New opportunities in passenger-to-freight conversion

The introduction of new aircraft has not significantly boosted the conversion of older passenger aircraft into freighters.However,increased freight demand from emerging companies like Amazon,along with higher load factors and cargo volumes for freight carriers,has indeed presented new opportunities for the passenger-to-freighter conversion market.

A few months ago,Mexicana MRO Services'newly built conversion line successfully delivered its first converted Boeing 767-300 freighter.This company,a joint venture between Mexicana Airlines and Bedek Aviation Group,a subsidiary of Israel Aerospace Industries(IAI),serves as a model for driving the next wave of development in the air freight market.

Currently,the increasing market demand for converted Boeing 767 freighters is keeping Bedek Aviation Group's hangar operations at Ben Gurion Airport in Tel Aviv very busy.Simultaneously,the burgeoning demand for passenger-to-freighter conversions has led to capacity constraints for Bedek Aviation Group,prompting their collaboration with Mexicana Airlines to expand capacity.

While the Boeing 767 has always been a popular freighter model among air freight companies,particularly favored by FedEx and UPS,the recent surge in demand for passenger-to-freighter conversions is largely attributable to Amazon Air.By the end of 2017,Amazon Air,established just two years prior,had a fleet of 32 freighters,with projections exceeding 40 by 2019.All of Amazon Air's freighters are converted passenger aircraft sourced from ATSG(Air Transport Services Group),in which Amazon holds equity,and Atlas Air.

Amazon Air's freighter acquisition strategy bodes well for the Boeing 767 passenger-to-freighter conversion market.However,if the number of passenger aircraft available for conversion is limited,Amazon Air's procurement strategy could even lead to an increase in orders for brand-new freighters.

ATSG operates 20 of Amazon's Boeing 767 aircraft.According to the company,they are not only receiving calls from airlines but also from non-airline companies looking to join the freight network—something unprecedented before.These companies,with their specific supply chain processes,are seeking a new freight solution rather than relying on traditional belly cargo or purchasing main-deck space.

On a macro level,market demand for specific aircraft types or emerging business strategies is a major trend,and the air freight industry is on the rise.According to the International Air Transport Association(IATA),global freight tonne kilometers(FTK)increased by 9.7%year-on-year in the first ten months of 2017,while month-on-month growth showed a steady decline(13.4%year-on-year growth in March 2017,compared to 5.9%in October).However,this figure is significantly higher than the average growth rate of the past five years(4.6%)and ten years(3.2%),which is positive news for freight airlines.Passenger-to-freighter conversions have created new market opportunities.