Passenger-to-freighter Conversion Business Booming in Asia-Pacific

The center of gravity for passenger-to-freighter (P2F) conversions is moving inexorably eastward, as the strength of China’s domestic aviation market drives the requirement for a variety of narrowbody types. At the same time, the ultimate requirement for more widebody conversions appears likely to see the skillsets of conversion houses outside China gaining more traction.

Few countries can match China for the economies of scale it brings to MRO and P2F, Norbert Marx, CEO of Guangzhou Aircraft Maintenance Engineering Company (Gameco), told AIN. “There are P2F centers in the U.S., Singapore, and Germany, but the combination of structural skills, and labor-intensive manpower, and also the manufacturing of kits, means China is a good destination for that,” he explained.

Industry trailblazer Israel Aerospace Industries (IAI) expects to convert around 300 airplanes this decade. “The majority will be widebodies,” Shmuel Kuzi, IAI Aviation Group v-p and general manager, told AIN. “The most efficient airplane for cargo is always widebody. Narrowbody is more for domestic or regional traffic. The B767, the B777, and the A330 will win out in coming cargo business scenarios.”

IAI plans to open a new facility with Sharp Technics at South Korea’s Incheon Airport for conversion of Boeing 777s in 2024. “I want to open in Korea first; we are developing an operation at Incheon Airport in Seoul for launch in 2024 to convert Boeing 777-300ERSFs,” said Kuzi. “It's too early to say how many aircraft will be converted. We are initially talking about five aircraft in Korea, and then we will go from there.”

He said Boeing 777 conversions in China for IAI or any other operator in the near future appeared unlikely, especially since IAI launched conversion of the "Big Twin" variant in a project with GE Capital Aviation Services (Gecas) in Israel in 2019. IAI expects a similar project to begin in Abu Dhabi in 2023.

“I don't see any reason to do 777 conversions in China at the moment,” he said. “We have a lot of cooperation, as we see in the UAE. I don't rule them out if, for example, a local company wants help in launching conversions. Conversion of the 777 has yet to begin in China.”

The narrowbody aircraft conversion industry has taken off as demand for dedicated freighters jumped during Covid-19. In 2021, Asia-Pacific MRO facilities, most of them in China, converted 61 passenger jets—about 50 percent of the global total, according to data provided by Ascend by Cirium.

Prominent players include Chinese houses Shandong Taikoo Aircraft Engineering Services Company (Staeco), Hong Kong Aircraft Engineering Company (Haeco), and Gameco; U.S. companies Aeronautical Engineers, Inc. (AEI) and Pemco Conversions, and IAI.

China ranks as the leading country for 737 conversions, Ascend by Cirium head of market analysis Chris Seymour told AIN. In 2021, Staeco in Jinan converted 23 of the aircraft, most being 737-800BCFs, under the Boeing supplemental type certificate (STC). Boeing, AEI, and IAI all used Chinese locations and last year converted 17 more 737NGs there, including at Gameco (Guangzhou), Haeco (Xiamen), Boeing Shanghai, and IAI subsidiaries Bedek-Lingyun (Yichang) and Haite (Tianjin). Separately, Pemco converted a 300SF at Jinan. Boeing plans to add more 800BCF lines at Jinan and Guangzhou in 2022.

“Boeing converts 767-300ERBCFs at ST Engineering’s Paya Lebar facility in Singapore and nine were done in 2021,” Seymour said. “It will also add two lines at Gameco in 2022. Five 757s were converted under the Precision Aircraft Solutions STC at Air China (Chengdu) and Haeco (Xiamen). Looking ahead, South Korea’s Sharp Technics is due to start converting 777-300ERs in 2024 for IAI and EFW has said it may add an A330 conversion line in China.”

He added that Asia-Pacific operators took 26 converted aircraft in 2021, including 16 Boeing 737s, mainly into China, South Korea, and Malaysia, and eight 757s and 767s, all to Chinese airlines, while Express Freighters Australia took two A321s to operate for Qantas.

AEI senior vice president of sales and marketing Robert Convey said his company had seen the pandemic trigger a dramatic increase in its conversion business starting in May of 2020. The sudden increase in available narrowbody passenger aircraft caused by the pandemic-driven grounding of airlines around the world produced an opportunity for cargo airlines, and AEI went from 10 conversion deliveries in 2019 to 15 in 2020 to 30 last year.

Staeco and Haeco serve as authorized AEI conversion centers. “As demand continues, we are optimistically forecasting 36 deliveries in 2022 and 45 in 2023 and I believe we will exceed these numbers,” he told AIN. “We see continued strong demand for narrowbody freighters well into 2024 and believe that if the virus continues to mutate and evade current vaccines this demand could extend well into 2026.”

Gameco’s Marx said in January the company had cooperated with Israel's IAI in the past but now worked with Boeing under its STC. “We do conversions on 737 NGs and, in January 2022, we started our third parallel line,” he said. “The plan is to deliver one converted 737NG a month. We are also starting 767 conversions this month. We signed for that at the Zhuhai Airshow. Of two lines, the first has now started. The second line will start in summer.”                      

Law firm Reed Smith, in a 2022 report titled Global Air Freight’s Future, cited IBA data to say a narrowbody conversion could cost about $4.2 million for a 737-800 and $6.1 million for an A321-200. “A widebody conversion could cost in the region of $14.7 million for a 767-300ER and $18.4 million for an A330-300. Clearly, this is a significant investment,” it said.

According to the law firm, last year Gecas Cargo announced the addition of a further six Boeing 737-800BCFs, bringing its fleet of P2F-converted 737-800NGs in operation to more than 40. In October, Avolon announced an agreement with IAI to become the launch customer for IAI’s Airbus A330-300 freighter conversion program, taking 30 conversion slots between 2025 and 2028.

Anke Lemke, head of communications at Elbe Flugzeugwerke (EFW) in Dresden, Germany, told AIN that the company, jointly owned by Airbus and ST Engineering, expected to triple conversion capacity to 60 aircraft per year (some 30 A330s and another 30 A321s) by 2024.

“We note a high interest in Airbus freighters,” she said. “To date, well over 60 A321P2Fs are in our order book and over 90 A330P2Fs. The air cargo sector is experiencing extremely strong growth, driven by e-commerce, time-sensitive and high-value cargo such as Covid vaccines, massive backlogs in ocean shipping, and growth in international trade.”

Buying a new dedicated freighter costs four or five times more than a conversion, IAI’s Kuzi said, but he was keen to stress the widebody’s future importance. “It's more efficient to covert than to buy new," he noted. "All over the world, conversion options are increasing, with the A330 and B777, just as the 767 and 747 before them became popular. The trend towards conversion is going to be even stronger now.”