Retirements and e-commerce set to tighten freighter market

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“Inconvenient retirements” of aircraft could lead to a tightening of the narrowbody freighter market, says Gediminas Ziemelis founder and current chairman of the board of Avia Solutions Group, a provider of ACMI (Aircraft, Crew, Maintenance, and Insurance) services.

As the freighter market has begun to stabilize after the return of passenger aircraft belly capacity, the drop in demand for narrowbody freighters and the corresponding decrease in supply could result in capacity shortcomings in the near future. There has also been a fall in passenger-to-freighter conversions, Ziemelis states.

Narrowbody freighters are vital to e-commerce operations and, with the elimination of belly capacity during the pandemic, as well as the growth of e-commerce, many aircraft owners and operators turned to passenger-to-freighter conversions as a potential way to increase their revenue.

As a result, conversions more than tripled from 61 in 2019 to about 185 in 2023, with the 737-800 freighter type seeing the most growth, with many lessors converting aircraft speculatively because they had no use for them in the passenger market at the time.

While the narrowbody conversion market saw tremendous growth during the first two years of the pandemic, deliveries of converted freighters have slowed now that passenger flights have resumed and even overtaken 2019 levels. Converters reduced their delivery schedules in 2024, while others have voiced concerns about challenges facing maintenance, repair and overhaul facilities, including supply-chain shortages and decreasing demand.

Narrowbody freighters coming off conversion lines have also headed into storage, leading to concerns about overcapacity, according to Oliver Wyman.

However, the rise of e-commerce has confounded traditional thinking of the freighter market. While growth of air cargo has traditionally been closely linked to growth in GDP, long-term air cargo traffic will continue to outpace global trade growth, according to Boeing’s most recent Commercial Market Outlook, published in June 2023.

E-commerce has doubled its share of retail sales over the last five years and could account for 23% by 2026, with a demonstrable impact on narrowbody freighter demand, says Ziemelis, quoting the Commercial Market Outlook by plane manufacturer, Boeing.

Boeing’s also says that new express networks will continue to support the growth in e-commerce, with a forecasted growth of 58% in express fleets over the next 20 years, while specific rates of growth will change per region with new opportunities being created around e-commerce platforms. In the narrowbody market, for example, the 737-800 freighter has already been adopted and utilized by the likes of Amazon, DHL, Mercado Libre and JD.com for their own networks.

However, an increase in retirements is expected in the next few years for many of the aircraft in the express freighter fleet. While e-commerce has relied upon narrowbody workhorses like the 737-400F and 757-200F, both types are nearing their inevitable retirements.

In fact, Boeing estimates that there are more than 700 30-year-old narrowbody freighters still in service.

Ultimately, airlines will be facing a shortage of converted narrowbody freighters as retirements continue. Combined with the decrease in conversions in the long-term outlook, there is an impending shortfall of freighter capacity in this segment.