ASL Aviation Holdings on Thursday said it placed an order with Boeing to convert up to 20 used 737-800 passenger aircraft to carry freight, doubling down on a fleet modernization strategy to support the growth of customers such as Amazon, FedEx and DHL.
The agreement is for 10 firm orders and options for 10 additional 737-800s. If the Dublin-based aviation services company exercises all purchase rights, it will eventually operate 40 of the narrowbody converted freighters from Boeing. The new aircraft will be allocated to ASL’s airlines in Ireland, Belgium and France in Europe, as well as Thailand-based joint venture airline K-Mile.
ASL has received 11 of 20 passenger-to-freighter retrofits previously ordered from Boeing, with two more undergoing conversion and the remaining seven scheduled to enter service between the summer and early 2023.
The influx of small freighters is a big reason behind Amazon Air’s increased flight activity in Europe since mid-2021, researchers at DePaul University recently reported. ASL Airlines Belgium and ASL Airlines France fly several aircraft under Amazon’s (NASDAQ: AMZN) brand and provide supplementary airlift as needed with own-registered aircraft used for multiple customers.
The 737-800 is popular with regional cargo airlines for its better payload — 52,800 pounds with a range of 2,025 nautical miles — and reliability. It also has lower fuel consumption and operating costs per flight compared to 737 Classic freighters.
The planes are well suited for quick shuttle runs with express networks because they can be quickly filled and turned around. Flying larger aircraft that are partially empty or have to wait longer for enough cargo is not economical for highly repetitive routes. ASL airlines primarily use the aircraft to transport express cargo and e-commerce shipments.
“The aircraft has proven itself to be an excellent fit with our customer and operational requirements throughout our European network of 100 airports,” said ASL Aviation CEO Dave Andrews.
Boeing (NYSE: BA) said the airframe modifications — interior removal, a large cargo door, reinforced flooring and wing boxes to support heavy containers, a rigid cockpit barrier, and roller system for loading — will be carried out by approved overhaul specialists Taikoo (Shandong) Aircraft Engineering Company Ltd., in Jinan, China, and Boeing’s new facility at London Gatwick Airport.
Conversions are expected to begin in the second quarter of 2023, when the existing order backlog clears.
ASL didn’t disclose whether it intends to lease or purchase the 737-800s, but in April 2021 it opened a credit facility with Goldman Sachs that would allow it to borrow up to $125 million to buy the initial tranche of aircraft and send them to Boeing for conversion.
A 737-800 cargo rebuild costs between $4 million to $6 million. Previously owned aircraft are going for about $13 million on the secondary market, according to industry appraisers.
Conversion houses are busier than ever — reconfiguring passenger planes for main-deck cargo operations. Demand is high because of strong global economic growth, the slow recovery of passenger airlines from the COVID pandemic, widespread ocean freight congestion and delays, and the boom in e-commerce. About 112 737-800s have been turned into freighters since Boeing launched its program four years ago and industry analyst Steve Fortune recently forecast more than 80 units could be produced in 2022.
He warned there could soon be excess capacity in the narrow freighter category if air cargo volumes shrink. Others say e-commerce will still keep production at record levels even if market softening slows the building frenzy.
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