Aircraft dealer Jetran LLC has acquired the rights to four Boeing 777-200 converted freighters from Cargojet, which this week dropped plans to buy the long-haul aircraft along with a modification package for main-deck cargo transport, FreightWaves has learned.
Cargojet on Monday said it was backing out of commitments with Mammoth Freighters, a startup aerospace firm backed by Fortress Investment Group that has designed an airframe conversion kit for 777 passenger aircraft, because of soft international demand for airfreight. Instead, it will focus on maximizing utilization of existing Boeing 757 narrowbody and 767 medium freighters in its Canada overnight express network and on international charter routes.
The airline had previously telegraphed that two of the large freighters would be operated for DHL Express, but co-CEO James Porteous on Thursday said Cargojet changed its mind when it couldn’t get firm commitments for the other two units and realized economies of scale weren’t possible with such a small fleet.
Cargojet originally envisioned having eight 777s, but last year it decided not to move forward with an investment in four 777-300s — eventually selling them and canceling production slots at an Israeli retrofit company. Porteous said the -300s were speculative investments that didn’t pan out with express operators or other cargo airlines once demand began contracting in 2022 from record highs fueled by the pandemic’s disruption of supply chains.
Spreading the fixed cost of hiring crews, pilot training, flight simulator time, spare parts and maintenance infrastructure across several revenue aircraft is much more efficient with a larger fleet, according to aviation experts, and Cargojet realized that even four aircraft were too few to justify the upfront expenditures. It had budgeted $1.2 billion to launch the 777 program.
“When we looked at the cost of capital as a public company — everything from ramping up the number of pilots [and maintenance staff] we would need to hire to cover the first two aircraft and routes for DHL, plus all the spare parts and tooling, and we’d have to buy or build a hangar at our hub in Hamilton [Ontario] because the aircraft doesn’t fit in our existing hangars — we just finally came to the conclusion this doesn’t make economic sense. It’s not a great use of capital,” Porteous said in a phone interview from an investor conference in Whistler, British Columbia.
Cargojet netted $75 million to $82 million from buying and selling the 777-200s, according to Monday’s announcement.
Porteous declined to identify who bought the 777-200s and a flight simulator, but Jetran confirmed it is the buyer.
“Jetran basically decided to step into Cargojet’s commitments to take those four airplanes because we see tremendous value in the [777 passenger-to-freighter] program and that asset class,” CEO Jordan Jaffe said in an interview. He declined to say how much Jetran paid for the aircraft or who the end user will be.
Mammoth Freighters, which is working to validate its design and get it certified by the Federal Aviation Administration for use in commercial aircraft, has 35 confirmed orders. Jetran has more than 20 of them, including nine 777-200s that will be resold to DHL Express.
Mammoth has a large maintenance hangar in Fort Worth, Texas, where conversion kits are being installed using Mammoth’s design, as well as a licensed contractor in the United Kingdom. It will also offer conversions for the 777-300.
Assembly work involves gutting the plane’s interior, adding a rigid barrier to protect the cockpit, installing a large door for pallets and reinforcing the floor to support heavy loads. The process typically takes four to five months for a large airliner, but prototype aircraft used for validation flights and certification take longer to complete.
The downturn in the air cargo market since the spring of 2022 has chilled orders for factory-built and converted freighters, raising concerns of a potential glut in narrowbody freighters as prior orders continue to be fulfilled. Analysts say there still is a need for more widebody capacity with Boeing last year ending production of the 747 jumbo jet, Western sanctions against Russia for invading Ukraine effectively removing many extra-large freighters from the market, airlines retiring MD-10 and MD-11 freighters, and other aircraft starting to reach the end of their useful life.
Jaffe said Cargojet’s decision doesn’t reflect on its sales forecast or confidence in Mammoth Freighters.
“They’re extremely well capitalized. They have an A-team of industry experts and some of the best facilities we’ve ever seen,” he said.
Jetran, based in Horseshoe Bay, Texas, last year acquired five 747-400 freighters, which are more than 20 years old, from Taiwan-based China Airlines in a sale-leaseback as a gateway platform for new 777 converted freighters or next-generation 777s to be built by Boeing, said Jaffe.
The jumbo freighters, he explained, allow Jetran to pursue new customers that can eventually move into the 777 and provide a bridge for existing customers that need aircraft until the Mammoth conversions are available. Airlines can take a short-term lease of three or four years and then transition to the 777 converted freighters.
“I don’t mind using the 747 as essentially a stopgap airplane,” Jaffe said.
The 777s are heavy-lift aircraft that can carry more than 100 tons. The wide fuselage makes them well suited for dense freight and light e-commerce shipments. Mammoth’s 777-300 converted freighter is designed with 14% more volume than a 747-400 and is ideal for lightweight freight that takes up space because it has more interior volume but a similar weight payload to the 777-200. That translates into 10 more main-deck pallet positions than the -200LR. The 777-300 is ideal for medium-length routes of about eight hours. The 777-200 is aimed more at long, intracontinental routes. Both variants are twin-engine aircraft and much cheaper to operate than four-engine 747s.
Cargojet adopts conservative fleet strategy
Cargojet is focusing on its existing fleet of 41 freighters — 17 Boeing 757 narrowbody aircraft and 24 Boeing 767 medium widebodies.
“The commonality of the flight deck with one pilot for both aircraft types, commonality of parts, makes a lot more sense for us to continue,” especially in the domestic Canada market, Porteus told FreightWaves. “We feel we can continue to grow the ACMI [dedicated contract transport] business with DHL with the 17 or 18 aircraft that we have operating with them today.”
Porteus acknowledged that Cargojet likely won’t be able to sell four Boeing 757s recently identified as surplus because the industry has an oversupply of standard-size cargo jets. He said Cargojet may be able to lease two aircraft and will return the others to service when parcel and freight demand pick up again.
Click here for more FreightWaves/American Shipper articles by Eric Kulisch.
Contact reporter: ekulisch@freightwaves.com
