FREIGHTER MARKET OUTLOOK
Transcript of FREIGHTER MARKET OUTLOOK
FREIGHTER MARKET OUTLOOKMARCH 2018
LET THE GOOD TIMES ROLL
STEPHEN J. FORTUNEFORTUNE AVIATION SERVICES
MARKET OVERVIEW• 1,900 jet freighters in operation
• Fleet average age - 22 years
• Extraordinary growth in 2017
• 41 factory freighters delivered in 2017 ~$15.2B*
• 79 conversions in 2017 ~$644M
• Exceptional E-commerce growth
• New conversion programs rolling out*40% MSRP
GLOBAL AIR FREIGHT YEAR OVER YEAR GROWTH RATE2012-2017
-2%
0%
2%
4%
6%
8%
10%
2012 2013 2014 2015 2016 2017
Source: IATA
Freight Tonne Kilometer Available Tonne KilometerBest Year in Cargo Growth Since 2010
FREIGHT YIELDS HAVE HISTORICALLY DECLINED“Freight yields have declined at an
average rate of 2.1 percent per year. . .
FREIGHT YIELDS IMPROVED IN
CURRENT RECOVERY
LONG TERM DECLINE IS EXPECTED TO
CONTINUE
Yield Decline Forces Productivity Improvement
NARROWBODY FREIGHTER FLEET 2012-17 – STAGNANT?
35%
15%
6%
28%
9%
7%
2012 Narrowbody Fleet - 691 Units*
727F
737F Classic
DC9F
DC8F
757F
737F
(JT8
D)
*Excludes 707F (6 units)
11%
36%4%
41%
6%
MD80, 2%
2017 Narrowbody Fleet - 704 Units*
727F
737F Classic
DC8 & 9F
757F
737F
(JT8
D)
*Excludes 737-700SF (2 units)Source: FlightGlobal
NARROWBODY PAX FLEET 2012-17 - 28% GROWTH
6%
45%39%
10%
2012 Fleet - 12,180 Units
757
737 Family
DC9, MD80/90 &
717
A320 Family
3%
46%
47%
4%
2012 Fleet - 15,644 Units
757
737 Family
DC9, MD80/90 & 717
A320 Family
Source: FlightGlobal
WIDEBODY FREIGHTER FLEET 2012-17 – STAGNANT?
28%
22%
12%
18%
A3303%
17%
2017 Widebody Fleet - 1,173 Units
747F
777F
DC-10/MD11F
A300/310F
767F
Source: FlightGlobal
32%
12%
5%
25%
A3301%
25%
2012 Widebody Fleet - 1,132 Units
747F
777F
DC-10/MD11F
A300/310F767F
WIDEBODY PAX FLEET 2012-17
Source: FlightGlobal
13%
22%
26%6%
22%
9%
A3802%
2012 Widebody Fleet - 3,359 Units
767
777
A330
A300
/A31
0A340
747
*Excludes 787 (3 units)
5%
12%
28%
13%
A300/A3102%
32%
A3503%
5%
2017 Widebody Fleet - 4,694 Units
767
777
A330/A340
747
787
A380
389 CONVERSIONS = $2.5 BILLION CONVERSION REVENUE (2012-2017)
MD80SF
737-300SF
737-400SF
737-700SF
757SF
767SF
747-400SF
A300-600SF
A330-300SF
1239
113
2
128
60
9 251
MARKET TRENDS TO WATCH
• China, China, China• 747-8F continues to struggle• A330-200F production ends• Narrowbody retirements continue to be
primary source of demand • New narrowbody P2F programs have
limited success prior to 2020
“The world economy is buzzing, airlines are enjoying record profits, backlogs of aircraft are at sky-high levels. What could possibly go wrong” – Adam Pilarski January 2018
Cyclical aircraft market – current nine year upmarket is longest on record
Answer: Just about anything
Opportunities? - plenty
NARROWBODY FREIGHTERS
EXISTING TYPES
• 737-300/400
• Large operator base (50+)
• Winding down as feedstock is depleted
• ~50 conversions thru 2022
• 757-200
• Small operator base (80% operated by or for integrators)
• Integrator requirement largely fulfilled
• Winding down with ~40 conversions remaining
NARROWBODY FREIGHTERS
UNDER DEVELOPMENT
737-800• 737-300/400 replacement• Multiple conversion providers• Certification in 2018• Order book – 96 firm & 30 options• Program success & timing dependent
on:• 737 Classic feedstock depletion• Decline in -800 feedstock cost• Selection by an integrator
NARROWBODY FREIGHTERS
UNDER DEVELOPMENT
A320/321• 737 replacement (A320); 757 (A321)• Multiple conversion providers• Same launch customer for both
leading providers• Certification likely in 2019• Being studied by express carriers• Boeing monopoly is an issue
WIDEBODY FREIGHTERSIN PRODUCTION
777F• 18 operators, 138 in service; 30 on order• Replacing MD11F & 747-200/400Fs• FedEx = 24% of fleet• Pax conversion possible, but less capable
747-8F• 12 operators; 78 in service; 25+ on order• UPS kept program alive• Production assured thru 2022• Niche aircraft, challenge to operate
profitably
WIDEBODY FREIGHTERSIN PRODUCTION
• 261 in service; 40% w/ FDX & UPS
• 62 orders (58 FDX, 4 UPS)
• More new orders? Amazon?
• High utilization and/or yield needed
767-300ERF
• Designed for long, thin routes
• 70+ initial orders, 38 delivered and 4
questionable orders remain
• Etihad permanently retiring six units
A330-200F
WIDEBODY FREIGHTERSOUT-OF-PRODUCTION & CONVERSIONS
747F• 100/200/300 fleet - 24 remaining with 8 in
storage• 400 conversions – 60 units, but almost 1/3 in
storage with many likely to be scrapped soon• 400 production freighters – 161 units with over
98% in service• No replacement for production nose loaders
ensures stable market
767-300ERSF• 69 aircraft – all in service• Almost 50% in service with Amazon• Feedstock availability limited & pricing is firm• IAI converted 2x Boeing
WIDEBODY FREIGHTERSOUT-OF-PRODUCTION & CONVERSIONS
A330P2F• Egyptair launched program (-200)• 300 program launch by DHL (1st delivery
Dec 17)• Feedstock limited, but growing• Strong operating economics for the -300• Competitive replacement for older 767-
300ERSFs• Good aircraft for high yield and general
freight
MARKET SUMMARY
Air freight market strong, but for how
long?
E-commerce impact significant & growing
Narrowbody freighter fleet size
unchanged, but highly dynamic
Production widebodies favored by express and flag
carriers
747 conversions ending, A330 & 767
fleets grow to meet e-commerce demand
Technology disruption likely
after 2020 i.e. UAV et al
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