The mid-sized air cargo market has been dominated in recent years by the Boeing 767, whether factory-build freighters (still in production for FedEx) or converted freighters (for which Amazon Prime Air is a key growth customer). The 767-300ER has become the conversion feedstock of choice, and Amazon has dealt with Delta and WestJet for additional aircraft when they exit service.
Amazon is a key operator of 767 P2F conversions and expects to have 85 aircraft operating in 2022, with potential growth to 200 by 2030. The question is whether there are enough 767-300ERs available as feedstock to keep the conversion programs busy once the currently scheduled conversions are completed? While factory-built freighters are still being delivered to FedEx and UPS, not all operators can afford purpose-built new aircraft and prefer conversions.
The Jet Information Services database shows that the majority of 767-300ER aircraft in the sweet spot of 10-15 years of service are now limited in terms of numbers, as production stopped in 2014. As a result, the roster of candidate airframes forces one of the following; movement to older airframes, which for countries is not possible due to age restrictions for used aircraft, living with a conversion of an older airframe that will likely require additional maintenance costs during its service life, or choosing another aircraft type. The feedstock of optimally aged Boeing 767-300ER airplanes for the conversion process is now quite small, with some aircraft still in service with airlines already committed for conversion when retired from passenger service over the next two years, as shown in the table below. The area shaded in blue represents the optimal feedstock for conversions today, while the area in green represents the optimal feedstock over the next five years. The number of 767-300ERs in those categories is dwindling.
What are the alternatives to the 767-300ER? The slightly larger Airbus A330-300 is the logical contender for the freighter market, as is the much larger 777-300. These alternative aircraft are becoming more available as the A330neo has entered the market as a potential replacement for older A330s and the 777X is scheduled to enter service in 2023 as a replacement for older 777s. With a significant number of aircraft currently grounded due to the pandemic, some of those aircraft may not return to passenger service in the near term.
IAI, which is a major player in the 767-300ER conversion market, is considering a conversion program for the A330-300 to join their existing Boeing 777-300ER conversion program. That would provide them a going forward candidate in the mid-sized freighter conversion market as well as one in the large freighter conversion market.
Airbus has partnered with ST Aerospace and EFW, Elbe Flugzeugwerke, where A321, A330-200, and A330-300 cargo conversions are performed. Both converters are expecting an increase in cargo conversions, with CDB in China as a key customer for EFW. Their programs are booked to capacity through 2023.
There are 771 A330-300s that have been delivered by Airbus through 3Q20. The following table shows a breakdown of those in service, currently parked, stored, and removed as of yearend 2020, per the Jet Inventory Services database. Aircraft that are parked are temporarily out of service, while those stored have been out of service for a longer period. Aircraft noted as removed may have been cannibalized for parts or are not going to return to service.
The Jet Information Services database shows 87 A330-300s built from 2006-2011 are parked or stored and could be potential candidates for P2F conversion. This provides an adequate feedstock source to cover Amazon’s (for example) planned growth once the 767-300ER feedstock is depleted. With a later production run than the 767-300ER, the A330s produced between 2015-2020 are candidates for conversion in another 5-10 years, ensuring longer availability of conversion feedstock.
The A330-300 was offered with engines from each of the major manufacturers, with Rolls-Royce taking the largest share of orders, followed by General Electric and Pratt & Whitney, as shown in the chart below:
It is likely, therefore, that the Rolls-Royce models will likely retain their value best as they are both more popular and more fungible than the GE or P&W versions.
Some relatively young A330-300s are in storage, including five with an average age of 3.8 years from South African Airways, two aircraft that average seven years old from CEBU Pacific, and two that average eight years old from Avianca. It appears that plenty of potential feedstock is available if it could be obtained at the right price.
Typically, feedstock for a cargo conversion program would be at the 10-15-year point in the life of an airframe. Looking at aircraft built between 2006-2011, there are 203 A3330-300s that were built that are of prime age for conversion, with 82 of those aircraft currently parked due to the pandemic. This would likely be a good time to strike deals with operators and owners to obtain feedstock for future conversions at reasonable rates. It appears that the A330-300 is well-positioned to become the future choice in the mid-sized air cargo market, providing increased competition for Boeing.