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Boeing adds 737-800 freighter conversion line in India

Extra capacity comes amid uncertainty about near-term prospects for air cargo business

Boeing has converted more than 737-800 aircraft since the program started in 2018. The 100th unit was converted in September for AirLease Corp., whose customer is Gol Airlines in Brazil. Gol is flying the plane for online retailer Mercado Libre. (Photo: Boeing)

Boeing will set up a new production line in India to convert used 737-800 passenger aircraft into dedicated cargo jets as the airfreight market cools and some question whether there will soon be too much manufacturing capacity.

GMR Aero Technica, an airframe maintenance, repair and overhaul facility, at Rajiv Gandhi International Airport in Hyderabad signed an agreement to carry out retrofits under the popular Boeing conversion program, according to a message on the company’s website and a Twitter post by Boeing India last week.

Few details about the new arrangement were available, including the expected number of conversions or potential customers. It typically takes more than a year for Boeing (NYSE: BA) partners to set up a hangar for conversion, acquire the necessary technology and tooling, and train staff. 

In January, Quikjet Cargo Airlines began operating two Boeing 737-800 converted freighters for Amazon Air to enhance speed package delivery between major urban centers in India. Other airlines with regional cargo operations in India include Indigo, SpiceJet and Blue Dart. The Amazon Air operation is based in Hyderabad, a rapidly growing hub for e-commerce distribution.

The Times of India said the GMR aftermarket facility will modify freighters for domestic and international users. 

India’s air cargo volume is expected to grow at an average annual rate of 6.3% per year through 2040, according to Boeing’s commercial market outlook last year. Domestic air cargo demand is projected to be 6.9%. The manufacturer forecasts demand for more than 75 freighters, including factory-built models.

For each passenger-to-freighter conversion, Boeing prepares a kit of parts and partners with airplane modification shops to perform the touch labor. The 737-800 can carry 52,800 pounds of freight. 

India would become the fifth country in which Boeing has subcontractors installing its 737-800 cargo modification kit, which includes a wide cargo door, reinforced flooring, a new interior skin, a rigid barrier to protect the cockpit from shifting containers and a cargo loading system. Boeing has five conversion partners in China, Costa Rica and the United Kingdom. The number of production lines at each location varies from one to seven, according to Boeing.

The aircraft maker also plans to establish two conversion lines at KF Aerospace in Kelowna, British Columbia, and begin converting 737-800s this year.

Boeing has the largest market share for 737-800 conversions, having started commercial production first in 2018. The company says it has redelivered more than 120 reconfigured aircraft to date and has 130 more orders in the pipeline. Independent conversion providers for the 737-800 are located in Israel and Miami. Competition is also coming from the 2-year-old Airbus A321 converted freighter. The Airbus joint venture responsible for reconfiguring jets in all-cargo mode announced plans last month to add a new production in Tianjin, China

Aftermarket demand

Boeing forecasts a worldwide need for about 1,300 standard-body conversions over the next 20 years, especially to support the growth of e-commerce and express cargo markets.  

Narrowbody conversions ballooned from about 55 per year in the decade before COVID to nearly 95 units last year, according to Cargo Facts. Conversions for all aircraft types topped 130 units. The numbers likely would have been higher were it not for supply chain disruptions and labor shortages that prevented repair facilities from working at normal tempos. Various estimates call for even more converted freighters to be produced in 2023, but they were issued before the full extent of the air cargo downturn was felt across the industry. 

Conversion shops have a backlog of more than 550 aircraft, more than a quarter for the 737-800 alone, according to Cirium. Several analysts have said lessors have invested in more conversions than the market can bear.

Despite a yearlong downturn in air cargo volumes from an unprecedented pandemic peak, there was little concrete evidence so far of a pullback in freighter conversion activity until last week, when Cargojet said it was postponing four conversions of large 777 freighters and selling two of the passenger planes it acquired. And analysts say the widebody market, which has less supply, is not oversaturated.

But there are clouds on the horizon in news that express delivery operators and their airline partners, such as Cargojet, Sun Country, Atlas Air and Air Transport Services Group, have experienced a decline in aircraft utilization since late last year. And as lease rates for passenger 737-800s recover toward cargo jets, lessors are likely to opt for business with passenger airlines because they won’t have to incur conversion expenses. 

Many cargo airlines, however, are investing for long-term growth.

In an email to FreightWaves, Boeing said, “We perform regular demand assessments and make adjustments accordingly” to conversion capacity.

Twitter: @ericreports / LinkedIn: Eric Kulisch / [email protected]

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Eric Kulisch

Eric is the Supply Chain and Air Cargo Editor at FreightWaves. An award-winning business journalist with extensive experience covering the logistics sector, Eric spent nearly two years as the Washington, D.C., correspondent for Automotive News, where he focused on regulatory and policy issues surrounding autonomous vehicles, mobility, fuel economy and safety. He has won two regional Gold Medals and a Silver Medal from the American Society of Business Publication Editors for government and trade coverage, and news analysis. He was voted best for feature writing and commentary in the Trade/Newsletter category by the D.C. Chapter of the Society of Professional Journalists. In December 2022, he was voted runner up for Air Cargo Journalist by the Seahorse Freight Association. As associate editor at American Shipper Magazine for more than a decade, he wrote about trade, freight transportation and supply chains. Eric is based in Portland, Oregon. He can be reached for comments and tips at [email protected]