Holding Pattern for Freighters

Things look worse when you take into account the fact that we have experienced some retirement of older narrowbody freighters in this period, while newer widebodies have been added.

This move to widebodies has resulted in increased freighter capacity even though the absolute number of freighters has remained constant.

As a result, we find there is an oversupply of freighter capacity today, and that oversupply must be dealt with before the fleet can grow even after traffic levels rebound.

The long-term prognosis is good

We believe that growth in the global economy can sustain a long-term growth rate of 6 percent per year in the air freight market. At this growth rate the global traffic level will triple through 2022.

ACMG predicts the global freighter fleet will increase to 3,540 units over the next 20 years to meet this increased demand.

In making this prediction, we take into account a continuing trend toward application of widebody freighters. In 1990, widebodies comprised just 16 percent of the freighter fleet, compared to 44 percent today. We predict the widebody share will grow to 60 percent by 2022.

The increased size of the average freighter, along with an assumed modest increase in annual aircraft utilization, results in greater productivity for each freighter. Consequently, the freighter fleet needs only to double to match the tripling in demand for air freight services in 2022.

Also note that today about half of air freight moves in the bellies of passenger aircraft. We believe there will be a gradual shift toward more reliance on freighters and less use of passenger aircraft belly space; however, we have chosen not to account for this in our analysis.

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To the extent that such a shift toward freighters does take place, the number of freighters needed in 2022 would be even higher than discussed here.

Also bear in mind that more than 1,100 of the current freighters are aging first-generation models nearing retirement. Adding replacement and growth together results in the need for 3,000 freighters over the next 20 years, or 150 freighters per year on average.

Even if we sustain only modest 3.5 percent average annual growth in traffic demand in this period, we will need 1,750 freighters to meet the growth and replacement needs.

How will this demand be met? Although it is risky to predict the quantity of each type of aircraft that will be used as freighters, we can make predictions with confidence concerning the aircraft models that will be popular in a freighter role.

What about the planes?

Over the next decade, ACMG predicts that 737-300s/-400s and 757-200s will be the most popular narrowbody models for freighter application. In the medium widebody category, it will be A300-600s and 767-200s, and in the large capacity segment it will be 747-400s and MD-11s.

Note that among these types only the A300-600F and 747-400F are available as new-built production freighters, which means the majority of the additional freighters will be passenger-to-freighter conversions.

It is also important to recognize that the A320 family, not yet adapted to freighter use, is expected to become a major player in the narrowbody freighter conversion market. However, such applications of A320s are not expected for several years.

Similarly, the introduction of production A380 freighters in 2008 will be a major development, but significant numbers of the triple-deckers will not be in service until after 2012. The same applies to freighter versions of the 777-200LR and A330-200 which Boeing and Airbus are expected to develop, but which are unlikely to enter service for at least five years.

We can already see the freighter fleet undergoing a transformation from older types to newer types. The fact that the freighter fleet has remained at about 1,600 units since 2000 has masked the fact that the composition of the fleet has changed.

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Since 2000, 159 mostly older aircraft have been retired while 184 newer aircraft have been added. Included in the retirements were 53 727-100Fs, 16 707-320Cs, 55 DC-8Fs and nine 747-100Fs, all first-generation jet aircraft types.

Meanwhile, more modern aircraft have been added. They include 26 757-200Fs, 38 A300Fs and A310Fs, 39 747-400Fs and 17 MD-11Fs. These aircraft are not only newer and more efficient than the aircraft they replaced, they have more cargo capacity.

In fact, ACMG’s research shows that 35 percent of the fleet is now comprised of “newer-generation” aircraft – 737-300s, 757s, 767s, A300s/A310s, MD-11s and 747-400s – up from just a 22 percent share for these types in 2000.

Furthermore, widebody models comprise 44 percent of the current freighter fleet, up from just a 37 percent share three years ago.

These changes clearly contradict the notion that the freighter fleet has stagnated. In fact, it could be argued that there is more freighter development taking place now than ever before, both in terms of production aircraft models and conversion programs.