Boeing keeps the faith
06 / 10 / 2015
Out of 72 orders for the Boeing 747-8 freighter just 13 remain to be delivered. Boeing will be cutting B747-8 production to just one a month from next March.
Some 48 out of 160 Boeing 777F orders remain to fulfil. The widebody conversion market is non-existent.
After a promising 2014 and a good first quarter due to the US west coast ports crisis, cargo growth came to a halt in the second quarter of 2015. July saw cargo traffic slip 0.6% and the word is that the August’s figures won’t be so good either.
Add in the continued growth of belly cargo, the steady erosion of the premium earned by freighter operators according to IATA, and tales of the shift of key airfreight commodities from air to sea, and you might conclude that it is not a good time to be the world’s biggest freighter manufacturer.
Yet Boeing continues to be bullish and to talk about air cargo doubling in the next 20 years.
True, these days it predicts a 60% rise in the freighter fleet over that period rather than the doubling it used to expect, but it is still forecasting an average 4.7% annual traffic growth between now and 2034, not far off the six percent that used to be the standard.
Where is that growth going to come from? Tom Crabtree, regional director-airline market analysis for Boeing Commercial Airplanes, has to admit there have been some sluggish years of late. The average growth in air cargo from 2004 to 2014 was two percent, he points out, though from 2009 (admittedly the big slump year) to 2014 (the best of the recent years) growth averaged 4.8%.
If that last statistic seems like cherry picking, he can nevertheless produce reasons why things can only get better. One is that global economic growth has been behind trend in recent years, at 2.5%-2.6% rather than the more normal 3.2%, and also that business investment, producing capital goods and parts movements for industry, has also been below par.
When all this reverses, the argument goes, air cargo will be in demand once more.
There are even positive signs already. “There is now stronger growth in Canada and the US and, dare I say it, even signs of recovery in Europe,” Crabtree says. He cites an unnamed carrier saying that European exports are picking up, due to the softer euro. “There is weakness in France, but the UK is chugging along, Germany is doing well and Spain and Italy have seen a pick-up they have not seen in years. We expect August to be disappointing but are bullish about the rest of the year.
”If cargo picks up, will it fly on freighters, however? Won’t belly cargo swallow a greater share of the growth as airlines gorge on next generation passenger widebodies?
Crabtree reckons the picture here is skewed by looking at legacy carriers in Europe and in some parts of Asia, many of which have been reducing or exiting freighter operations. The failure of US all cargo operators such as World Airways and Evergreen might also go into this mix.
But there are, he says, a number of newer freighter operators (many, not coincidentally, recent Boeing freighter customers) who have been seeing rapid growth.
“AirBridge do not report monthly to IATA and they did not exist 12 years ago. Their growth rate from 2009 to 2014 was 35% per annum.
”AirBridge also signed a memorandum of understanding at the Paris Air Show to purchase 20 B747-8 freighters. Since the deal has not yet been finalised, the orders do not appear in the official B747-8 order book yet, but will do a lot to boost the B747-8 backlog when they do.
Other fast growing operators on Crabtree’s list include Emirates (12% annual growth from 2009 to 2014), Silk Way (35%, and three B747-8Fs in service, with two more to come), Etihad (15%), Qatar Airways (25%, with eight B777Fs on order and eight to come), Ethiopian (33% and two B777Fs on order with two more to come) and Turkish Airlines (29% and a staunch Airbus freighter customer).
You might say that these are the exceptions which have had money to invest in freighters, but Crabtree puts it the other way round. “Carriers that have invested in new and modern capacity tend to be the ones who have done better,” he says.
Boeing is also fond of pointing out that 56% of air cargo still moves on all-cargo aircraft. That figure includes the integrators, but it has remained pretty steady. “It peaked in the low-60s from 2003 to 2008, but before 2000 it was always around 54% to 55% and we expect the figure to remain in the mid-50s going forward.”
As for belly cargo, well, Crabtree is not going to deny that the B777-300ER is a great cargo aircraft, but while it can carry 25 or even 30 tonnes, he says the average is around 10 tonnes per flight. “That is because passenger airlines serve passenger needs. You have never heard of a passenger or their baggage being bumped to take an extra pallet of cargo.
”Talking of integrators, Crabtree also points to DHL as one of the hidden growth carriers. Since it uses so many different AOCs in its fleet its presence is not obvious but DHL UK, EAT, Aerologic and Polar Air Cargo all have aircraft flying for the integrator – in Polar’s case six B747-400Fs and seven 747-8Fs. Crabtree says DHL saw 26% average annual flown cargo growth between 2008 and 2013.
Integrators are even more important for the B767-300F, where 100 of the 184 orders to date – and all of the current 79 unit backlog – are accounted for by FedEx. UPS is next with 59, LATAM with eight and DHL with six. Otherwise, customers include ANA, Asiana, JAL and Azerbaijan Airlines, and SF Express is rumoured to be lining up (something Crabtree says he has no knowledge of). A B767-300 conversion programme is still extant but has no customers at present.
Boeing is also actively exploring a B777-800BCF programme which would put it in competition with AEI. Crabtree says it has authority to offer the airplane to customers and is actively doing so, but does not yet have authority to launch. The aircraft would have 19% better costs per tonne kilometre compared to the B737-300SF.
A B777-200ER conversion is also technically still on the table, but Crabtree admits the factory-built freighter, which has 20 tonnes better payload and more range, has proved more attractive. The good thing about that freighter is that its passenger variant is in everybody’s fleet and the passenger production line has a huge backlog. That at least is one production line that Boeing will find easy to keep going.
Meanwhile, the company has also been getting B747-400BCFs back as part of deals to sell new freighters – Air China Cargo did such a trade in when it bought eight B777Fs. Lest you think these are taking up space in the desert, Crabtree insists it is quite otherwise.
“I am happy to report that we are running out of -400BCFs to sell or lease,” he says, declining to say who is taking the aircraft. “I even had an email the other day asking if we had any MD-11Fs available, which I found it hard to conceive. “But that just shows you that there will be a market for the B777-200ER conversion, as the perfect MD-11 replacement.” ■