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Cargo converts

Ian Putzger finds out more about the new narrowbody freighter conversion candidates on the horizon

Anew generation of narrowbody freighters is in the starting blocks. Conversion specialist Aeronautical Engineers Inc (AEI) is currently working on its first Boeing 737-800 freighter for GE Capital Aviation Services (GECAS), which marks the transition from Classic 737s (-300 and -400 series) to the younger and larger -700 and -800 NG series.


The 737-800 is going to have a payload of 23.5 tonnes and a range of over 2,100nm. It will have 12 main deck pallet positions for 11 full-height containers and one half-width ULD.


Meanwhile, Bedek Aviation, the conversion arm of Israel Aerospace Industries, is rushing to complete the first revamp of a 737-700 aircraft into all-cargo configuration. It is working on three 737-300s for Alaska Airlines, the launch customer for the freighter. According to the original timetable, they were scheduled for delivery in 1Q17, but delays have pushed the introduction of the aircraft back by about three months, the US carrier has confirmed.


Bedek and PEMCO are the two conversion outfits that have opted for the smaller 737-700, whereas three players decided to embrace the 737-800. GECAS, which is the launch customer for the first 737-800s from both AEI and Boeing, looked at the -700 but concluded that the -800 was future-proof, based on its experience with 737 Classics.


“We converted the -300 in 2002, then the market came out in force on the -400 with additional main deck capacity,” recalls Richard Greener, Senior Vice President & Manager, Cargo at GECAS, adding that the characteristics in this sector tend to favour the most capable aircraft.


“We want to lease this aircraft for another 16 years. The -800 could become the mainstay within the narrowbody freighter sector,” he reflects.


GECAS has already placed its first two 737-800 freighters, both with Dublin-based ASL Aviation Group, which acquired the airline operations of TNT Express and flies under contract for the FedEx-TNT group. Nevertheless, the advent of the 737-800 freighter is unfolding slower than had been expected. Bob Convey, Senior Vice President of Sales & Marketing of AEI, believes that his firm will turn around 6-10 units in 2018. He expects 737-800 conversion to hit its stride between 2020 and 2022.


First and foremost, the slow pace has been blamed on the residual value of 737-800s, which has been loftier than anticipated. According to Convey, the gap between the -400 and the -800 renders the latter inviable for some time. Whereas Classics can be found for $3-4 million, NGs go for more than three times that amount, he reports, adding that the price will have to come down to $8-9 million.


Greener agrees that 737-800 prices are holding at the moment. “We don’t see prices eroding that quickly, based on the low fuel environment,” he remarks. GECAS has over 280 737-800s on its books, so the acquisition price is not an issue for him. Instead, he asks at what point does it make sense to convert an aircraft into a freighter and when should you continue to use it in passenger configuration. “The -800F makes an efficient freighter, and based on current economics GECAS can demonstrate the -800F is now a better option than converting 737 classic freighters.”


On top of the steep price, the NG feedstock is too tight at this point, Convey adds. “People are having a hard time finding one today.”  Greener predicts “limited but steady supply” next year, with fewer conversion candidates available than most lessors and operators want. >>

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