Investment from oil and gas majors needed for aviation to hit green goals
Investments from oil and gas majors are “needed big time” in order to reach the ...
AMZN: APPEAL UPDATEDSV: PRESSURE BUILDS AAPL: OPENAI FUNDING INTERESTCHRW: ANOTHER INSIDER CASHES INHLAG: GRI DISCLOSUREMAERSK: HOVERING AROUND FOUR-MONTH LOWSTSLA: CHINA COMPETITIONDHL: BOLT-ON DEAL TALKAMZN: NEW ZEALAND PROJECTDHL: SURCHARGE RISKKNIN: LEGAL RISKF: 'DEI' HURDLESPLD: RATING UPDATEXOM: DISPOSALS
AMZN: APPEAL UPDATEDSV: PRESSURE BUILDS AAPL: OPENAI FUNDING INTERESTCHRW: ANOTHER INSIDER CASHES INHLAG: GRI DISCLOSUREMAERSK: HOVERING AROUND FOUR-MONTH LOWSTSLA: CHINA COMPETITIONDHL: BOLT-ON DEAL TALKAMZN: NEW ZEALAND PROJECTDHL: SURCHARGE RISKKNIN: LEGAL RISKF: 'DEI' HURDLESPLD: RATING UPDATEXOM: DISPOSALS
The suggestion that B737-800 conversions are oversupplied has been confirmed by experts at Aeronautical Engineers AEI).
According to Robert Convey, the firm’s SVP, sales and marketing, the situation is “serious”, and compounded by a lack of demand for those freighters.
Over the past two years, industry analysts have been warning of a potential oversupply – reportedly, around 80 737-800s were converted last year, but Mr Convey thinks this figure is exaggerated.
“The numbers are closer to 45-50 a year, combined between AEI and Boeing,” he told The Loadstar.
Last year, AEI delivered 18 737-800SF freighters, five 737-400SFs, two MD-80SFs and three CRJ200 SFs – what it called a solid year – and its 2023 recap announcement in January referred to the narrowbody freighter market becoming overbuilt during the pandemic era.
The -800 still accounts for most deliveries this year, but AEI expects a moderation to accommodate current demand, said Mr Convey, and AEI estimates it would work on a dozen aircraft this year.
“ I think it will be until mid-or end of 2025 before we see a little bit of an uptick from that dozen,” he added.
And he reckons the market for -800s will be quiet for a period. AEI currently has just two aircraft being converted.
“We are a pretty lean company, and we have no debt. So we can weather storms like this quite easily; a dozen conversions for us will keep our electric bill and salaries paid,” he added.
Mr Convey has observed around 100 narrowbodies still parked. He says 757s are coming out of service in big numbers due to difficulties with engine supply, and 737-400s are getting too expensive to maintain.
“So, until those 100 or so aircraft get consumed or parted-out, there’s not going to be a lot of new conversions,” he said.
Further, he disagreed with the notion that 737-800 feedstock is plentiful. He noted: “There is not a lot of feedstock right now. Even the part-out market is having problems because they cannot buy aircraft. They cannot compete with the high prices the passenger market is paying.”
There is clear evidence that passenger operators are keeping their aircraft in service longer than planned, a situation exacerbated by delays in production and technical issues at airframe and engine OEMs.
“Its going to take several years for things to normalise, especially on the OEM side, and then demand will return. Thus, the availability of aircraft and engines will normalise at normal prices,” Mr Convey said.
Several -800 conversion lines have sprung up in recent years, including Boeing’s Gatwick facility. But, in Mr Convey’s opinion, any new narrowbody conversion lines announced recently will not be activated due to the oversupply and lack of demand.
“There’s talk about Boeing setting up in India, that is a disaster waiting to happen,” reckoned Mr Convey. “They will probably focus on their two or three main conversion centres, as will we.”
Meanwhile, AEI is considering introducing new freighter programmes for the 737-900 and the CRJ 900. Mr Convey said of the latter: “I think it will make a decent freighter, but it’s just a matter of timing.”
And looking ahead, Mr Convey remains hopeful for the narrowbody market. He said: “We will get back to a normal steady flow. This is a very cyclical business and when you throw a super event like Covid into a cyclical business, you get super highs – but you also get super lows.”
Listen to this clip from the recent Loadstar Podcast to hear Loadstar Publisher Alex Lennane discuss IATA’s CASS fail:
Comment on this article