The changing shape of the air cargo market

The early, and somewhat unexpected, success of the Airbus A380F freighter
>program could prompt a major rethinking of the way the cargo aircraft
>market, estimated to be worth around $ 130 billion over the next 20 years,
>will develop.
>There is one area where Airbus and Boeing broadly agree: At current rates
>of growth, the world will need around 725 new all-cargo aircraft by 2023.
>Both companies also agree that widebody aircraft will represent about 60%
>of the all-freighter fleet by 2022, and only disagree slightly on how this
>number will be reached — with Boeing suggesting more
>passenger-to-freighter conversions, rather than all-new cargo aircraft
>sales.
>
>But the emergence of an aircraft with a significantly larger payload
>capacity than is currently available — although the proposed Boeing 747
>Advanced Freighter would be a direct competitor — could radically change
>the dynamics at the top end of the market. The development of the A380F and
>other new freighters able to carry well over 100 tonnes could cut deep
>swathes into the market for intermediate-sized cargo aircraft.
>
> A shift to larger aircraft
>One early indication that the new aircraft could radically alter
>long-established forecasts might be found in the January 2005 announcement
>that UPS would buy 10 A380Fs — but at the cost of cutting its 90-aircraft
>order of A300-600Fs to 53. The UPS A380F freighters will be used mainly on
>its routes to China, where business is brisk and slots are limited: In the
>quarter ended September 30, 2004, UPS recorded a 29% rise in shipments out
>of Asia compared with the previous year.
>
>This strategy for replacing large fleets of medium-sized widebody
>freighters with fewer, but bigger and newer, types was heralded in 2004.
>According to Frederick Smith, chairman of Federal Express and another A380F
>customer: "Rather than flying multiple daily MD-11 aircraft between FedEx
>Express hubs in Europe, North America, and Asia, FedEx can operate a single
>A380 aircraft on those routes."
>
>The question of the impact of larger aircraft on the overall cargo market
>is pertinent for two reasons. There is an urgent requirement to replace
>older generations of freighter types such as the Boeing 707, McDonnell
>Douglas DC-8, and Boeing 747-100 as they reach the end of their economic
>life, and this has meant many cargo airlines are currently deciding their
>future aircraft purchase strategies. The decision has been made even more
>pressing by the current dramatic growth in the Asia air freight sector.
>Overall freight traffic growth on transpacific routes was more than 10%
>last year.
>
>The movement toward replacing current aircraft types with something larger
>has been evident for some time. Narrow-body Boeing 707s and McDonnell
>Douglas DC-8s are being replaced by widebody twins such as the A300/A310
>and Boeing 767. Older 747-100 freighters and DC-10s are giving way to
>747-400s, MD-11s, and now the A380F.
>
>This growing requirement for big new freighters has been good news for
>Boeing: At the beginning of 2005 Boeing still had 23 outstanding orders for
>its new-build 747F line, from a total order book of 126. Big business for
>Boeing
>
>The A380F is not the only new high-capacity freighter on the market. Last
>November, Boeing announced the launch of its 777 Freighter, with a revenue
>payload capability of 101 tonnes and able to accommodate 27 standard
>pallets (244 X 318 cm) on its main deck and 10 in its lower cargo hold. It
>will be able to fly 9,630 km with a full payload.
>
>The company is also in talks with customers on the possible launch of a 747
>Advanced Freighter, featuring a stretched 747 fuselage, more composite
>parts, a redesigned wing, new engines, an extended range, and a payload of
>134 tonnes.
>
>If all these huge new freighters do make it to market they will provide
>substantial increases in capacity, which could more than match the
>projected increase in demand for new air freight services, currently
>estimated at 6% a year.
>
>Alongside these new high-capacity dedicated freighters, the Boeing 747-400
>passenger-to-freighter conversion business is also starting to gather
>steam. Early Boeing 747-100Fs and 200Fs are coming to the end of their
>economic lives or are failing to meet the growing list of environmental
>restrictions at airports around the world, especially in Europe. There now
>exists a potential market for 500 747-400 conversions; Boeing has already
>received over 20 orders for this work, named B747-400SF (Special
>Freighter), which it has subcontracted to Taikoo (Xiamen) Aircraft
>Engineering, or TAECO.
>
>The Special Freighter will have an estimated capacity of 113,490 kg and a
>range of 7,600 km. So far, Cathay Pacific Airways, Korean Air Lines, and
>All Nippon Airlines have all placed orders for them. Cathay Pacific will
>receive the first of the type in December this year.
>
>Israel's Bedek IAI is also offering 747-400 freighter conversions — and
>with sudden competition for high-capacity freighters driving costs down to
>less than $ 60 million for a 747-400 conversion, cargo airlines could well
>be tempted to trade up beyond their initial replacement plans — especially
>as business is currently so buoyant. Capacity on the rise
>
>All of this points to a sudden surge in capacity, which is fine when the
>market is generally healthy, as now, but could lead to damaging levels of
>overcapacity at some time in the near future. But whatever happens, air
>cargo aircraft are going to grow substantially in size.
>
>According to Boeing: "Widebody freighters, currently 44% of the fleet,
>will. . . end the period (2023) making up 60% of the fleet. The number of
>widebody airplanes will nearly triple. The shift toward widebody freighters
>will result in a fleet-wide increase in average freighter airplane payload.
>In many cases, operators such as express carriers prefer medium widebodies
>as a replacement for retiring standard-body freighters. Thus, the share of
>standard-body freighters will decrease from 56% to 40% over the next two
>decades."
>
>The fastest growing market of all for air freight is in IT goods from Asia
>to Europe and North America, representing 40% of the total shipments by
>tonnage and nearly 75% by value, according to Airbus. These new
>high-capacity freighters will open up new services on Pacific routes and
>consolidate existing business. More cities will be joined by "next day"
>freight services, and door-to-door delivery times will be substantially
>reduced.
>
>The next few months will be an important indication of which way the air
>cargo market is likely to head. If Airbus increases its A380F sales
>figures, this could indicate a movement toward further consolidation of the
>fleet at the expense of intermediate aircraft, and, ironically, a further
>positive indication to Boeing of the growing market for high-capacity cargo
>types. CONTRASTING VIEWS OF THE 2023 WORLD FREIGHTER FLEET
>
>Note: This table may be divided and additional information on a particular
>entry may appear on more than one screen2004-2023Less than 50 tonnes,40-65
>tonnes,Cargo fleetTotal numberstandard bodymedium
>widebodyBoeing3,4561,3831,002Less than 30 tonnes,30-60 tonnes,small jet
>freightersregional freighters(mainly U.S.(707F,
>DC-8F,narrowbodies)A300-600F)Airbus3,6169731,2722004-2023More thanCargo
>fleet65 tonnes, largeBoeing1,07130-80 tonnes,More than 80 tonnes,long-range
>freighterslarge freighters(Combis, 767-300F,(MD-11, 747,
>A380)DC-10-30/40)Airbus375996 FREIGHTER AIRCRAFT DELIVERIES AND VALUE
>ESTIMATES2004-2023 deliveriesTotal numberNew aircraftValue, $
>billionsBoeing2,940724139Airbus3,139727129 IATA INTERNATIONAL CARGO
>FORECASTS,* 2004-2008Average annualRoute area2004 growthgrowth rate
>2004-2008North
>Atlantic8.5%4.8%Transpacific10.3%4.6%Europe-Asia/Pacific11.4%7.0%Europe-Middle
>East7.8%6.1%Europe-Africa7.4%5.6%Within Asia/Pacific12.0%6.1%Within
>Europe7.8%5.7%Within Latin America/Caribbean4.4%3.7%Total
>international10.1%6.0%
>
>* Freight tonnes.
>
>THE FIVE FASTEST GROWING FREIGHT MARKETS OVER 2004-2008Freight in
>2003,Average annualthousands of tonnesgrowth rate
>2004-2008China-Netherlands36.923.0%India-Sri
>Lanka11.221.7%Philippines-Thailand26.218.2%China-Malaysia35.016.2%Austria-China5.114.6%
>Source: Freight Forecast 2004-2008, IATA. LARGE FREIGHTER
>COMPARISONSTypeRange, kmPayload,
>kgA38010,400150,000747-400F8,149105,000An-124-1004,500120,000MD-11F7,40091,670777F9,630105,000
>
>Source: Jane's Information Group and Air Charter International. A380F
>CUSTOMERSOperatorNumberOptionsDeliveryEmirates 2102008FedEx10202008ILFC 5
>02008UPS10102009