firm orders by type. Known orders — particularly in the narrowbody as well as 777 conversion space — are just the tip of the iceberg. We understand there are significant orders in the pipeline with lessors expected to announce orders shortly, some likely during the Farnborough Air Show. Figure 1 - July 2022 Freighter Order Backlog

The individual breakdown also excludes options as there is uncertainty around the level of commitment behind non-firm orders. This affects the narrowbody and 777 conversion space more than others, although we note there are also twenty-nine Air Bridge Cargo options for the 777-200F which are unlikely to be converted into actual orders at this stage.

Whether this level of order backlog is a problem depends on the delivery profile in each segment. Most of the narrowbody backlog is expected to be delivered within the next two to two-and-a-half years while in the widebody space orders are more spread out or will not commence for a number of years.

Figure 2 (below) shows our assessment of key freighter supply milestones over the coming years. Figure 2 - Freighter Supply Timeline 2021-2027-plus

Currently most of the market activity is in the narrowbody and medium widebody redelivery space. The 777-200F and 767-300F production freighters are delivering at a rate of about twenty per year, but due to ICAO emissions regulations, no further deliveries will be possible beyond 2027. Between 2023 and 2025 a total of five new widebody conversion programs (three 777-300ER, one 777-200LR and one A330-300) and one production freighter program (the A350F) will commence redeliveries. The 777-8F is expected to follow some years later.

Supply options in the narrowbody segment are fairly well-defined (see Figure 3) but some new A320/321 programs are also expected to enter the market. Figure 3 - Freighter Conversion Program Status

The level of delivery activity we are seeing for both narrowbody and medium widebody is unlike anything we have seen historically, and also our long-term freighter forecast. Figures 4 and 5 show historical redelivery activity in the narrowbody and medium widebody segment as well as the expected number of redeliveries this year. Figure 4 - Narrowbody Conversion Activity 2001-2022F

Figure 5 - Medium Widebody Conversion Activity 2000 - 2022F

Historically, narrowbody activity has been in the order of about fifty or so aircraft each year, and in the medium widebody, figures have tended to range between fifteen to twenty per year. Current numbers are out of line with these historical values and also inconsistent with our own long-term forecast which predicts about sixty narrowbodies and about thirty-five medium widebody additions — both production and conversions — per year for the next twenty years.

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