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MAY 10
Vol. 39, No. 5B
China Airlines kicks off freighter fleet modernization with 777F order

Taiwan-based China Airlines (CI) announced this week it had inked a Memorandum of Understanding with Boeing that includes an order for three 777Fs and options for three more, as the carrier gets started on a fleet modernization program [FATs 004861-4866].

Expected delivery dates have yet to be announced, but China Airlines has left open the possibility of supplementing its existing 747-400F capacity if the market warrants, or replacing aging 747-400Fs. The airline said in a statement that the incoming 777Fs could be used either to “meet growing demand” for cargo on routes to Europe and North America, from Asia, or to replace “some older 747-400Fs.”

See also: China Southern to add two 777Fs, a sign combination carriers are hungry for freighters?

At present, China Airlines is the largest operator of 747-400 production freighters in Asia, with eighteen of the airframe type in service – second only to Atlas Air’s fleet of factory-built 747-400Fs. Regarding the age of CI’s 747-400Fs, the youngest freighter was delivered just under nine years ago, while the oldest aircraft is approaching nineteen years since it rolled out of the factory. Undoubtedly, some of the carrier’s higher-cycle freighters are coming up for costlier maintenance checks, which may make retirements appealing.

Another factor that could accelerate CI’s fleet modernization is whether a prospective 747-400F buyer came knocking at their door. Last month, at Cargo Facts Asia, George Li, VP, SF Express, said the express company’s airline affiliate was looking to grow its widebody freighter fleet to more than 100 units by 2022, up significantly from the eight 767-300BCFs it operates today. Customers like SF are therefore certainly in the market. That is not to preclude the possibility of a number of other carriers exploring options to take on additional factory-built 747-400Fs over the next few years. Cargolux, for one, will add three 747-400ERFs this year. Just last year, Atlas Air acquired three 747-400Fs from CI’s fellow Taiwan-based freighter operator, EVA Air.  

Returning to the 777F, not including the order just placed by China Airlines, Boeing’s current backlog of known orders for the type is in the range of fifty-seven to fifty-nine. The 777F has been a popular freighter among China’s combination carriers – China Southern operates twelve of the type, Air China Cargo operates eight 777Fs, China Eastern Airlines’ affiliate China Cargo Airlines operates six 777Fs, and Taiwan-based EVA Air operates four. 

More freighter-converted 767s for UPS

In its first-quarter earnings release, ATSG announced that it had secured a new agreement with UPS to dry lease at least four 767-300BDSFs to the Atlanta-based integrator [FATs 004867-4870]. As part of the agreement, Cargo Aircraft Management, the company’s leasing affiliate, will deploy four freighter-converted 767-300Fs to UPS during the second half of 2019.

Last year, ATSG secured rights to twenty 767-300s coming out of the American Airlines fleet as the carrier gradually swaps out its 767s for 787s. Many, if not most, of the American planes are expected to go into service for Amazon Air. During an investor call with analysts, ATSG confirmed it has already secured rights to additional feedstock for the UPS conversions, in addition to feedstock that it already has lined up for conversions over the next few years.

Without going into specifics, Rich Corrado, COO, ATSG, implied the American feedstock did not fit UPS’ requirements. “The demand from some of our newer customers required a specific variant of the 767 that we didn’t have in the American feedstock. So we needed to acquire aircraft that were specific to their needs.” UPS’ current 767 fleet numbers sixty-two units, all but three of which are production freighters. The three 767-300BCFs in UPS’ fleet are of newer vintage, aged 15-16 years.

Cargo Facts would not be surprised if the 767-300s CAM ends up leasing to UPS are younger than the American Airlines retirements. The first three 767-300s UPS added to its fleet were ex-Japan Airlines units. JAL continues to operate twenty-two 767-300s, but with more 787s on order, could soon retire additional units.

For more on ATSG’s 1Q19 earnings, visit our site here.
Amazon to break ground on CVG hub next week
Amazon Air will break ground on its new $11.5 billion global air cargo hub at Cincinnati/North Kentucky International Airport (CVG) on May 14, an Amazon spokesperson confirmed. The hub will be located on a 1,100-acre plot of land, similar in size to other global hubs for major integrators, such as FedEx’s 900-acre Memphis (MEM) hub, and will be utilized for both domestic and international operations. Amazon’s CVG hub will have the capacity to handle more than 100 aircraft. Amazon’s cooperation with Deutsche Post-DHL, which has its North American hub at CVG, could in the future give Amazon access to international routes from CVG.
Is Adidas’ turn to air freight over ‘supply chain shortages’ linked to tariffs?
During a 3 May conference call to discuss its 1Q earnings for 2019, Adidas CFO Harm Ohlmeyer began with the news that the sportswear giant would have to expedite some shipments by air, rather than by ocean or trucking, during 2Q and 3Q, to mitigate the impact of shortages in its supply chain during the first quarter. While the company did not mention the cause of these delays, the majority of its suppliers are located in China, raising the question of whether the current trade wars between China and the United States – or any efforts to shift to new, non-Chinese suppliers to avoid the tariffs – have had an impact on the North American market. Cargo Facts would not be surprised if that were the case. Last year, we predicted that, as some manufacturing shifted to Southeast Asia over the US-China trade war and rising manufacturing costs, Southeast Asian airports would see subsequent increases in traffic, with more goods imported from Vietnam, Thailand, and the Philippines, bound for China, Europe, North America, or other regions. Apparel was one of the more mobile commodities included in the manufacturing shifts.
Recent freighter aircraft transactions:

Air Atlanta Icelandic acquired a 747-400BDSF (27898, ex-EVA Airways) [FAT 004871].  

FedEx took delivery of a 767-300F (64056) from Boeing [FAT 004872].  

Automatic LLC ferried a 737-300QC (28054, ex-Mistral Air) to San Jose (SVO) for conversion to full-freighter configuration by PEMCO at the Coopesa facility [FATs 004873-4874].  
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