Putzger Perspective: Smaller freighters have fallen out of fashion

Smaller freighters are dropping out of the skies. FedEx is retiring about one fifth of its 757 freighter fleet. Next year Atlas Air will end flying eight 737 cargo planes for Amazon – one year ahead of their contract expiry.

The same goes for 17 B767Fs that Atlas is currently operating for Amazon’s regional network.

According to air cargo research and consulting firm Transport Research Advisory, at the end of May 602 freighters – more than 20% of the global fleet – were stored. Of these, 348 were narrowbodies and 132 mid-sized widebodies.

A year ago Jonathan McDonald of aviation consulting firm IBA observed that, “everyone and his dog was converting 737-800s” in 2022.

Back then Amazon’s regional freighter fleet was going through the roof and aircraft lessors were chasing superior lease rates for cargo planes.

Today, Amazon has shifted to regional distribution facilities to speed up deliveries, and one converted 737-800F was stripped of its engines for use on a passenger plane.

The rise of Atlas Air was synonymous with its build-up of the largest 747 freighter fleet on the planet.

Over the years the company broadened its portfolio to include smaller widebody as well as narrobody freighter types. This year it has set the controls for expanding the large widebody fleet, bringing on eight more units.

Large widebodies are in high demand, for several reasons. The e-commerce volumes generated by the likes of Shein and the business model of flying these directly from China to the US call for dedicated freighter capacity.

Moreover, the rise of bellyhold capacity is slowing and passenger service frequencies between China and the US remain way below 2019 levels.

Congestion at Asian marine gateways, coupled with a pronounced narrowing of the differential between airfreight and container rates, has added to the demand for freighters.

The question is how these demand drivers are gearing up beyond this summer. Predictions are that demand for marine transport will recede after the peak season for this mode.

E-commerce, on the other hand, is seen as a powerful generator of cargo flows for years to come. According to Boston Consulting, it will grow from 19% of global retail sales in 2023 to 41 percent by 2027.

Efforts to stem the tide of parcel flows have failed so far but more legislative pushes are in the pipeline. Will those succeed, or are law makers engaged in a hopeless game of whack-a-mole?

Putzger perspective: E-commerce shipments face rising pressure