Cargo Airlines And Lessors See Imminent Freighter Shortage

Air cargo operators may soon run into a shortage of freighter aircraft, as a significant portion of the in-service fleet comes up for retirement and feedstock for passenger-to-freighter conversions becomes scarce, airline executives pointed out at the International Society of Transport Aircraft Trading (ISTAT) Americas conference in San Diego.

“Roughly 120 widebody freighters are over 30 years of age,” Atlas Chief Commercial Officer Michael Steen told delegates at ISTAT. “We will see a significant amount of retirements over 5-10 years. Converted aircraft alone will not make up for the retirements. We need the new production aircraft in the market on time.”

• As retirements near and programs end, freighter capacity might fall short
• Fleets are still shifting toward all-cargo aircraft
• Market focuses on widebodies

Atlas is one of the world’s largest operator of widebody freighters with a fleet of 118 aircraft plus a further 20 under management. Atlas operates 59 Boeing 747s alone and recently took delivery of the last 747 ever built, a 747-8F.

Steen’s concerns about a longer-term shortage of aircraft are not just focused on the production side, where only two active final assembly lines are producing newly built aircraft—for the Boeing 767F and 777F—and many of the passenger-to-freighter (P2F) conversion lines are still in the preparation stage.

The Atlas executive also points out that the cargo industry has undergone a permanent structural change: Before the COVID-19 pandemic, about half of air cargo tonnage was transported onboard passenger aircraft, a share that greatly increased as most passenger aircraft were temporarily grounded during the pandemic. But even as long-haul travel rebounds in most markets—including important segments such as transatlantic routes—the all-cargo aircraft market share is still at 61%, Steen said, well above earlier trends.

Steen voiced concern that the industry could be faced with “a similar situation as during the pandemic,” when airlines lacked cargo capacity due to high demand. According to International Air Transport Association data, air cargo demand in January was down 15% compared with January 2022. But Tom Crabtree, managing director of the Trade and Transportation Group consultancy, noted at the conference that this came off a very high level, and yields are still above where they have been historically. The longer-term growth trend, perhaps following a market correction down from peak levels, will continue, Stein and Crabtree agreed.

There are currently three widebody P2F programs—the 767-300ER, 777-200LR/777-300ER and Airbus A330-200/300. Two new-build freighter programs, the 777-8F and A350F, have been launched, with entry into service planned for 2027 and 2025, respectively. On the other hand, production of new 777Fs and 767Fs will have to cease because of more stringent International Civil Aviation Organization emissions standards coming into force in 2027. And the final 747F was delivered early this year.

That all means two new programs are replacing three that are being phased out. There have been suggestions that Boeing might launch a freighter version of the 787 at some point. But even if it did, production is so far behind the initial schedule, and demand for passenger aircraft so high, that any 787-based freighter would likely not have a material market impact until about 2030 or later.

Airbus has been clear that the A350F was only its first step in the attempt to compete against Boeing in the large freighter market. CEO Guillaume Faury has hinted that the company is seriously considering a cargo variant of the A330neo. Adding that version to the A330neo family could also be a good way to accelerate sales of the A330neo program, orders for which have only recently begun to pick up momentum.

One aspect for Airbus to consider is that a large number of passenger A330s are coming up for retirement in the next few years, and at least some could be candidates for P2F conversions. Many operators will likely prefer the much cheaper P2F option, particularly in medium-haul feeder markets where aircraft utilization is typically lower. However, Steen stressed that airlines need both channels.

Some P2F programs are picking up their pace. Air Transport Services Group is converting 20 A330s this year and more than that in 2024, CEO Rich Corrado said at ISTAT. Yet, Steen noted, “There is very limited 767 feedstock.” Hani Kuzbari, co-CEO of lessor Novus Aviation Capital, pointed out that “the P2F reality is that 777s are now very much required as passenger aircraft, so the feedstock is not going to be available.”

As far as retirements are concerned, Corrado also warned of “pent-up demand.” During the last three years, only about 15 aircraft annually have left the fleet. A more normal number would have been 70 a year.

The availability of a sufficient number of aircraft is not the only issue—the production stop of the 747 is also going to be a problem. “Nose loading is absolutely essential for us,” Steen said. “We use the nose door [for] loading all the time, if only for efficiency reasons.” He also pointed out that because of Russia’s war against Ukraine the industry has lost the only other cargo aircraft with nose loading capabilities, the Antonov An-124. With those capabilities going away over time, “at some point the industry will have to adapt the supply chain,” he said.

Steen said it is conceivable that Atlas could operate its fleet of 747-400Fs longer to retain that capability. However, Atlas’ -400 fleet is 22 years old on average and is not coming up for replacement for more than 10 years.