Boeing’s Freighter Conversion Programs Enjoying a Renaissance

 - July 27, 2020, 3:23 PM
DHL Express will add four 767-300 Boeing Converted Freighters (BCF) as part of the logistics company’s effort to modernize its long-haul intercontinental fleet. (Photo: DHL)

Boeing’s freighter conversion programs have seen a surge in business since the onset of Covid-19 as the severe drop in passenger flights results in a decline in belly capacity and a wealth of grounded airplanes creates an unprecedented amount of feedstock. Boeing’s 737-800BCF and 767-300BCF have emerged as prime beneficiaries, leaving the company searching for more production capacity at a time when the business already controls 90 percent of industry sales.

The programs received a further boost during last week’s “virtual” Farnborough International Airshow, known as FIA Connect, when Boeing announced a contract on Wednesday calling for DHL Express to add four 767-300BCFs and another on Thursday with Aircraft Finance Germany covering two 737-800BCFs.

In an interview with AIN during the FIA Connect event, Boeing Converted Freighters interim director Jens Steinhagen explained that the reasons for the surge in activity largely lie with the now substantial size of airplanes suitable for conversion and the resulting declines in cost for the airframes. In fact, values have dropped an average of about 15 percent, depending on the model and age of the airplane.

“We are seeing the parking of a large portion of the passenger fleet resulting in a lack of belly capacity, which drives up cargo rates and improves the case for conversions and also creates a strong need for dedicated freighters,” he said. “So all that is driving a surge in the conversion market and we’re definitely experiencing that in the increased  customer interest.”  

Steinhagen said he thought the surge in activity would last for years rather than months, not only based on projections for a multi-year recovery for the airline industry but on the likely prospect that customers that normally wouldn’t gravitate toward online ordering will continue the practice now that they’ve seen its convenience benefits.

To date Boeing has collected orders and commitments for 132 of the BCF version of the 737-800s and has converted 34. As demand increases, the need for production capacity undoubtedly will follow, and last month’s inauguration of a 737 conversion facility in China at Guangzhou Aircraft Maintenance Engineering Company (Gameco) proved timely.

Two other Chinese MROs also provide conversion capacity; Shandong Taikoo Aircraft Engineering Company (Staeco)  and Boeing Shanghai Aviation Services (BSAS). Boeing promises an approximate 90-day turnaround time regardless of the conversion facility, another feature of the company’s offering that Steinhagen trumpeted as part of the program’s value proposition.

For the 767-300BCF, Boeing has seen orders and commitments rise to 51 with the DHL deal. ST Aviation Services Company in Singapore (SASCO) performs all the 767 conversions. A 767 conversion at SASCO takes about 105 days, which Steinhagen considers a relatively short time given the job at hand. Boeing, he added, enjoys an advantage compared with other conversion programs because it has access to firsthand design data and all the parts necessary for conversion onsite when the airplane arrives.

“That gives us the ability to have a very short and a very dependable conversion process,” he explained. “You can really depend on the airplane being in your hands on the [contracted] delivery date.”

Steinhagen said Boeing has started studying possibilities for increasing capacity to accommodate the growing demand for the standard-body and widebody Boeing Converted Freighters. Noting that much of the demand for conversions comes from Europe and North America, Steinhagen also said that plans for more capacity might include new deals with MRO providers to meet the growing market demand.