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February 26, 2024
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News:

With passenger traffic down during the current global pandemic, a lot of attention has turned to the freighter market. This is an area in which Boeing holds a massive advantage in market share vis-à-vis Airbus, with about 88% of the market. The freighter market, while much smaller than the passenger aircraft market, is still substantial, and airlines will be looking to replace their fleets in the future as their existing freighters exit service.

Airbus has gained a lead over Boeing in narrow-body aircraft and has matched Boeing in new orders for wide-body passenger aircraft. But the freighter market is where Boeing maintains a lopsided market share over Airbus. Airbus knows this well and is working on strategies to close the gap, including conversion programs for narrow-body freighters. Boeing wants to defend this market. The question is now how and when rather than if.

Airbus needs to produce the A330neo freighter and price it to sell in the market. A freighter variant could provide incremental program revenues during a period in which wide-body orders are down and expected to remain low over the next 2-3 years. Boeing could similarly offer a freighter version of the 777X, which Qatar sought to order in 2019.

Analysis:

The freighter market is bifurcated into companies that utilize new aircraft and carefully manage their carbon footprints globally, and those who utilize older used aircraft converted to cargo operations. The new aircraft users are typically the package freight operators like FedEx, UPS, and DHL as well as major airlines, such as Qatar, who are attempting to lower their carbon footprint through the use of more efficient aircraft.

Today, many countries are imposing new regulations regarding introducing used aircraft into their markets, both for environmental and safety reasons. As a result, several countries now limit aircraft over 15 or 20 years of age from entering the fleet. This is weakening the economics for cargo conversion programs, as aircraft to act as feedstock need to be younger and more expensive for a conversion program to economically make sense.

The result will likely be a resurgence in the new cargo aircraft market, where current models with fuel-efficient engines can operate over a 10 or 20 year expected life to generate positive returns and maintain residual value when initial operators replace them with newer models. Boeing forecasts the market for new freighters to be 1,040 new aircraft over the next 20 years, and 1,780 converted freighters over the same period. Between aircraft, spares, and services, cargo will be a $500 billion-plus market segment to the OEMs over the next two decades.

Insight:

Boeing’s market share in the freighter market is dominant, with about 88% of the freighter aircraft fleet and a market share than annually generates between 85-90% of new orders. Both manufacturers are aware of the situation and developing strategies to gain and preserve market share, respectively. This small segment could produce some interesting future battles.

Will Airbus develop an A330neo freighter based on its existing model, or should they develop a full cargo door A350F that would provide superior economics and carbon footprint but at a higher cost? Will Boeing decide on the appropriate timing for a 777X freighter model to counter potential efforts by Airbus with a larger aircraft? How large of an investment will Airbus be willing to make to gain market share in the cargo market?

The A380 appears to be a prime candidate for a conversion program, as many airlines have retired the aircraft from passenger services and taken write-downs on residual values. If the feedstock becomes inexpensive, as we expect, the A380 could become an interesting option as a freighter conversion program, including cargo doors and use of the upper deck.

Lufthansa Technik is doing a partial freighter conversion for some A380s today, but for main deck only cargo that over the long-term does not appear as cost-effective as a full conversion program would be. Loading cargo to the second deck, high above the ground, is also a difficulty to be overcome. A full conversion would be extensive, and require some additional ground logistics, but would have a strong cargo capacity and range with good economics.

The $500 billion market segment for new aircraft, conversions, and services is currently dominated by Boeing. In the wake of the 737MAX crisis compounded by the pandemic, there is an opportunity for Airbus to take advantage of a competitor’s relative weakness. The question now is whether freighters will become a strategic priority for Airbus, and their willingness to make a long-term commitment to that market segment. An interesting new battle could be brewing – watch for future developments.



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President AirInsight Group LLC

News:

With passenger traffic down during the current global pandemic, a lot of attention has turned to the freighter market. This is an area in which Boeing holds a massive advantage in market share vis-à-vis Airbus, with about 88% of the market. The freighter market, while much smaller than the passenger aircraft market, is still substantial, and airlines will be looking to replace their fleets in the future as their existing freighters exit service.

Airbus has gained a lead over Boeing in narrow-body aircraft and has matched Boeing in new orders for wide-body passenger aircraft. But the freighter market is where Boeing maintains a very lopsided market share over Airbus. Airbus knows this well and is working on strategies to close the gap, including conversion programs for narrow-body freighters. Boeing wants to defend this market. The question is now how and when rather than if.

Airbus needs to produce the A330neo freighter and price it to sell in the market. A freighter variant could provide incremental program revenues during a period in which wide-body orders are down and expected to remain low over the next 2-3 years. Boeing could similarly offer a freighter version of the 777X, which Qatar sought to order in 2019.


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