Momentum for narrowbody freighter conversions continued to build in recent days with news that Malaysian all-cargo carrier Raya Airways has signed a deal for four retrofitted passenger aircraft while ASL picked up more lender support for its major fleet expansion. Plus, a Chinese aircraft leasing company is entering the freighter market for the first time.
Singapore-based ST Engineering said Thursday its freighter leasing subsidiary will lease four Airbus jets — two A320 and two A321 used passenger aircraft — reconfigured for cargo containers in the main cabin to Raya Airways, which is investing in a bigger fleet to take advantage of long-term growth in the Asian air cargo market. Tear down of the passenger compartment and installation of new features, such as a wide cargo door and heavy-duty floor beams, will be conducted by Elbe Flugzeugwerke (EFW), a joint venture between ST Engineering and Airbus based in Dresden, Germany.
Work on the first unit has commenced at ST Engineering’s main facility in Singapore, with delivery expected in the fourth quarter.
Raya Airways officials say e-commerce growth and the need for time-definite delivery in Southeast Asia are driving the company’s expansion strategy. Airbus estimates express freight, powered by e-commerce, will grow 4.7% per year during the next 20 years while industry consultancy Cargo Facts puts the growth rate at 5.5% over five or six years, significantly faster than general cargo. Boeing estimates intra-Asia air shipping will increase 4% to 5% over the next 20 years.
“These are truly exciting times at Raya Airways as the added payload capacity will enable us to add numerous major routes to further expand the company’s footprint in the region,” said Chief Commercial Officer Hidayat Rahim in the news release.
The airline plans to add five total Airbus converted freighters, more than doubling the size of its fleet to nine aircraft. In April, it received a converted Boeing 767-200 medium widebody cargo jet from Air Transport Services Group (NASDAQ: ATSG), bringing its active fleet to three 767s and one Boeing 737-400. Raya previously ordered an A321 passenger-to-freighter conversion from ATSG, which has partnered with an aerospace engineering firm on the structural redesign and sale of conversion kits to approved overhaul shops.
The A321 has been on the market less than two years and is considered by experts a strong challenger to the Boeing 737-800 converted freighter in the narrowbody segment, which has seen an explosion in demand from lessors and express operators the past two years. The planes are quickly becoming popular with domestic and regional express operators because of their functionality, modern fly-by-wire technology and improved fuel efficiency compared to previous-generation aircraft. EFW had redelivered seven A321 converted freighters through February and previously said it expects to exceed that figure in 2022.
Raya will be EFW’s second customer for the smaller A320 after United Arab Emirates-based Vaayu Group, which is leasing the first unit to Astral Aviation in Kenya. EFW in March received its structural change certification for the A320 from the European Union Aviation Safety Agency.
The converted A321 has a payload capacity of 29.7 tons, while the A320 can carry 23 tons a maximum distance of 1,800 nautical miles and 18.7 tons for flights reaching 2,500 nautical miles, according to EFW.
ASL lines up freighter financing
ASL Aviation Holdings, which owns several airlines that supply airlift for express delivery companies in Europe, last week said it has extended and enlarged its revolving credit line with Goldman Sachs to help finance an aggressive expansion that includes both 737-800 and A321 converted freighters.
The new debt facility is worth $200 million, up from $125 million secured in April 2021, and signals lender confidence in the company’s strategic plan and growth prospects.
Dublin-based ASL has firm orders with Boeing to convert 30 737-800s, with rights for 10 more production slots. Boeing is expected to redeliver the 13th aircraft by the end of July, with two more currently undergoing metal cutting. The remainder of the initial 20-unit tranche is scheduled to be completed by early 2023.
ASL, the largest operator of 737-800 freighters, said it is now shopping for aircraft for the second phase of the conversion program. ASL subsidiaries in Ireland, Belgium and France use the aircraft to transport express and e-commerce consignments.
In May, ATSG landed an ASL order for three A321 converted freighters in the next several months, plus two A330 cargo-modified aircraft in 2024.
The 737-800 is popular with regional cargo airlines for its better payload — 52,800 pounds with a range of 2,025 nautical miles — and reliability. It also has lower fuel consumption and operating costs per flight compared to 737 Classic freighters.
ASL Aviation also owns ASL Airlines United Kingdom, which flies ATR72-600 turboprop aircraft. It also has joint venture airlines in South Africa and Thailand.
Some analysts warn there could be a glut of narrowbody freighters by mid-decade because of the rush by lessors and others to convert standard jets to cargo configuration after they’re done hauling passengers. Narrowbody makeovers could top 110 units this year — more than double the annual output during the previous decade. Conversion facilities say they are booked for two years or more and are investing in new production lines.
Lessor sees 737 cargo opportunity
Meanwhile, Hong Kong-based China Aircraft Leasing Group Holdings Ltd. (CALC) on Monday signed a contract with Aeronautical Engineers Inc., an independent conversion provider in Miami, to reconfigure a 737-800 into what will be the lessor’s first cargo jet.
AEI said it expects to present the modified aircraft to CALC in October. Reconstruction will be carried out by authorized AEI conversion center, Shandong Taikoo Aircraft Engineering Services Co. in China. CALC said conversions give it an opportunity to realize greater returns after plane’s useful life in passenger transport is over.
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