Freighters to the fore as planemakers bet on trade flows -Breaking
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By Jamie Freed
(Reuters) – A boom in cargo air travel is creating an auspicious environment for Airbus (NYSE:) and Boeing (NYSE;) to build new large freighters. However, longer-term trends, particularly the strength the global economic recovery will decide whether or not either of them succeeds.
Airbus secured its first contract for its A350 freighter jetliner on Monday at Dubai Airshow – an aircraft the European Group hopes will end Boeing’s dominance in the global market for goods flight.
Boeing has been working to develop a possible freighter model of its 777X. However, it has yet not announced a launch. Potential buyers could include Qatar Airways.
Air passenger growth has declined for two years due to the pandemic. However, there has been some good news in the freighter sector. There has been an explosion in online commerce, supply chain disruptions and a decline in passenger flights. This has increased demand.
New models pose big risks, and they would be only available for the second half a decade.
This includes a quick recovery of passenger flights and companies moving to source more products closer to home. There is also a rising number of freighter passenger jets that are being converted.
The economic strength and future of global trade are also uncertain due to U.S. – China trade tensions, which have yet to be resolved.
Stuart Rubin, the managing director of aviation for consulting firm ICF (Airbus) and Boeing’s Freighter Plans said “It is not a risk free decision.”
The cost to develop the models has not been disclosed by either company.
SHORT-TERM BOOM
A shortage of passenger plane stomach capacity caused freight rates to soar, delay the retirement of MD-11s models and resulted in lessors racing to make older planes suitable for freight transport.
Frederic Horst is Cargo Facts Consulting’s managing director. He stated, “Freight-wise everybody with a airplane could make money at this moment.” “We are witnessing a lot more strange and unusual things than you would expect. “You’re witnessing 737 narrowbody cargoers flying Europe-to-Asia.”
Large, widebody cargo ships like the A350 or 777X are often able to carry trade-linked, denser products such as automotive parts, semiconductors, and pharmaceuticals along long-haul routes that connect Asia with North America and Europe.
Converted passenger aircrafts are lighter and can carry more cargo, such as ecommerce packages.
FedEx (NYSE): Cargo firms like FedEx and large airlines, such as Korean Air Lines, Lufthansa and Korean Air Lines have all benefited greatly from disruptions to their supply chains during the financial crisis and high container shipping rates.
Tom Sanderson from Boeing’s product marketing department stated that air freight was four- to six times more costly than sea freight in the last month. This compares to normal rates of 12 to 15.
Some of the pandemic-driven increases in air freight may continue, there are reasons to believe.
Airbus predicts that the global e-commerce market will increase by 4.7% annually over the next 20 year, as opposed to 2.7% in general cargo.
Bertrand Grabowski, an independent industry advisor said that ordering freighters on the current market is possible if you can get a fair price.
Boeing predicted that in the aftermath of last year’s pandemic, the worldwide large-widebody cargo fleet will grow to 850 aircraft in 2039, from 610 planes in 2019, due to an increase in demand.
New, fuel-efficient freighters are also in favor of environmental trends.
Boeing’s soon-to-be-discontinued 747-8, as well as the 777F and 767F, cannot be produced after 2027 due to new environmental standards unless product changes are made.
Boeing said that Boeing may seek exemptions from these rules to allow it to plan freight.
FADING BENEFITS
Analysts say that there is evidence of some signs that the panademic benefits associated with air freight may be starting to diminish.
The supply chain disruptions are now less severe and container rates have fallen. Some companies have moved production closer home to avoid any future surprises.
According to Marco Bloemen (Cargo advisory lead, Accenture’s Seabury Consulting), European fashion firms are moving manufacturing production from China to countries like Portugal, Turkey, and North Africa.
Demand for new models could be limited by the growing market that converts 777 passenger airplanes into freighters. This includes AerCap 777 300ER and Israel Aerospace Industries.
Although the planes that were converted will not be as capable of carrying heavier cargo than their new counterparts, the ICF’s Rubin said they could still benefit from the boom in ecommerce.
Emirates signed Monday a contract with IAI for four converted 777-300ERs to be freighters. The airline cited its capability to transport large volumes of ecommerce as the main factor in this deal. Two more factory-built 777 freighters were also ordered by the airline.
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