26.3 C
Asia
Sunday, October 2, 2022
HomeEconomyBleaker economy could sour airline industry's bet on cargo planes

Bleaker economy could sour airline industry’s bet on cargo planes

Analysts say aircraft leasing companies now could be bogged down with too many freighters or forced to cancel conversions, as well as being hit by falling freight and freighter lease rates. is.

SINGAPORE – In an era when travel has plummeted due to the coronavirus pandemic, the airline industry’s record-breaking scramble to convert old jetliners into freighters comes as bleak global economic conditions hit demand. This can lead to excess cargo space.

Analysts say aircraft lessors, which have seen a threefold increase in annual conversions since 2019, are now either bogged down with too many freighters, may be forced to cancel.

“This spike in conversion rates is raising concerns about a bubble,” said Chris Seymour, head of market analysis at aviation advisory group Ascend by Cyrium, which could slow down by mid-decade. I am concerned that there is

AirAsia, Air Canada, Qantas and Vietnam Airlines are among the airlines adding cargo planes to their fleets in tenders to diversify their revenue streams.

But freight rates are down nearly 40% from a December record, with shipping giants FedEx Corporation After an acceleration at the end of August, the slowdown in global demand worsened, clouding the peak of the year-end shipping season, it said.

A rapid economic slowdown and rising pessimism combined with declining aircraft values ​​and a surge in cargo demand led renters and airlines to give second-hand planes new life as purpose-built freighters during the pandemic. is a rapid reversal from the expectations of

According to Cirium data, 192 conversions are expected this year, up from 122 last year, 64 in 2019, and a further increase to 221 next year based on current orders. It is expected that

Companies such as Singapore Technologies (ST) Engineering, Swire Pacific’s Hong Kong Aircraft Engineering Company (HAECO) and aircraft maker Boeing have all worked to free up maintenance hangar capacity after many airliners have been grounded. , added passenger to freighter (P2F) conversion functionality.

P2F converters are struggling to keep up with surges in demand as they expand capacity amid supply chain disruptions from a tight labor market, rising costs and repeated lockdowns in China.

Geoffrey Lamb, president of ST Engineering’s commercial aerospace division, said: “Thus, new customers coming in now to book slots should book in late 2026 or 2027.”

In some cases, lenders such as AerCap Holdings, BBAM and Aero Capital Solutions (ACS) have even reserved speculative conversion slots before signing up airline customers.

Mike Dolefeld, vice president of commercial programs for Boeing Global Services, said:

Aercap declined to comment, but BBAM and ACS did not respond to requests for comment.

Some airlines are eager to acquire freighters due to a strong e-commerce market and the slow return of passenger flights with freight capacity in some regions, analysts said. are wondering how long this trend will continue.

“We think there will be an impact from lower lease rates, especially in the narrowbody segment,” said Frederick Horst, managing director of Sydney-based freight consultancy Trade and Transport Group.

“Lenders could be stranded in modified planes.”

Leasing companies face a greater risk than converters, which can fill hangars with other maintenance work, as passenger demand recovers, Holst added.

HAECO seeks to avoid undue exposure to P2F conversions from lenders, said the company’s chief operating officer, Richard Kendall. freight demand in a few years.

“I don’t want to see the bubble burst and the promises broken and not refilled,” he said as a bystander at the MRO Asia-Pacific conference in Singapore. – Rappler.com

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Recent Comments