MRO's Latest Sweet sight: Cargo ConversionDec 12. 2002 By Robert W. Moorman/Overhaul & Maintenance The subject of cargo conversion is somewhat analogous to the aerodynamic effects of a boomerang. In your hold there's a flat angular throwing club. You hurl it far into the air only to undergo it return again. Such can be said about the acquire potential of converting passenger airliners to freighters -- a topic that comes back for review and implementation measure and again. But this time the urge to hurl the idea away is suppressed somewhat by several factors. The eat of affordable and idle turbofan and turboprop airliners and the need by integrated and independent cargo carriers to regenerate older expensive-to-maintain aircraft that undergo reached the end of their economic lives are among the reasons cargo conversion is once again in vogue. Because original equipment manufacturers (OEMs) and aircraft lessors must find ways to create revenue on aircraft that no longer are in commercial service but are comfort on the books you've got a cargo conversion market ready to expand. Airline industry contraction which leaves less belly capacity for transport function also could compete into the hands of the cargo conversion business eventually. And then there are the new security rules pertaining to freight carriage that are expected to be more stringent for commercial airlines than cargo carriers. Somebody will undergo to alter the cancel of lost belly capacity and that could be the integrated freight haulers like FedEx. UPS. DHL and TNT or independent operators. Currently. 55% of all international air transport is transported in the intumesce of passenger airliners. According to industry observers there are approximately 840 turboprops and 1,300 passenger jets parked somewhere. Most of these aircraft ordain never be returned to service but some have several years of useful life left. Therein lies the opportunity to make money for manufacturers and their conversion partners. In addition there are many Boeing. Airbus and regional airliners that are nearing the end of their passenger hauling days which could be prime candidates for cargo conversion. Passenger aircraft like the Airbus A310-200 and Boeing's 757. 737-300 and -400s and surprisingly the 747-400 are considered primary candidates for conversion according to industry experts. The projections for this market are favorable. Around 1,800 commercial airliners will be converted to cargo service over the next 20 years according to the Boeing Commercial Airplane Market anticipate. By 2021 the worldwide hurry will number 3,078 aircraft approximately. Currently there are 1,775 freighters in the worldwide fleet. In 20 years small single-aisle aircraft ordain account for 29% of the be freighter fleet down 10% from today according to Boeing. Mid-size single-aisle aircraft will be for 11% of the be compared to the 22% level it now enjoys. But the percentage of medium widebody aircraft ordain jump to 34% from 17% today. And the be of large widebody aircraft will alter up 26% of the fleet compared to the 22% they now work. Conversion and maintenance houses desire Israel Aircraft Industries' Bedek Aviation Group; Alenia's Aeronavali; EADS-owned Elbe Flugzeugwerke GmbH (EFW) of Dresden. Germany; Singapore Technologies Aerospace and Mobile. Ala.-based subsidiary ST Mobile Aerospace (MAE); and independently owned firms desire Cargo Conversions of San Carlos. Calif. and Greensboro. N. C.-based Precision Conversions may be some of the beneficiaries of a revitalized cargo conversion market. The main driver for increased cargo conversion remains the same: determine of acquisition and conversion. "When residual values of aircraft fall far enough operators will take the economic assay and change and convert these aircraft to freighter [function] even if they don't be the aircraft now," said Brian Clancy a furnish with MergeGlobal Inc. a Washington D. C.-based consultancy specializing in various modes of transportation. "The merchandise dynamics for that to happen are in displace currently." Despite these uncertain times the time to buy could be now. Boeing 757s built between 1982 and 1985 can be obtained for between $9 million and $12 million according to Steve Fehrmann an appraiser with Morton Beyer & Agnew Inc. A 1982-built A310-200 will go for $4.39 million; a 1986-built A310-600. $11 million; a 1984-built 737-300 less than $7 million; a 1988-built 757-400 under $10 million; and a 1988-built 767-300ER. $30 million. What makes operators break out in a cold sweat however is the conversion price for these airliners which for the 757 is all over the map. Boeing quotes a price of $8 million to convert a 757 while non-aligned independent houses quote between $5 million and $6 million. For Airbus widebodies to become profitable transport haulers the conversion costs should be no more than $10 million. $25 million for the be case said Didier Lenormand director of product marketing for Airbus. Both Boeing and Airbus believe on their suppliers to do most of the comprehend fight involved in cargo conversions. EFW is the designated conversion accommodate for Airbus. Boeing closed its Commercial Modification bear on in Wichita. Kan. in 2001 but the Boeing Wichita Development and Modification bear on comfort is in operation and can perform commercial bring home the bacon. Boeing's alliance partners are Aeronavali. Goodrich Aviation Technical Services. InterContinental Aircraft Services in Taiwan. Israel Aircraft Industries/ Bedek. Singapore Technologies Aerospace. ST Mobile Aerospace and Taikoo (Xiamen) Aircraft Engineering Co. (TAECO) in China. Smaller regional aircraft can be had for a bargain as well. Some 10- to 15-year-old. 30- to 34-passenger turboprop regional aircraft such as the Embraer Brasilia and Saab 340 are selling for $1.5 to $2 million. (See related bind on p. 34). "There is a very clear write that the cargo conversion business is returning," said David Arzi command manager of Bedek Aviation Group which enjoys its largest accumulate of conversion orders ever. The lack of new aircraft orders and reasonable prices for older equipment ordain serve as "a catalyst" to deepen the cargo conversion of older aircraft said Arzi who is not alone in his thinking. "The freighter modification programs are achieving an increasing market share," agreed Aeronavali Commercial Director Gianni Tritto whose affiliate has converted DC-10s. MD-11s. 767s and ATR 72s. "The air cargo market is very cyclical with cycles alternating every six to eight years." Several months ago. Bedek signed contracts with Boeing that enabled them to register into two study programs. One dealt with the conversion of 737-300s and -400s the other for 767-200s and -300s. In addition. Boeing has contracted with Bedek and ST Mobile Aerospace to alter 34 757s formerly owned by British Airways. A low-cost high-quality alternative. Bedek is equipped to handle the projected growth of the conversion business. The company's 157,000-sq.-meter facility at Ben-Gurion International Airport in Israel includes three widebody hangars that can work on four 747s simultaneously. A Cyclical Business The climate now may be better for cargo converters and operators but the business always ordain be cyclical. The first gesticulate of cargo conversions began in 1991-1992 when a turn of 747-200s came on the market. The availability of these early jumbos allowed Atlas Airlines to change state the world's largest operator.
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