IBA’s Freighter Conversion Whitepaper, May 2018

Whilst the surge in global freight volumes that was witnessed in the first half of 2017 has peaked, we still expect growth (FTKs) to be somewhere between 4-5% for 2018 as growth returns to more subdued levels following the end of the inventory restocking cycle. This paper looks at the current and future freighter market, production, routes into the market and takes a close look at a B737 conversion.

Boeing and Airbus forecast robust freighter fleet additions for both growth and replacement in the next 20 years. Boeing forecasts, in their Current Market Outlook 2017-2036, that the freighter market will require 2,480 additional freighters (1,560 conversions and 920 new) with Airbus predicting in their Global Market Forecast 2017-2036 that an additional 1,950 freighters (1,218 conversions and 732 new) will be needed.

According to IATA’s March 2018 Freight Analysis report, global freight volumes rose by only 1.7% year-on-year, which whilst at first glance appear poor, it should be noted that March 2017 saw growth of 14%. The decline in growth can also be attributed to the end of the restocking cycle which was one of the drivers behind the high growth figures. IATA themselves have cautioned against reading too much into the most recent figures and expects growth of 4-5% overall for 2018.

There is an interdependence between the demand for air-cargo and economic growth. Before the onset of the 2008 global financial crisis, demand for air-cargo was strong but like many markets this shifted as global economies slowed in the years following, and demand flattened. In 2018, once more, the global economy and improved industrial production is driving demand for air-cargo and the extraordinary growth in e-commerce, and the demand for express delivery services is driving bullish growth forecasts for air freight from the OEMs. It is not just industries which rely on the movement of time-sensitive and high-value goods such as consumer electronics and perishables that want air-freight; rapidly growing e-commerce, changes in consumer expectations for fulfilment, and express delivery services are driving the growth in demand for air-freight. E-commerce items reportedly make up 20% of global air cargo volume.

Current market conditions still favour older generation aircraft, feedstock is still available for the short term and fuel prices are low. However, the market is facing a transition to new generation converted freighters for the long term and IBA expects an acceleration for replacement and growth from 2020, but not before, due to current high market value of new generation feedstock aircraft for conversion.

The whitepaper is available to download by clicking here and filling out our easy to use form.