As we have reported many times, the combination of high fuel costs and low inventory carrying costs for shippers in the current interest rate environment, has made surface transport much more attractive. While this has negative implications for the air freight industry as a whole, the mood at the ISTAT Americas conference this week regarding the prospects for widebody freighters was particularly pessimistic.
Speaking on the “Freighter Market and Conversion” panel, Steve Rimmer, CEO of lessor Guggenheim Aviation Partners, said he believed that large widebody freighters are becoming viable only for “first tier” operators, and that the viability of any factory or converted freighter type is increasingly based on the fleet decisions of the major integrators. He did, however, comment that there remained a niche for medium widebody types. The panel’s overall consensus was that there is too much air cargo capacity in the market (main-deck plus belly) and that passenger-to-freighter conversion for widebody aircraft is too expensive, even at current prices.
Mr. Rimmer’s comments were echoed in various ways by the other panelists.
- Jep Thornton, the panel’s moderator and a Partner at Aerolease, stressed the competition from belly capacity – a 777-300 flight is “like a freighter aircraft flying next to a passenger aircraft”.
- Ron Wainshal, CEO Aircastle, defined the market for widebody freighter aircraft as “the 777F and everything else”. Unfortunately for lessors, he added that the 777F lease rates do not compensate for the price difference vs. a 777 passenger aircraft.
- Igor Pasternak, CEO of Aeros, advocated the fuel efficient nature of his Aeroscraft airship vehicles to revolutionize heavyweight and outsize air cargo.
- Alfonso Rey, Chairman of Centurion Cargo, was the most upbeat of the panelists, noting that hard times for all-cargo carriers are not only a recent phenomenon, pointing out that more than 100 all-cargo airlines have disappeared in the last twenty years. Regarding competition from belly capacity, he said that passenger airline belly cargo offerings are less flexible and less reliable than what is offered by freighter operators. He urged greater attention to air cargo’s value proposition and warned against complacency, “the enemy of all-cargo airlines is doing nothing.”
- Finally, Cliff Duke, head of LCF Conversions, presented his Low Cost Freighter concept, saying that we must “start with a $250,000 per month lease and work backwards”. He further argued, regarding the next generation of widebody passenger aircraft, such as the 787 and A350, that status quo widebody conversion was untenable in the long run; “We are not going to cut holes in 20-year-old composite hulls.”
Like This Post