Cargo Kings - Boeing Large Freighters
Special Column By Guest Author & Colleague, Chris Cook - Cargo Kings - Boeing Large Freighters
Analysis of the passenger-to-freighter 747-400 conversion market, 777F and 747-8F markets
Rising jet fuel prices and distress in the financial sector dampened world air cargo growth in 2007 and 2008. In spite of the severity of these and other near term challenges, over the next 20 years, world air cargo traffic will triple compared to current levels, and the number of airplanes in the freighter fleet will double; according to Boeing’s latest, in-depth and extensive World Air Cargo Forecast (WACF). With world air cargo traffic to expand at a predicted annual average rate of 5.8% over the next two decades, and thus tripling current traffic levels, the freighter market will be all too keen to lap up any freighter available to meet demand.
Boeing’s venerable 747 Freighter line-up is simply stupendous. With the highly-efficient, technologically advanced, ultra-capable new 747-8F leading the line-up, followed by the formidable 747-400ERF, 747-400F and 747-400BCF* (including -400SFs), Boeing is well positioned to seal the upper freighter market neatly with the most capable, efficient and modern freighters. The new 777F, which slots in just below the -400BCF in capacity, offers the next most logical complement in the freighter market and also happens to be the world’s longest range freighter airplane and offers the lowest trip cost of any large freighter.
“We know that one freighter won’t meet the needs of all carriers. With our team’s deep knowledge of the air cargo market and our experience in providing air cargo lift, Boeing is able to offer a complete line of freighters, production and conversion, to meet the broad and varied needs of the market,” comments Boeing.
Boeing’s large freighter aircraft are the industry leaders, and offer the highest load densities, best economics and best flexibility of any other competing freighters. However, with the 747 Freighter production switching to the new, phenomenal 747-8F, the 777F just starting to enter the market, and the 747-400BCF market growing due to -400 passenger airplanes becoming available shortly, which of these three airplanes will enjoy a bigger success in the large freighter market?
Image Courtesy Of Boeing
“Economic activity, as measure by world GDP, remains the primary driver for air cargo growth. World GDP grew 3.7% in 2007, following 3.9% growth in 2006,” says Boeing in the latest WACF. Over this time period, the 747-8F secured sizeable, significant orders, as did the 777F. “In the near term, the world economic outlook is increasingly gloomy as financial markets continue to suffer from a global liquidity crisis and loan defaults. A substantial recovery in economic activity is not expected before 2010,” Boeing highlights in the WACF.
Whilst indeed times are gloomy and the freighter market is taking a pounding, when the recovery begins and the up-swing kicks into full gear, the demand for the -8F will out-strip supply, as with the 777F.
Boeing defines a large freighter airplane as an airplane with a payload greater than 80,000kgs. Over the next two decades, the large freighter market will require 1,102 additional airplanes according to Boeing. Out of these 1,102 airplanes, 641 will be new-built freighters, and 461 will be converted freighters.
Clearly, out of the 641 new-built factory freighters, Boeing is aiming the 747-8F and 777F to soak up the majority of that market segment. Competition could surface from Airbus if the A350F is launched within this 20 year market forecast timeframe, or indeed if the A380F is revived. But, currently there’s no firm A350F offering, nor any A380F offering, so it’s predicted by sources close to the matter that the 747-8F and 777F will secure near 300 orders each in this segment. Boeing currently holds firm orders for 78 Boeing 747-8Fs and 73 Boeing 777Fs.
Boeing large freighters trounce Airbus’s shelved A380F:
Whilst the currently shelved Airbus A380Freighter indeed offers some compelling economics and significant cargo volume, the A380F in reality is quite impractical and clumsy. Both the 747-8F and 777F have the ability to interline with one another as both are able to accommodate the industry standard 3.1m(10ft) high pallets on the main deck. The A380F can only accommodate 2,44m (8ft) high pallets on its main deck and only 2.1m (7ft) high pallets on the upper-deck. Airbus argues that the A380F’s massive cargo volume space is an attractive feature of airplane, which offers some 10,000 cubic feet more space than the 747-8F. However, Boeing is quick to point out that the -8F offers superior load-density capabilities as well as claim that the -8F utilises it’s nearly 30,000 cubic feet of total cargo hold volume more efficiently. The 747-8F and the 777F can accommodate a maximum load density of 158.6 kg/cubic meters (9.9Ibs/cubic foot) – the highest in the industry.
“By developing both the 777F and the 747-8F during roughly the same time frame, we were able to work with our customers in harmonizing key common attributes, such as the interior load height and the density capability,” says Jim Edgar, regional director for Boeing Cargo Marketing.
The A380F is optimised at a load density of 126,6kg/cubic meter. Airbus argues, however, that the A380F is be able to accommodate higher load densities than 126kg/cubic meter, should it be required, but that would ultimately, and significantly, drive down the amount of pallets it can fly, thus effectively meaning it would fly with volumes of dead, wasted and highly-costly space. Whilst Airbus also argues that the 10,400km range of the A380F allows for more point-to-point flying and thus avoiding stopovers, Boeing counters that the range of 8,000km is an optimum range for freight operators.
Cargolux, the co-launch customer for the 747-8F, is just one of the cargo airlines that back up this claim from Boeing. Another major trump card in favour of the -8F is that it has the flexibility and ability to utilise all current ground support infrastructure in place already for the 747 freighters. Further, the unique nose-loading capability of factory built 747-Freighters allows for a large variety of high-yield, ultra-large components to be loaded.
Emirates Airlines’ SkyCargo division that has 10 747-8Fs as well as 8 777Fs on firm order also commented that the advanced 747 is better suited for the airport environment. “The 747-8F is a lot more flexible as it can be handled at virtually any airport, whereas the A380F’s upper deck loading is a challenge as not many airports will have the equipment to do that loading,” said Ram Menen, the senior vice president of Emirates SkyCargo. Emirates once held orders for two A380Fs, but swopped them to the A380 passenger version and opted for the 747-8F instead. Boeing calculates that the cost of an all-new 26’ high loader at every destination to load the upper deck of the proposed A380F will amount to more than double the costs of a 747 loader at every destination.
Image Courtesy Of Boeing
Another interesting fact that is sometimes overlooked is that the 747-8F is in fact able to carry more revenue payload than the A380F. Airbus displays the payload capability of the A380F around150,000kg, but that is inclusive of tare weight. The -8F’s maximum payload including tare-weight is a little over 140,000kgs. The A380F can only carry 129,360kg of revenue payload, or some 4,000kg less than the -8F! To cap off the long list of superior advantages the 747-8F offers over the A380F, Boeing claims that the -8F will be 24% more fuel efficient than the A380F, all while offering 22% to24% less tonne/mile costs and 20% to25% lower trip costs. Cargolux CEO, Ulrich Ogiermann, recently commented: “They {customers} will want to be sure that if they have to fly goods, they fly them in the most fuel-efficient aircraft, and that aircraft is the 747-8F.” Similar comments are echoed by all current and potential future -8F customers as well.
Differentiating the Boeing 747-400BCF Market
Turning to the converted freighter market, where Boeing has a bullish outlook for the -400BCF market (which could be shared with other converted freighters such as MD-11s/777s/A340-600s), the current economic climate and growing environmental pressure is causing analysts to question the actual size of the passenger-to-freighter conversion market, with many analysts suggesting that the 747-8F’s market is in fact larger than previously forecasted and that the 777F is set to be the preferred option in the lower payload range category rather than the -400BCF for example.
Air France took delivery of their first Boeing 777 Freighter on 19th February, and they reaffirmed that despite the global economic crisis, resulting in the reduction of air-freight, it is imperative to adapt to the market changes and prepare for the years to come with the most efficient, reliable and capable freighter aircraft.
“Our new Boeing 777 Freighter will operate very well with our 747-400ER Freighters,” said Air France Executive Vice President for New Aircraft & Corporate Fleet Planning Pierre Vellay. “Also, we will benefit from the airplane’s commonality with our proven 777 passenger fleet and improve our cargo efficiency to help us through the current economic difficulties.”
When Air France ordered the 747-400BCFs, in a key point made by Air France also was that their -400BCFs were purchased to bridge the delivery of their 777F airplanes.
Cargolux’s CEO, Ulrich Ogiermann, has stressed on several occasions that the 747-8F was chosen due to its superior operating costs, class leading fuel-efficiencies and capabilities. Further, shippers are becoming increasingly more vigilant of the carbon-footprint of flying freight by air, and are demanding only the cleanest, greenest and most capable airplanes.
“Corporations will want to be as green as possible we don’t want to be ¬flying 10 year-old aircraft with yesterday’s engines. We want aircraft with next-generation engines, the largest payload and the best fuel efficiency,” said Atlas Air’s CEO, William Flynn as one of the reasons why the airline opted for up to 26 Boeing 747-8Fs instead of additional -400BCFs.
Korean Airlines, Atlas Air and Cathay Pacific Airways all have placed solid orders for the 747-8F despite having -400BCFs, and whilst some may argue that the -400BCF is indeed intended to fulfil other missions within those airlines, it is a clear indicator that the -8F and -400BCF offer two unique, complementary and different roles and that the -8F market is unaffected by the -400 passenger to freighter converted market.
Therefore, whilst the need for converted freighters will be high, it won’t affect the outlook for the 747-8F and 777F. Besides, in an environment where the market is demanding the most fuel-efficient freighter aircraft, there’s growing pressure on air freight operators to order 747-8Fs or 777Fs instead of opting for -400BCFs.
“Operators who provide premium and long-range services often prefer production freighters to conversions because their superior reliability, operating costs, and capability can out weigh the significant on-ramp acquisition cost advantages enjoyed by conversions,” Boeing indicates of the favours for new production built freighter airplanes.
Image Courtesy Of Boeing (World Air Cargo Forecast)
Make no mistake, the -400BCF offers some compelling attributes when it is compared to new freighter airplane prices, to older, significantly less fuel-efficient, less-reliable, noisy and old-technology tri-engine and quad-engine freighter airplanes, such as the DC-10-30F or 747-200SF. The -400BCF allows operators to achieve greater longevity of their -400s and an opportunity to increase profit margins. But, there’s a fine line between opting for the -400BCF or a 777F or 747-8F.
The -8F offers the hugely popular nose-loading capability whereas the -400BCF lacks a nose cargo door. The -8F is just a significantly larger, more capable, greater-capacity freighter airplane than the -400BCF, and therefore, the -8F is in a different size market than the -400BCF all together. However, the -400BCF could find itself squaring off against the 777F more than ever now.
Providing cargo capacity normally associated with larger airplanes, the 777 Freighter can fly 4,880 nautical miles (9,038 kilometers) with a full payload of 226,700 pounds (103 metric tons), whilst the -400BCF will be hauling some 107,842kg (237,750Ibs) of revenue payload over 4,091nm (7,580km). Both fly at a similar Mach0.845 econ cruise speed. Clearly, if range is not the requirement, the -400BCF offers compelling attributes, but if an airline wishes to fly the same -400BCF payload much further, then the 777F is the option.
Whilst payload configurations vary, both the 777F and 747-400BCF are closely matched, with the former having a total of around 23,000cubic feet of cargo volume, and the latter some 25,000cubic feet of cargo volume. The 777F offers extremely attractive economics against the -400BCF, but the -400BCF offers attractive acquisition costs.
Another noteworthy point to examine closely is, if the converted freighter airplane market for large airplanes does indeed require 461 converted freighters over the next 20 years, how many of those orders will be soaked up by the -400BCF?
Boeing points out that despite their WACF highlighting that the market could be shared with MD-11s, 777s and A340-600s still to be converted from passenger to freighter airplanes, that the -400BCF will secure being the significant market player. Only a handful of MD-11s remain to be converted, so that model’s impact is minimal. Whilst the 777 conversion study is underway, it’s still very much a development study with 777 conversions only forecasted to occur around the middle of next decade. The availability of the A340-600 could be limited for quite sometime due to the low number of A340-600s built, and further these are newer airplanes than the 777-200 and -200ER and thus will only be ripe for conversion towards the end of next decade.
It is therefore plausible to predict that the 747-400BCF will lap up a considerable portion of the 461 orders, not only due to the lack of any viable competitor to that market yet, but since there’s going to be a substantial amount of -400s reaching the prime age of passenger to freighter conversions. Over the next few years, many -400s will become available for conversion, so the market is going to be benchmarked with the -400BCF even more than currently.
Despite the -400BCF not being as efficient and economical as the 777F and 747-400F/ERF/-8F, it certainly has a good appeal to lower echelon cargo carriers who can’t foot the bill for new, costly production freighters. Major airplane leasing company Guggenheim Aviation Partners, although holding an order for 4 747-8Fs as well as 5 777Fs, has seen the potential the -400BCF holds and has been successful, for example, of placing the -400BCF with Martinair Cargo of the Netherlands. Guggenheim, however, recently sold the Martinair -400BCFs to Aircastle, another leasing company. Up until the -400BCF, Martinair didn’t operate 747-400Freighters and could not enjoy the advantages of the -400 until the -400BCF’s emergence.
Martinair is just one example of many operators that can finally enjoy the benefits of flying the air freight benchmark. Boeing delivered Martinair’s -400BCF to Guggenheim Aviation Partners on November 30th, 2006. It happened to be the 7th -400BCF delivered through Boeing to cargo operators at the time. The -400BCF clearly offers a great stepping stone for some airlines to step up to 747 freighter capacity, without incurring high purchase costs/insurance costs. An addition point that Boeing makes is that, as an OEM, the company provides support to its BCF models in the same way it supports new airplanes.
Another example is brand-new air freight company ACG (Air Cargo Germany) that has started operations with a 747-400BDSF. This boosts the -400’s passenger-to-freighter conversion case since it is once again appealing to airlines due to its lower acquisition costs, attractive economics against older generation freighters and ability to compliment the 747-400F/-400ERF/-8F and 777F fleets. The -400BDSF* has been converted by another modification program other than Boeing’s own BCF program, hence the different acronym.
“The worldwide popularity of production (747-8F/-400ERF/-400F) and conversion 747-400 freighters will sustain their share of the world’s large freighter fleet, even as newer large freighter models are added to the fleet during the next 20 years. Today, although 747Fs represent only 16% of the world’s freighter fleet by number of aircraft, they provide well over 50% of the world’s total freighter capacity,” Boeing reiterates in the WACF.
So, despite the 747-400 already being some 15 years old when it entered the converted freighter market, the -400BCF will serve a vital role for years to come. Alternatively, for longer-term freighter fleet planning, the brand-new 777F and 747-8F will rule supreme.
Christopher Cook (Commercial Pilot)
Johannesburg, South Africa
28 comments March 18th, 2009
