With the official launch of the 777-8 Freighter confirmed today with the first order from Qatar Airways, it marks the start of Boeing’s renewal of its full-freighter portfolio. AirInsight talked to Tom Sanderson, Director of Product Marketing of Boeing Commercial Airplanes, to discuss its freighter position and the cargo market. 777-8 Freighter launch kicks off Boeing's portfolio update. It was Chief Financial Officer Brian West who during Boeing’s 2021 results webcast on January 26 mentioned that the freighter version of the X is now being offered to customers. That was one day after Reuters reported that Qatar Airways is close to signing an order for fifty 777X Freighters (including options), which happened on January 31 during that state visit of the Emir of Qatar to Washington. Qatar Airways has been in pole position to become the launch airline of the 777X Freighter, especially since its relationship with Airbus has hit rock-bottom of the A350 issues and an order for the A350 Freighter is unimaginable right now. The 777X Freighter has been on the table for some time and was expected to be launched during last November’s Dubai Airshow, but it wasn’t. As Ihssane Mounir, Senior Vice President of Commercial Sales and Marketing said just before the show, Boeing wasn’t ready yet to launch the freighter as it was still reviewing the specifications. Sanderson confirmed this later during the show. As the technical specifications confirm the 777-8 Freighter is sized between the -8 and the 777-9. At 112.3 tons, it has a higher payload capacity than the 102 tons of the current 777F, which is crucial if it wants to meet or even exceed the 109 tons available on the A350F. Tom Sanderson wasn’t willing last week to share the specs of the freighter: “Since the 777-8 will at this point follow after the freighter, you can’t say it is based on the -8. I can’t say it will have its technical specs because we haven’t launched yet. A freighter has always been part of the family plan, but we aren’t in a position to announce a launch customer yet.” Although Brian West only last week confirmed that the 777X freighter is being offered, Mounir said in Dubai that there have been quite a few customer discussions on the type in the past few months. Sanderson: “Customer discussions have to run their course before we get to launch. We can’t disclose details of that, but between Dubai and whenever we launch, there will have been more customer discussions”, Sanderson said last Thursday during an online call. The first step in the renewal program With the launch of the 777-8 freighter, Boeing secures the future of the 777F program that itself is based on the 777-200LR. Since the launch in 2005, 288 777Fs have been sold, including the four to China Airlines announced last week. Half of all 84 full freighter sales in 2021 were 777Fs. The 777F/777XF sit in the market segment of new large freighter widebodies, which Boeing projects to include 450 aircraft until 2040. The Commercial Market Outlook also includes 440 new medium-sized widebodies the size of the 767-300F. Since the launch in 1995, the -300F has won 370 orders and commitments, including the December deal from UPS for nineteen aircraft. But as the launch year indicates, the 767 is getting of age. Actually, it has only five years of life left in its current version, as from January 1, 2028, the new ICAO emission rules come into effect for new aircraft designs from 2020 and all in-production aircraft from 2023. As ICAO said in 2017 when the rules were announced: “Those in-production aircraft which by 2028 do not meet the standard will no longer be able to be produced unless their designs are sufficiently modified.” Boeing has a range of options on how to update the aging 767 and make it compatible with the 2028 emissions rules but hasn't decided yet. (DHL) So there is work to do to bring the 767 up to date. Calhoun said in July and Mounir in Dubai that Boeing could seek an exemption to the rules, although their remarks seemed more directed on buying time to launch the 777-8 Freighter. But it definitely also applies to the 767F, which would benefit from a delay of the implementation of the 2028 rules by requesting an exemption. Plan B, said Mounir, is re-engining the 767, a plan that has been on the table since 2019. Back then, the General Electric GEnx was the favorite candidate to replace the current GE CF6s or Pratt & Whitney PW4000s. The plan could include fitting new engines to the longer 767-400 and offering that as the updated version. As its market forecast indicates, Boeing doesn’t want to lose its position in the medium-sized freighter market with potentially 450 sales: “Absolutely, that’s an important part of the market. The mid-size freighter space will continue to be important, so we will protect it,” says Sanderson. How Boeing plans to do this hasn’t been decided: “We have a range of options available. You alluded to some of them, but there are others. We are not at a point yet to make a decision as to which option we’ll go for. You indicated to the timeline, we are well aware, we have time to make the choice, but we haven’t chosen from our range of options yet.” Requesting an exemption is within that options, confirms Sanderson. “We are still talking to customers about what is the best way to address this market. (…) When we have to decide obviously depends on which option we will take. The longer (a solution) takes, the sooner you have to decide. There is a point in time in the future when we need to decide how we are going to address the mid-sized freighter space, but we haven’t reached that, so that’s why you haven’t seen us commit yet.” Sanderson isn’t sure if the forthcoming emission rules are behind the recent order spree for 767Fs and 777Fs, like that of UPS. “I can’t speculate about UPS’ internal thoughts, but there is certainly market demand. They are effectively running 110 percent of their pre-Covid capacity, with incredible yields. So it absolutely makes sense for them to add capacity to capitalize on that demand. Right now, the easiest and most efficient way to add capacity is to acquire as many freighters as they can.” New freighters versus conversions We are talking new widebody freighters until now, but there is a growing demand and offering of secondhand, former passenger aircraft for which conversion programs are available with numerous specialists. Boeing Global Services offers the Boeing Converted Freighter (BCF) program for the 767-300, which has received 101 orders. The 50th 767-300BCF was delivered to LATAM last December. Boeing sees demand for 500 widebody conversions until 2040 and is responding by adding conversion capacity, but other players in that market like Israel Aerospace Industries (IAI) have also captured a significant slice of the cake. It has been doing 767 conversions for some years and is currently working on its first 777-300ERSF. IAI has partnered with Sharp Technics in South Korea and Etihad Engineering in Abu Dhabi for more 777 conversions, gradually bringing capacity to twenty aircraft per year. Aren’t these conversions eating into Boeing’s market for new aircraft? Tom Sanderson doesn’t think so: “Where dedicated payload and weight is concerned, you are best served with a production freighter that has that structural modification engineering built in it from its conception. The conversion freighters are excellent at lower density, so this is why you see the conversion 767s in strong use with express carriers. The production freighter has more payload capacity, the conversion freighter is a different economic profile that has essentially the same volume, so it is favored by those carriers running lower density that need the volume to serve that payload.” He continues: “There is some overlap, but the advantage of being able to offer them both is we can offer whatever makes more sense. And at the moment where demand is so high, the ability to provide both, provides additional ways of adding capacity into the system when the customers want is.” Airbus is also offering conversions of its A330-200s and -300s, whose popularity as a passenger-to-freighter are growing. But the European airframer is also strongly believing that production freighters are the most efficient on all fronts. Especially if they, like the new A350F, are designed to meet the requirements of both the high volumes of the express carriers and the high payload capacity of the freight forwarders. Narrowbodies The new versus converted freighters isn’t an issue in the narrowbody segment. This is entirely occupied by conversions of the Boeing 737-700s and 800s and the Airbus A320ceo/A321ceo. Boeing is projecting demand for 1.200 narrowbody conversions until 2040. The 737BCF program already has reached 227 orders and delivered 71 aircraft until November 1, 2021. That there are no new narrowbody freighters available has partly to do with the residual value of older aircraft, says Tom Sanderson: “There is typically a higher number of standard-body aircraft in the fleet. So feedstock is higher, but the major player here is: single-aisle aircraft are typically looking more at volume than at payload. The dedicated engineering that we put into a production freighter significantly to improve their payload capacity, is not as important in a narrowbody. The performance of a standard-body conversion is very competitive. Economically, to take the residual life of a passenger aircraft and turn it into a freighter makes a lot of economic sense.” The Boeing Converted Freighter program of the 737-700 and -800 has until now attracted 227 orders. (Boeing) Embraer said at the Dubai Airshow that it will likely launch a converted freighter program for their E1-jets and isn’t ruling out launching a dedicated freighter based on the E2-series sometime in the future. Airbus has no plans to offer a Neo-freighter, so what about Boeing? Will there ever be a MAX freighter? “I can’t speculate to the future and would never say never, but our current strategy in the standard-body segment is that conversion is the right solution for the market”, says Tom Sanderson. “If our customers or market forces indicate something differently, absolutely that’s something we will look at. Just because it may make sense for Embraer, that doesn’t necessarily mean that it makes sense for us to do it.” Saying goodbye to the 747-8F Getting back to the 777X Freighter: it will replace the 747-8F, of which the production will end coming November after 107 orders. Although the 747 will be available for many years to come, some regret Boeing’s decision to end production of such a highly capable big freighter. But as Sanderson says: “The market has very clearly indicated they prefer twin aisles over quads in almost all situations. The advantage of the 747-class freighter is in some cases the unique loading with the nose door and in some cases the very high payload capacity. There are a number of aircraft that can meet that requirement for decades to come, including the 747 fleet. We will definitely keep an eye on if there is a market requirement for something different to specifically address those key points where the 747 stands out, but our backbone, large freighter going forward is to be the triple seven. Which in terms of payload efficiency and range can do virtually everything that needs to be done.” After delivery of the last 747-8F coming November, Boeing's biggest freighter will be the 777XF. (Boeing) A market that Boeing has no intention to enter is that of oversized cargo. Airbus said on January 25 that it has started offering two Beluga STs to this market, growing this to five aircraft in 2024 and even establishing a dedicated airline to operate oversized cargo. Boeing has its Dreamlifters that ferry segments of the 787, but Sanderson says they will be kept exclusively for Boeing’s own operations: “There absolutely is a niche market for outsized cargo. The Belugas serve the same purpose as our Dreamlifters. They have unusually low payload capabilities because they favor volume. It is an incredibly small niche, so at the moment, Boeing is using Dreamlifters for our own operations. We totally understand that Airbus has a capability and sees value in offering that capability.” Cargo market About one thing Boeing (and Airbus too) is very clear: pent-up demand for full and conversion freighters isn’t a one-off trend. Yes, the Covid crisis has caused a sharp reduction in available belly-hold capacity on passenger aircraft as their long-haul networks were hit by the pandemic. International capacity is still eleven percent down but should slowly recover and be fully back to 2019 levels in 2024. But demand for full freighters is sustained and largely driven by shipping rates and the surge in e-commerce, a trend seen already before the pandemic. Boeing expects world air cargo growth in revenues tons kilometers (RTK) to double to four percent until 2040, notably between East Asia and North America, East Asia and Europe, and Intra East Asia and Oceania. This needs support by growing the freighter fleet by 2.6 percent, or 2.600 new and converted freighters. What has made full freighters very popular in the last two years is that they have been able to take over part of the demand from other transportation modes like rail and notably shipping after they ran into capacity issues of their own. “Freighters play a key role in that overall cargo network. Less than eight percent of all airframes flying are dedicated freighters but they are carrying more than half of all the air freight”, explains Sanderson. Capacity in RTKs collapsed in 2020, recovered to +49 percent in April 2021, and stabilized to on average nine percent. Graphic showing how rates for sea shipping have increased six times since mid-2020, whereas those for air cargo 'only' doubled. This gives air cargo an advantage that is expected to last for some time. (Boeing) Total revenues of the air cargo markets are valued at $123.8 billion, mostly on dedicated freighters from express carriers, all-cargo companies, combination carriers that offer both belly-hold and cargo, and from passenger belly-hold only. Revenues are up 85 percent compared to 2019 levels, but as capacity dropped, yields have exploded and are also up 85 percent in dollars per ton/kilometer. One reason is that air cargo is more popular is that pricing for sea shipping has increased six times, whereas air shipping rates grew by “only’ two percent, making air shipping more competitive. “Air cargo is now between three and sevens times more expensive than sea shipping compared to ten to twenty times pre-pandemic. How long that trend can continue depends on how much air cargo capacity we can add to the system and how well the shipping companies can recover their capability. With some consolidation on sea shipping going on, we may not revert to the pre-pandemic ratio between air freight and sea freight for quite some time”, says Sanderson. Add to that the preference of express carriers to respond with nimble transport modes to meet e-commerce demand, and that’s good news for the airframers that offer full freighter aircraft, concludes Tom Sanderson: “All of the freighters are flying as much as they can and being packed as full as they can be, and still not keeping up with market demand yet. That’s why the demand for new freighters and conversions is so strong.”
