Stronger Growth for Air Cargo Predicted: UK Consultancy

The strong recovery of the U.S. economy coupled with an appreciating dollar against almost every currency, will see stronger growth in the air cargo market this year, a senior consultant told a commercial update webinar last week.

Egyptair intends to convert some of its A330 passenger aircraft into freighter configuration  /  company courtesy
Egyptair intends to convert some of its A330 passenger aircraft into freighter configuration / company courtesy

Richard Evans, senior consultant at Ascend, the consultancy arm of London-based Flightglobal, said the fall in fuel price In recent months had also helped, with some relief on the cost pressures on air cargo.

He also predicted a possible upturn in the wide-body conversion market – following on from recent programme launches in the narrow-body segment and the launch of the A330 P2F by EgyptAir, as exclusively reported by CargoForwarder Global.

Asia and ME lead the way
The highest growth in 2014 was by airlines based in Asia and the Middle East, he noted. The air cargo market has had a tough time since the 2008 recession, with traffic falling nearly 10% in 2008 and 2009, before rebounding 19% in 2010 but then stagnating for a further three years.

However, in 2014, the cargo market finally sustained growth of 4-5% each month, and now WorldACD and IATA figures forecast a similar growth pattern for 2015, a rate which Evans believes might even be "a little pessimistic".

Large orders were placed in 2005-07 for new-build freighters, and these units were delivered into the recession, causing overcapacity, noted Evans. "As a result many freighters were parked – a few of the more competitive ones have returned to service in the last year," he said.

The conversion market for narrow-bodies has recovered since 2010, mostly driven by replacement aircraft.
"We have seen a significant increase in single-aisle conversions, and 737-400s and 757s remain in strong demand for freight conversion. This has been driven by some replacement demand of older 727s, the growth of the Chinese domestic express freight market, and FedEx's programme to convert 757s, primarily as a replacement for older A310s and DC-10s," Evans pointed out.

Collapse of wide-body conversion market
However, the wide-body conversion market has "collapsed" as a result of the oversupply of new-build aircraft. "At first sight, the conversion data does not look too bad, but the conversions since 2009 have mostly been single-aisle aircraft, with capacities below 35t. Last year saw an historic low for the wide-body market, with only five aircraft being converted – and none of these were 747s."

 

But 777 conversion is ready to go
Evans said further conversions of 747s are unlikely "as there are many stored 747Fs at present", including around 20 factory-build 747-400Fs. Instead, he believes the 777-200ERF is "ready to go" as Boeing has completed all the necessary design work. "The 20-year-old 777-200ERs have now declined to below 25% of their initial value, as have low-weight A330-300s."

If air cargo growth continues at 4-5% as predicted, a 777 conversion programme "might be" launched in the next 12 months, he suggested, adding that a possible launch may come from an airline that both owns 777-200ERs and has an established cargo division – perhaps Korean or Saudia."

Korean Air Cargo will up its fleet of Boeing 777Fs  /  source: private
Korean Air Cargo will up its fleet of Boeing 777Fs / source: private

Korean Air orders more 777Fs
Last Thursday, Korean Air placed an order for five Boeing 777 freighters, valued at U.S. $1.50 billion at current list prices. The aircraft will be delivery beginning this year until 2017. In a regulatory filing the South Korean flag carrier stated that it intends to purchase the planes to replace older 747-400Fs. As one of the world’s largest cargo airlines, Korean Air currently operates an all-Boeing freighter fleet of 26 airplanes that includes 17 747-400 freighters, five 747-8 freighters and four Triple Seven Freighters.

Nol van Fenema

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