Narrowbodies, Turboprops Remain Best Conversion Bets

Boeing’s 737NG is poised to make a big splash in the conversion market.

Rising retirements and the introduction of new aircraft pushing capable, older-technology ones aside are helping to boost the passenger-to-freighter conversion market, although an uptick in air cargo demand would help even more.

The year’s first quarter saw global volumes down 2.1%, including a 5.6% drop in the key Asia-Pacific region, International Air Transport Association (IATA) figures show. Capacity was up 6.7%, keeping pressure on yields. “All told, 2016 is shaping up to be another year of disappointing growth for air freight,” IATA says.

Anemic air freight numbers have dealt a hard blow to dedicated widebody freighters. They have “suffered” as cargo has shifted to long-haul passenger aircraft bellies, and express demand has not filled the gap, Oliver Wyman reports in its latest fleet and MRO outlook. This has hampered efforts by Airbus and Boeing to land customers for their 777 and A330 conversion programs.

Older narrowbody types continue to be attractive conversion targets. Pemco has converted 14 737 Classic freighters since 2013 for China’s SF Airlines alone.

Aeronautical Engineers Inc. (AEI) delivered 19 converted freighters in 2015, including 17 737-400s, and intends to average 30 conversions per year, says Juan Zapata,vice president of operations. AEI’s first Bombardier CRJ200 conversion is due to be completed this year, and a 737-800 conversion program is underway.

Boeing, eyeing a bigger slice of aftermarket business, announced its own 737NG conversion program in February; seven customers are committing to “up to” 55 737-800Fs. Three of the five disclosed customers are Chinese carriers, underscoring Asia-Pacific’s growing prominence in the freight market.

Airbus last year said it would rekindle efforts to place converted A320-family aircraft after its failed attempt in 2011.
ST Aerospace has been tapped to lead the program, with support from Elbe Flugzeugwerke. The trio also collaborate on the OEM’s A330 conversion program.

Oliver Wyman’s projections show 665 conversions over the next decade, accounting for 70% of an estimated 951 total net additions to the world’s freighter fleet. Narrowbody conversions will dominate, at 538, or 81% of total conversions, led by 737 Classics, 757s and MD-80s, which will account for 70% of the projected narrowbody conversions. Turboprop conversions will likely total 64, followed closely by those of widebodies, at 62, and one lone regional jet conversion, most probably a CRJ.

“[T]he market is limited,” Oliver Wyman says, particularly when pitting CRJs against lower-cost turboprops.

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