Jetrader - May/June 2012 - 16

Conversion Market?
By Steven Fortune, Principal, Fortune Aviation Services The passenger-to-freighter (“P2F”) conversion market generates in excess of $500 million in annual business and yet receives little attention from the commercial aircraft trading community. In fact, Airbus projects demand for almost 1,900 conversions over the next 20 years. Boeing’s forecast is similar with a forecast for 1,990 units. This projected demand results in a $20 billion plus market between now and 2031. Although small in comparison to new aircraft sales, the P2F space warrants a further look from time to time. This article provides a status report and a look forward. To operate efﬁciently, the commercial airfreight market requires an aircraft mix of different sizes and capabilities. From the short-hop Cessna Caravan to the 120-ton payload and intercontinental capability of the 747-8F, each aircraft type serves a speciﬁc mission in creating a highly effective global air cargo ﬂ eet. Currently 1,862 jet aircraft make up the freighter ﬂ eet with an additional more than 860 turboprops. Converted freighters make up 60 percent of this ﬂ eet. The decision to convert a particular aircraft type is driven by many factors, including available feedstock, estimated freighter performance, availability of similar production freighters, intended market use and the freighter aircraft size class. For example, the economics of operating narrowbody freighters rarely, if ever, supports the use of production aircraft. In the narrowbody freighter market, low aircraft utilization creates a premium for the signiﬁcantly lower capital cost provided by a converted aircraft. This helps to mitigate the impact of the higher maintenance cost and fuel burn of these older aircraft. Two-thirds of the current narrowbody freighter ﬂeet (497 units) is conversions, including a 46-year-old 727 converted 20 years ago. Despite a narrowbody ﬂeet that most of us would consider to be in its twilight

What’s Ahead for the Freighter
An update on current passenger-to-freighter conversion programs
years (average age is 28 years), Boeing and Airbus, in a rare moment of agreement, both forecast that additions and replacements to the narrowbody ﬂeet will be 100 percent converted aircraft. Unlike the narrowbodies, medium and large widebody aircraft (current and future) consist of a mix of production and converted aircraft. In the widebody market, the typical scenario is a successful production freighter program followed by conversion of passenger models of the same aircraft type. The ubiquitous 747 freighter ﬂeet of almost 300 aircraft is dominated by production freighters (66 percent of the ﬂeet) but still enjoys a robust conversion market. Some operators, such as Cargolux, ﬁnd that they need the higher performance of the latest production freighter, while other operators can proﬁtably operate older production aircraft or converted passenger units. The inexorable rise in jet fuel prices, however, is forcing the retirement of older 747 variants in favor of the 747-400 P2F and eventually the 777 P2F. In contrast to the 747, certain aircraft types enjoy greater success as converted freighter than they did as passenger aircraft. For example, approximately 200 passenger A300-600s were produced, but 157 converted and production A300600s freighters are currently ﬂying. The A300-600 passenger model competed

Table 1
Commercial Freighter Fleet – February 2012 Active Stored BaE 146 22 4 707 6 727 168 68 737 (CFMI) 103 9 737 (JT8D) 25 15 747 291 61 757 188 8 767 133 6 777 54 A300 193 25 A310 54 16 A330 10 CRJ Regional Jet 4 1 DC-10 81 23 DC-8 32 30 DC-9 19 36 F.28 1 L-1011 TriStar 3 MD-11 167 6 TOTAL 1544 318
Source: Ascend

Total 26 6 236 112 40 352 196 139 54 218 70 10 5 104 62 55 1 3 173 1862

16 The ofﬁcial publication of the International Society of Transport Aircraft Trading

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Jetrader - May/June 2012

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