Good news for operators as large widebody freighter options increase

In the last editions of our annual 20-year freighter forecast , we could but lament the lack of large widebody freighter options. Over the past six months this has changed with Airbus announcing an A350 freighter product which will be available starting 2025, by which time at least two 777 conversion options should also be available. Sadly, the last 747-8F will roll out of the factory next year, bringing the unfortunate end to a unique and excellent freighter aircraft. The current backlog as at the end of November was seven units. Boeing has not come out of the closet yet regarding timing and specifications of a 777X Freighter, but the 777-200F has gained additional orders and now has a backlog of about 65 aircraft (or about three years at current production rates of about 2 per month). Starting 2027, however, ICAO emissions regulations will prevent further 777-200F units being produced, so an alternative will need to be available before that date. Otherwise in future freighters will definitely mean Airbus and not Boeing anymore.

Of the 770 units to be added to the fleet over the next 20 years to cater for growth and retirements, we expect that only 20% will be converted aircraft. The existence of factory freighter programs in this segment is important as the market is primarily geared towards the operation of new aircraft, a direct consequence of the diverse operator mix and the requirement for superior economics and reliability in high-utilisation operating environments. I speak from painful experience of having operated both 747 production and converted 747 freighters. The latter was always at a distinct disadvantage from both a performance, maintenance cost, fuel burn and capabilities perspective, and which were not offset by lower capital costs. In the current high-yield market environment all of this matters very little because the only consequence is lower profits. In a normal market environment, it is not uncommon for freighter operators to have to sweat like crazy to make 5-6% margins.

Aircraft Capabilities

Although the current future line-up of freighters does not include anything with a nose door, outsized customers can draw some consolation from the fact that the existing 747-8F and newer 747-400ERF fleet is expected to be around for a long time and much of this capacity is concentrated in big all-cargo operators such as Cargolux, AirBridgeCargo, and Atlas. The chart below provides an overview of the volume and structural payload capabilities of different in-operation, future planned and potential freighter types. Most of the existing freighter fleet is geared primarily towards higher-density cargo, while future products like the 777-300ER conversions are aircraft which will cater well for lower-density express and e-commerce cargo, but not for higher density general and perishable cargo. General cargo densities are typically around 150-160 kg/m3 (about 10lbs/ft3), while densities in small-package markets are close to 110 kg/m3 (about 7 lbs//ft3) or even much lower. Note that the structural payload does not include tare weight of pallets and containers, so revenue payloads may be 5-10 tonnes lower depending on configuration and aircraft type. Figure 1 - Large Widebody Freighter Structural Payload and Volume

Specifications on an 777XF could range between 700 and 900 m3 volume, depending on the variant used as a base. A larger -9F would ultimately be an aircraft that would cater only for low-density freight while a version of the -8F would likely be more appealing to operators.

The specifications of the A350F announced by Airbus appear to point to an aircraft that would work well in both general cargo and express markets - provided that the structural payload does not drop below the advertised 109 tonnes. Airbus has a good chance of becoming the dominant production freighter provider in this segment, depending on what Boeing does with the 777XF.

Customer Commitments

After officially launching the A350 freighter this year, Airbus has announced commitments (in the form of letters of intent) from four customers and for up to 31 units: Singapore Airlines, with a commitment for seven aircraft plus five options with delivery commencing in the fourth quarter of 2025. The aircraft will replace its ageing 747-400 freighter fleet. Air France-KLM, with a commitment for four plus four with delivery starting in 2028. The aircraft is being viewed as a replacement for its 777s. Air Lease Corporation, with a commitment for seven aircraft. ALC is a nobody in the freighter leasing business, but has a large portfolio of almost 500 narrow and widebody passenger aircraft under its management, including A350s. These aircraft are earmarked for delivery in 2026. CMA CGM with an order for four aircraft for delivery between 2026 and 2028. The shipping line and owner of CEVA logistics is a new entrant into the freighter operations space and commenced A330 freighter operations in 2021 and has also placed an order for 777-200Fs. The company relies on third parties for operating the equipment, currently Air Belgium. Things are also getting more interesting in the 777-300ER and 777-200LR conversion space: IAI's program with Aercap (previously GECAS) has received commitments from Emirates (4 units in 2023 and 2024), Belgium-based CAL offshoot Challenge (4 units in 2025-2026) in addition to Aercap commitments of 18 firm and 12 options, of which at least a number will be redelivered to Kalitta Air starting in 2023. The Mammoth program secured orders from Cargojet for 2 777-200LRMFs with an option for 2 more and a further options for 2 777-300ERMFs. We feel that the market may be too small for multiple 777 conversion providers, depending on the breakeven units for each program. The two 747 conversion programs only produced about 80 units - 50 for Boeing and 30 for IAI.

Meanwhile, the 777-200F backlog stands at about 65 aircraft with a wide mix of customers. Interestingly, about a third of the backlog is related to unidentified customers, some of which were identified as CMA CGM and Emirates over the past months. The chart below shows an overview of the 777-200F backlog by customer. Maersk also emerged as a new entrant 777 customer in the past months, although we note the company has long-term experience operating 767s on behalf of UPS through its Star Air subsidiary. Figure 2 - 777-200F Backlog as at 30 Nov 2021

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