Singapore Air Show

Boeing 737-800BCF Defies Freighter Market ‘Softness’

 - February 10, 2020, 8:00 PM
The Boeing 737-800BCF features 12 pallet positions on the main deck. (Image: Boeing)

The recent lull in worldwide cargo traffic hasn’t tempered the ambitions of Boeing Global Services’ freighter business in the Asia-Pacific region, as the U.S. airframer prepared to open a sixth conversion line in China this year for the 737-800 Boeing Converted Freighter (BCF) while negotiating the terms of a contract with Singapore’s BBAM Aircraft Leasing covering three of the airplanes. The order, announced Tuesday at the show, calls for the conversion of three 737s in BBAM’s existing fleet. A contract signed last fall with Guangzhou Aircraft Maintenance Engineering Company (Gameco) specifies plans to add the further conversion capacity Boeing believes it needs to meet the robust demand the latest order reflects.

The BBAM order no doubt helped boost the confidence of Boeing Global Services director for converted freighters and complex modifications Alvey Pratt, whose team has managed to collect orders and commitments for 130 of the airplanes since the program’s launch three years ago. Now, as forecasters predict a return to growth in global freight traffic in the second half of 2020, Pratt sees more reason for optimism.

“I think Asia, in general, holds the most growth in the freighter market in our market outlook,” said Pratt. “But that can be a mix…it can be China, we can look at Southeast Asia obviously as an emerging market. And right now we have a couple of BCFs operating in India under SpiceXpress. So yeah, it’s going to come from all over the region…and it’s pretty exciting.”

To date, all but two of the 24 BCFs delivered have gone through lessors including launch customer Gecas. Boeing plans to deliver another 22 this year and, as Pratt explained, more individual operators will start taking direct delivery as the program progresses. Still, Boeing expects lessors to account for some 65 percent of all sales in the long-term.

Boeing’s agreement with Gameco reflects the need for more production capacity as demand for the BCF accelerates. Two other Chinese MROs provide the current conversion capacity; Shandong Taikoo Aircraft Engineering Company (Staeco) now operates three lines and has begun assembling a fourth set of tooling for what Pratt characterized as a surge line. Finally, the Boeing Shanghai Aviation Services joint venture operates another two lines. Boeing promises a 90-day turnaround time regardless of the conversion facility, another feature of the company’s offering Pratt trumpeted as part of the program’s value proposition.

The partnerships with Chinese MROs make sense given that Boeing expects a third of the market for the airplane to reside in the People’s Republic. “We see huge growth freighters, and probably over 1,200 standard body freighters in our current market outlook. We see a significant portion of that in China,” said Pratt. “It’s been pretty broad globally but we certainly see, long-term, China having a big, big role in that growth.”

Chinese operators include Hangzhou-­based YTO Airline and Beijing-based China Postal Airlines, which took its airplanes on lease from Gecas.

Improved Market Expected

While the segment of the passenger-­to-freighter conversion business occupied by the 737-800 has seen something of a shortage of suitable used airplanes, Pratt said Boeing’s position as the model’s OEM has mitigated the feedstock challenges, notwithstanding the pressure the grounding of the 737 Max has undoubtedly placed on the supply. Meanwhile, the company sees a need for further conversion capacity, possibly outside of China, to service Europe and North America, for example.

“What I’m seeing is the customers that we have and new customers coming to us and saying, ‘We’ve got tails and we want to convert them,’” insisted Pratt. “So that’s just caused us to continue to go add conversion lines and to expand our capacity. It would probably be ignorant of me to say that constraint’s not real. But it has not affected our growth trajectory. In fact, it’s been greater than we initially anticipated before we thought there was going to be any other constraints in the marketplace.”

Although Pratt acknowledged trade tensions have affected the wider freighter market recently and Boeing’s market forecast for Southeast Asia, for example, shows demand for just 10 new widebody freighters over the next 20 years, he said he sees prospects broadly improving this year in the express package market. Pratt also stressed that replacement demand will account for much of the BCF’s long-term sales.

“Obviously there are some trade tensions and you have some weakened economies and industrial activities, but we expect that to improve next year and cargo…to grow a couple percent in 2020,” he said. “The other thing about that is there’s also talk about how we replace the existing lift that’s out there. Just like in the passenger market, where you introduce a more economical platform, that may be an opportunity for those that are operating other forms of lift, maybe in terms of 737 Classics…Some of those things get a little long in the tooth. And then you see in some of these emerging markets, this is just a really good platform to get started.”

Performance improvements over 737 Classic freighters include capacity and range while the 737-800BCF’s reduced fuel burn brings clear economic benefits. The BCF carries up to 52,800 pounds of cargo while flying routes of up to 2,000 nautical miles. Twelve pallet positions—11 standard pallets and one half-pallet—provide 5,000 cubic feet of cargo space on the main deck, supplemented by two lower-lobe compartments providing more than 1,540 cubic feet of space for bulk cargo.