Bloomberg put out a story that UPS and Amazon are encouraging Airbus to consider an A330-800F.  This is a very important link in the A330neo story so far.

The A330-800 has no current orders.  This is a situation Airbus cannot and will not tolerate – they must move forward with alacrity.  Boeing’s freighter business has picked up.  IATA data shows that freighter traffic is coming back.  The rise in e-commerce is a big part of that story.

Consequently, when we hear that Amazon is looking for a solution, everyone sits up and pays attention.  Amazon has been building its own freighter using pre-owned 767s that are converted to freighters.  As the 767 retires from passenger service, this pool of aircraft becomes available as a low-cost freighter solution.

But fuel prices are rising again.  Older aircraft burn more fuel and require more maintenance.  They may be cheaper than new, but nothings free.  Older aircraft are priced accordingly.  There are no “steals” in this business.

Looking at new aircraft is a logical option.  Most especially when the new aircraft needs orders. There is a confluence of interests here for both Amazon and Airbus.

Amazon is a bit different than UPS, a company with a long history of air freight and running a substantial fleet.  UPS knows the business well and has seen its own business grow on the back of e-commerce.  If even UPS is talking to Airbus, something’s up. UPS has been buying Boeing freighters of late. The lack of any news from FedEx does not mean they aren’t also sniffing.

To get an idea of just how big this market is, consider there were 803 freighters listed as active as of 3Q17 in the United States.

Breaking down that into just the widebody freighters we see the following.

Ignoring the turboprop freighter business, this what the looked like, by operator, in 3Q17.  We highlighted the two operators from the Bloomberg story.

What does the data tell us? The is aging, especially the DC/MD10, A300/310 and 767.  There are 232 freighters of 20 or more years old among these models. Since the USA represents 43% of the freighter market, the OEMs are going to focus very closely on the decisions made by USA operators.  China may be important, but is not yet the key influencer.  We also note that when it comes to freighters, the largest models don’t make the optimal freighter option.  For example, the 777F is based on the -200 and the is also based on the -200.

We asked Airbus about the Bloomberg story, and their response was: “We are always looking at new concepts based on our existing passenger platforms; this is an integral part of our design philosophy. Also, is our strategy to study which concepts would make good freighters”. A predictable response under the circumstances.

Amazon is, in our view, the more interesting potential customer. The Amazon Air is operated by Atlas Air.  One move Amazon could make is to simply buy that company.  But that does not necessarily grow their fleet capacity.  Amazon wants to vertically integrate freight into its business.  is also developing drone deliveries. Amazon will want more aircraft and, given the fleet out there, perhaps a new model works better than conversions?

The A330neo platform offers what any operator wants: good plus a reliable airframe from a reputable OEM.  What Airbus wants now is critical mass and Amazon is that rare breed of customer that can pull this off with one order.

The Bloomberg story indicates big things are happening.  Amazon may be about to disrupt another industry.

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