By Alan Hedge

October 1st, 2018

How the mighty have fallen! In March 2017, Etihad had just taken delivery of its fifth A330-200F, which joined five 777Fs. At the time, the airline served forty-two destinations with its fleet of ten shiny freighters, and former CEO James Hogan boasted that Etihad Cargo was well positioned to maximize opportunities, thanks largely to the company’s investment in partnerships. Unfortunately, the airline along with its cargo division were themselves pulled down by the failure of several of those investments. When Tony Douglas arrived in January 2018, one of the first things he did was ground Etihad’s entire fleet of A330 factory freighters.

Despite denials from both parties, rumors (most recently heard last month) have been swirling that one way to save Etihad would be for Emirates to take over. However, since the two carriers’ hubs are only about 100 km apart by road, what would be the value (other than political) of keeping two separate cargo hubs?

The chart below summarizes the freighter fleet and network of each airline:

In the last year, Etihad has slimmed down its freighter network to twenty-eight points, plus its Abu Dhabi hub. Meanwhile, Emirates serves nearly half again as many points, at forty-one. Although the two airlines only serve seven points in common nonstop from their hubs, those points make up over one-third of Etihad’s spokes, and short distances between some of the unique points in Europe served by both carriers only increase the amount of overlap. About the same overlap exists system-wide when non-hub flying is taken into account.

Adding Etihad’s freighter fleet to Emirates could increase service frequency to existing network points and free aircraft now serving duplicate routes to exploit new business opportunities. However, it is more than likely with today’s decelerating demand growth that if it acquires Etihad, Emirates will need to act quickly to eliminate overlap and create a combined freighter network smaller than the sum of today’s two carriers.

By Alan Hedge

September 10th, 2018

On 27 August, the United States and Mexico reached a preliminary trade deal that will affect the future of complex North American manufacturing supply chains. Under the current North American Free Trade Agreement (NAFTA), automobile manufacturing in North America has become increasingly integrated, accounting for about $135 billion in total trade between Canada, Mexico, and the US – and air freight plays an important role in transporting key parts and subassemblies that keep the assembly lines moving.

If the proposed US-Mexico trade deal goes ahead, the national content and labor wage provisions will not only change both express and specialty cross-border air logistics as automakers shift production to adapt, but will also potentially raise the sticker price of cars sold in North American, thus reducing sales volumes.

We at Cargo Facts Consulting looked at the key airports and airlines that specialize in non-express freight carried on freighter aircraft between the US and Mexico. Total air freight tonnage between the US and Mexico in 2017 was 447,000 tons (406,000 tonnes). Of this, what we are calling “specialty” cross-border air freight makes up only 2.5%. However small a percentage of the whole, without this crucial link of both scheduled and charter service, the automotive and other industries that benefit from the single North American market could not function.

For all US-Mexico cross-border air freight carried by freighter aircraft, Los Angeles (LAX) and Memphis (MEM) dominate US gateways with a 49% share. In Mexico, a lion’s share of 76% of US-Mexico cross-border air freight aboard freighters originates or is destined for busy Mexico City (MEX) or Guadalajara (GDL). However, you may not have heard of many of the largest US and Mexico specialty air freight airports included in the table below:

Both Texas airports on this list play an important role in cross-border intermodal logistics, while Willow Run is only thirty-five miles from Detroit – the traditional center of the US auto industry – and Greenville/Spartanburg is the home of the largest BMW factory in the world. Meanwhile, in the early 2000s, the auto industry in Mexico become increasingly concentrated in the areas of Coahuila, Guanajuato, and Puebla, explaining the prominence of the Mexican specialty airports above.

Of course, the major integrators DHL, FedEx, and UPS, as well as all-cargo airlines like Atlas and AeroUnion, play a role in moving freight in a number of cross-border industry verticals, including automotive. The carriers listed below also continue to play a crucial specialty role:

By Alan Hedge

August 10th, 2018

In November 2017, air freight traffic was growing 8.0% year-over-year, jet fuel was selling for about $1.75/gallon, Cargolux CEO Richard Forson was telling journalists that he was thinking about expanding his fleet of 23 747 freighters, and Boeing’s production of new 747-8Fs had slowed to a crawl. From where were these additional freighters to come?

Fast forward nine months to today: according to IATA, air freight traffic in June 2018 grew 2.7% y-o-y, fuel is about 20% higher, at $2.10/gallon, and Cargolux still has 28 747 freighters (although the carrier has already secured at least one 747-400F set to come off-lease this year). There are eighty-two 747‑8Fs currently in service (including seven NCA aircraft in maintenance).

What about the 747-400/-400ER commercial freighter fleet? Below is the census of the active and stored fleet by age broken down by factory vs. converted freighters:

Adding the in-service 747-8F fleet to the 747-400 freighter fleet gives a global fleet of 276 aircraft (older model 747 freighters have been excluded).

Demand for 747-400 factory freighters remains strong, with less than 10% in storage, so it would not be inconceivable for some of the youngest units in the best condition to be picked up, as were the last three ex-Jade International units at the beginning of this year.

If some demand remains for factory freighters, might there be a possibility of trickle down to the parked converted freighters? The story here is gloomy. Over one-third of the converted fleet is in storage, and the age distribution of the stored converted units is skewed much older than the factory freighters (median age over ten years older). With the overhang of parked freighters, both factory and converted, it is no wonder that in 2017, only two conversions were performed, both the relatively easy upgrade of a 747-400 combi to full-freighter.

While the operating fleet of 747-400 freighters looks set to continue flying for a number of years, the in-service converted units, which do not have nose loading capability, and are much older than the factory freighters, appear exposed, especially if fuel prices increase significantly.

Those interested in learning more about the future outlook for widebody freighters are invited to join us 10-12 October at the Omni San Diego for Cargo Facts Symposium 2018. Industry experts from leading manufacturers, conversion houses and lessors will cover the topic at length during a roundtable panel discussion titled, “The Next Big Freighter?” For more information, or to register, visit Earlybird registration ends Friday, 24 August.