Express fleet swells with new builds, younger conversions

The culmination of global and economic events, along with the gradual return of belly space on scheduled passenger flights, has recently slowed the growth of airfreight volumes carried by express integrators.

That is not to say that the express fleet has stagnated in its growth. In fact, the combined jet freighter fleet in operation with the three major global express integrators increased to a total of 1,086 aircraft as of Sept. 30, up 6% year over year (YoY), according to Cargo Facts research.

This analysis will focus on the narrowbody and widebody conversion and production freighters operated by and on behalf of FedEx Express, UPS and DHL Express, consisting of own-operated aircraft as well as those contracted to provide service on an ACMI or CMI basis.

FedEx, UPS and DHL widebody and narrowbody fleet distribution as of 9/30/2022

While the number of widebody freighters stood at 711 at the end of last month, up only 3.5% YoY, the narrowbody contingent grew by 10.6% to 375. This was almost entirely driven by 737-400Fs and -800Fs; in fact, the number of 737-800Fs flying in express service for FedEx, UPS and DHL has more than doubled since the end of September 2021 and, at forty-three, now accounts for 4% of the total express fleet.

The number of net additions of aircraft flying for the top three express carriers declined 22% YoY to sixty, compared with the seventy-seven incremental units Cargo Facts recorded at the end of September 2021.

DHL grows in multiple ways

Even though the availability of belly space continues to accelerate, DHL Express has remained steadfast in its commitment to growing its fleet, increasing its cargo capacity by 18% YoY to 315 aircraft — far higher than FedEx’s and UPS’ YoY fleet expansion of 2% and 1%, respectively.

DHL’s fleet operations would be best defined as an outsourced hub-and-spoke system managed by its global partners offering various services such as ad-hoc charters, ACMI, CMI, dry lease and joint venture airline agreements.

Because of this, it is always more challenging to nail down the exact number of freighters flown by or for DHL compared with those flown by or for FedEx and UPS. DHL’s partner carriers include its own airlines like EAT Leipzig, DHL Air UK, DHL International Aviation Middle East and DHL Aero Expreso; partially owned airlines like AeroLogic, Blue Dart Aviation, Polar Air Cargo and Tasman Cargo Airlines; and ACMI or CMI carriers like ABX Air, ASL, Bluebird Nordic, Cargo Air, Compass Cargo Airlines, iAero Airways, Mesa Airlines, Kalitta Air, Raya Airways, SmartLynx and Swiftair, among others.

DHL Express active fleet as of 9/30/2022

After receiving the last of its 2018 firm order for fourteen factory-built 777Fs and ordering an additional eight units with options for four more in 2021, DHL further grew its total orderbook with Boeing to twenty-eight units in March, when it added six more 777Fs to the backlog.

Three of the new units from the 2021 order have now been delivered to DHL, which assigned two to its DHL Air UK operations. However, seemingly in need of quick large-widebody capacity, the company opportunistically acquired a 2010-vintage 777F (37714, ex-China Cargo Airlines) and added that aircraft to its U.K. fleet in August.

With the addition of widebodies, DHL Air UK is transitioning to long-haul, international flight operations and now looks very different from a year ago. As part of a plan created in response to Brexit, DHL established the new DHL Air Austria and transferred eighteen 757-200Fs previously registered in the U.K., allowing the express integrator to minimize costs while continuing to provide airfreight service within the European Union.

Leaving aside production 777Fs, DHL is also taking on more medium-widebody conversions. In the past twelve months, it has added an A330-300P2F to each of the EAT Leipzig and Air Hong Kong air operator certificates (AOCs), with four more currently in conversion. DHL is by far the largest user of A330-300F capacity and has now placed four with Air Hong Kong, three with ASL Airlines Ireland and two with EAT Leipzig.

Showing that it is content to operate a mixed Airbus and Boeing fleet, the express company put its strategic planning into action at the 2021 Dubai Air Show, where it announced nine 767-300BCF conversion slots with Boeing. This came after DHL began acquiring a tranche of very young ex-LATAM units from Jetran in October of that year.

These conversions started early this year, with the 2012-vintage unit 41746 arriving Feb. 27 at the Guangzhou Aircraft Maintenance Engineering Company Ltd. (GAMECO) facility in Guangzhou (CAN) to become the first 767-300ER to undergo a Boeing conversion at the site. Two more have since arrived at CAN for conversion.

DHL expresses confidence in ACMI and CMI partners

In pursuing its strategy of diversifying its partner carriers, DHL during the past twelve months has added Singapore Airlines as an entirely new CMI partner as well as two others that are new to the 737-800 platform.

As part of an agreement announced in March, Singapore Airlines began operating the first of five new, DHL-owned 777Fs between Singapore (SIN) and Los Angeles (LAX) via Seoul (ICN) in August. Singapore Airlines is the first major scheduled combination carrier to become a DHL CMI partner, joining AeroLogic, Atlas Air and Kalitta Air in flying DHL’s 777Fs.

Turning to narrowbodies, DHL is doling out all its 737-800BDSF conversions to CMI carriers and has taken redelivery of five since this time last year, with more to follow.

Kalitta Charters II, which already had one DHL 737-400SF in its fleet, took delivery in July of the first 737-800BDSF (28318, ex-SAS) converted at the Atitech facility in Naples (NAP). The aircraft was put into service in September, making the carrier the second U.S.-based operator to provide CMI service for DHL’s 737-800BDSFs.

Meanwhile, Spain-based Swiftair is the express integrator’s first European CMI service provider for its 737NG freighters, having taken on two DHL-owned 737-800BDSFs earlier this year.

Leaving aside its own 737-800BDSFs, DHL now also has one 737-800BCF and one 737-800SF in its full yellow livery, both in ACMI service. The former (30672) is owned by Bahrain-based Texel Air, which took redelivery of it in August, while the latter (32796) is dry leased by iAero Airways, which began flying it in July 2021. Bluebird also supports DHL’s operations in Europe with two of the carrier’s 737-800Fs (29786 and 29782) and three 737-400Fs (28887, 26302 and 24573), providing ACMI service for the express integrator.

On the Airbus narrowbody front, DHL will soon have a fourth A321-200F flying in its ACMI network, with the recently redelivered, 2000-vintage unit 1207 (ex-Air Astana) now painted in a hybrid SmartLynx/DHL livery. The A321-200PCF will join another SmartLynx A321-200PCF, a SmartLynx A321-200P2F and a Titan Airways A321-200P2F.

There have been significant developments with DHL’s existing 767 partners, too. Air Transport Services Group (ATSG) announced in February that it will operate two more DHL 767-300Fs on a CMI basis, bringing the total number of DHL aircraft under its management to twelve.

A month later, Canada-based Cargojet made public its agreement with DHL to place five additional 767-300Fs, as well as an unspecified number of its incoming 777 conversions, on ACMI with the Germany-based logistics company. This was part of a larger partnership deal between the two companies that gave DHL warrants to acquire up to a 9.5% stake in the airline.

FedEx shuffles older freighters

FedEx Express, which has the largest fleet of the three integrators, reported in September that its Q1 FY2023 income had decreased 18% YoY, mostly due to the macroeconomic climate and freight volumes declining across the U.S., Asia and Europe.

The Memphis, Tenn.-based company, which pulled its own annual forecast after performing well below expectations in the three-month period ended Aug. 31, said it had decided to place some older narrowbody aircraft into storage and cut flight frequencies as part of a cost-reduction strategy to save nearly $1.5 billion.

FedEx active fleet as of 9/30/2022

But while 757-200Fs were heading to the desert, several other aircraft were heading to Los Angeles (LAX). A 1976-vintage MD-10-30F (46871) that had been in storage at Victorville (VCV) since late March was ferried to LAX on Sept. 14 for return-to-service maintenance, and began flying at the end of the month. And, the 1988-vintage unit (48311) arrived at LAX on Sept. 28, after almost four months of storage, plus the 1999-vintage ex-Lufthansa MD-11F (48801) that had been reactivated at the end of 2021 finally entered service in September.

At the same time, FedEx is injecting brand-new freighter capacity into its fleet. After taking delivery of ten more new 767-300Fs from Boeing since Sept. 28, 2021, the company now has 119 of the type, with thirty-three on its backlog and options for fifty more.

UPS: better, not bigger — for now

UPS, unique among the big three express integrators for purchasing and operating its own 747-8Fs, took delivery of its twenty-eighth and final unit (65774) in April. However, while it may appear as though UPS’ large-widebody fleet growth is set to stabilize for now — in line with CEO Carol Tome’s “better not bigger” strategy — the company quietly revealed in its Q2 earnings filing in July that it holds options for two 747-8Fs.

Given that Boeing is nearing assembly of the final 747-8F, destined to join Atlas Air, it is likely that the two aircraft under option are used units. It remains to be seen whether UPS will firm up those options.

UPS active fleet as of 9/30/2022

The only other noteworthy changes since last year for UPS are to its medium-widebody fleet. The company, which is already the second-largest operator of 767-300 freighters and has eighty of its own as of Sept. 30, announced in December 2021 a firm order for nineteen new 767-300Fs, and later exercised options for eight more in August.

But UPS, which told Cargo Facts that it continually looks at the aircraft market for opportunities to grow its fleet, also purchased a 2010-vintage ex-Japan Airlines 767-300ER (40364) in July and has signed up for a conversion slot with Boeing for the aircraft.

UPS has turned to 767 conversions before to fulfill shorter-term needs; apart from three other ex-Japan Airlines 767-300BCFs that UPS purchased and converted in 2017 and 2018, the company agreed in 2019 to dry lease four 767-300BDSFs and one -300BCF on lease from Cargo Aircraft Management (CAM).

The year ahead

This year has seen lift capacity return at an accelerated pace. The emergence of new cargo startups, combined with the return of passenger flights and existing operators growing their fleets, has only balanced the supply and demand scale of airfreight. With factors like rising global inflation and interest rates, along with the continuing war between Ukraine and Russia, the express market may not see the same level of growth in 2023 as the past two years.

In terms of the freighter fleet flying for the top three integrators, it is clear that the average age will continue to decrease as FedEx, UPS and DHL — and the ACMI carriers that serve them — take on more new deliveries and fresh conversions while planned retirements of older freighters that were halted during the pandemic are put back into motion.

FedEx, for example, will proceed to retire its entire MD-10-30F fleet by May 31, 2023, while adding new 777Fs and 767-300Fs, and UPS will begin to take delivery of its newly ordered 767-300Fs in 2023.

In the narrowbody segment, Cargo Facts expects to see an increasing number of A321Fs and 737-800Fs flying in express service, with known additions to join the likes of ASL Aviation Holdings, SmartLynx, Swiftair, Compass Cargo Airlines and Titan Airways.

Meanwhile, the large-widebody space has become even more competitive in the past twelve months, with Boeing officially announcing its new 777-8F with a launch order from Qatar Airways in January, and Airbus, Mammoth Freighters and Kansas Modification Center all announcing customers for their respective programs.

But as FedEx, UPS and DHL have not committed to any of these programs so far, it remains to be seen whether a much-coveted order from one of these express companies will come in 2023.

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