The cargo-only passenger jet may be a dying breed among passenger airlines, but a few aviation companies are actually embracing an all-cargo business model that involves the use of aircraft with seats removed as a faster, cheaper way to market than buying full freighters.
One of them, AELF FlightService, plans this year to begin operating 10 large Airbus A330 and A340 aircraft that have been retrofitted to carry freight on the main deck. Management believes that making the configuration more permanent will appeal to shippers of lightweight, e-commerce goods in a tight market. By eschewing the traditional tactic of buying used passenger aircraft and structurally reinforcing them to handle large containers, the company intends to minimize upfront costs and speed time to market.
The company is waiting for the European Union Aviation Safety Agency (EASA) to approve the design modification developed by startup engineering firm Avensis Aviation, clearing the path to transform the AELF aircraft into cabin freighters with floor-loading capability.
EASA and the Federal Aviation Administration granted supplemental type certificates to temporarily modify passenger cabins as an emergency measure so airlines could move critical medical and other supplies when the pandemic threw economies into turmoil. The EASA exemption expires at the end of July. The new certification will allow the light-duty freighter to fly beyond the current deadline.
AELF is a privately held mid-tier aircraft and engine leasing company incorporated in Delaware that pivoted to cargo charter operations when airlines began returning leased aircraft they couldn’t afford after the pandemic wiped out air travel. In late 2020 it led the acquisition of a controlling interest in Maleth Aero, a for-hire carrier with an operating certificate in Malta, and quickly stripped the seats from four of its widebody Airbus aircraft to maximize space for cargo.
The A330-200s were reconfigured by Canadian aircraft maintenance and cabin installation firm Avianor. But the changeover package, which includes cargo netting to hold down parcel freight, is only covered by the temporary EASA exemption that ends this summer. AELF announced Wednesday that a fifth A330 with an interior makeover from Avianor has joined the fleet and flew its first commercial cargo flight last week from Vietnam to the U.S.
Many airlines jumped at the chance to operate passenger freighters when travel demand plummeted. The resulting shortage of global cargo capacity, combined with high demand for transport of medical supplies, vaccines and e-commerce purchases, boosted freight rates, making the flights profitable. Air cargo demand grew 6.9% in 2021 and projections are for another strong year. But many carriers have returned the aircraft to full passenger service or are phasing them out as travel demand continues to recover. Rising fuel prices also hurt the economics of operating aircraft that can’t carry as much cargo as a full freighter.
“We see a good opportunity going forward even with passenger belly freight returning to the air and some of the maritime supply chain issues working through. We think this is a good space to be in and it’s a good complement to the dry leasing side of the business,” Joe Cirillo, chief operating officer at AELF FlightService, said in an interview. “The investment in Avensis conversions is a long-term gesture by us, saying, ‘We are here to stay.’ These aircraft are going to operate basically into perpetuity for as long as their useful lives and the opportunity in the market exists.”
The hybrid cargo model — between a pure heavy freighter and an auxiliary passenger aircraft — is a novel response to the ongoing capacity challenges faced by cargo owners and logistics providers. Eastern Airlines, a small passenger airline, is following a similar strategy with a fleet of up to 35 Boeing 777 aircraft aimed at business with low-density goods for import or export. It recently inked a deal with Flexport, an influential freight forwarder, to ferry goods from Asia to Chicago twice a week.
Speed bump forces strategic adjustment
EASA’s recent decision not to extend the exemption for cargo in the cabin beyond July 31 complicated AELF’s plans because Avensis has encountered delays obtaining approval for the permanent modification.
Unable to move ahead with a limited freighter conversion, AELF said it will reinstall seats and offer the A330s for passenger charter service for the busy summer flying season, starting in August. The company has also acquired a sixth A330-200 that will supplement the passenger fleet.
Cirillo said management expects the supplemental type certificate will be issued this summer, at which time the five widebody planes will be sequentially reconfigured by an aircraft maintenance company for main-deck cargo in time for peak shipping season.
The reversible nature of the cabin configurations is attractive to AELF as more cargo capacity enters the market. Executives say the mini-conversion gives them flexibility to ride the seasonal highs of the respective passenger and cargo markets by flipping the plane to a different configuration as circumstances change — a process that only takes a couple of weeks.
“The nice thing with these ‘soft’ freighters is that … you can vacillate between two different marketplaces, two different business models, two different yield types,” Cirillo told FreightWaves. “In freighter favorable markets that’s where we’ll be and in passenger favorable markets that’s where we’ll be.”
Airlines are returning more passenger aircraft with dual capability to service as the pandemic recedes, while all-cargo operators are placing record orders for converted freighters. The extra supply, combined with potential softening in the extraordinary demand of the past two years, could lead to lower cargo rates and profit margins for carriers.
“We like the passenger space,” said Cirillo. “But we’re keeping a close eye on what yields are going to do as all of these newly converted freighter aircraft come to the market. So we’ll be prepared to take advantage of whatever opportunities the market offers.”
Shortcut to cargo service
Modifying the cabin interior for cargo storage involves stripping out the galley and seats and adding a cockpit barrier and system for securing cargo to the floor. Avoiding a full-blown conversion, complete with a new cargo door and reinforced flooring, saves millions of dollars and at least a one- to two-year wait for an appointment.
Cirillo didn’t rule out AELF FlightService eventually investing in fully converted freighters — the company owns two Boeing 767 passenger jets that could be candidates, but said the upfront cost and lengthy lead time required to reserve slots at busy conversion centers creates a higher barrier to entry. Going with a partial conversion makes more sense, especially with high demand expected to continue amid strong export manufacturing, inventory replenishment and ocean shipping congestion.
“The opportunity is here and now. We wanted to be in a position to take advantage of the current market environment. The Avensis model boasts a higher capacity [than Avianor’s] and it can do a lot of the same things that a traditional freighter can do without the cargo door,” the chief commercial officer said. “In many instances, cargo doors are required. But there are a lot of missions where that type of functionality isn’t a necessity. And so we’re able to bring a product to the market that is responsive to the current opportunity, but also has a really good niche.”
AELF plans to build the cargo fleet from the A330-200s that are already being deployed and scheduled for a permanent makeover, as well as four aircraft from partner European Aviation that are being operated by Maleth and additional purchases or leases in the secondary market, Cirillo said.
Opportunities for buyers of A330s are good because many haven’t been reactivated yet by airlines or leasing companies. The surplus of planes has pushed down values.
The A330 conversions by London-based Avensis involve much more than seat removal and a system for securing cargo to the floor. The design includes fire detection modifications, improved ventilation and avionics upgrades so pilots can clear smoke out of the cabin. The extra fire protections are what gave aviation regulators the confidence to allow the permanent use of the aircraft as Class E cabin freighters.
AELF FlightService is focusing on eastbound trans-Pacific routes to the U.S. Top U.S. destinations so far include Pittsburgh, which has made cargo development a major priority in the past two years, and Chicago Rockford International Airport, a growing air cargo hub an hour west of Chicago O’Hare airport. The auxiliary freighters have carried everything from COVID vaccines, protective medical equipment and oxygen generators to consumer goods and textiles.
Cirillo acknowledged that loading and unloading passenger jets with cabin cargo is more labor intensive than using pure freighters with wide cargo doors and roller systems for handling large pallets and containers. A few airports have expressed reservations about servicing main-deck cargo-only aircraft because of ongoing staffing shortages, but Cirillo said AELF hasn’t faced any difficulties yet and is developing contingency plans in case ground handlers become unwilling to meet its needs.
One potential solution is to carry extra employees on board certain aircraft that could supplement manpower at the airport to unload the cargo and help the cockpit crew with other logistical matters. An easier option at receptive domestic airports would be to hire personnel locally and have them at the airport when an aircraft arrives.
AELF could also focus on certain airports that have necessary ground infrastructure to process the passenger freighters and utilize ground transportation to feed other markets.
Cirillo said there have been no labor problems on the departure side in Hanoi, Vietnam, a key market where terminal operators are able to assign 15 to 20 people to load an A330.
“It’s something we need to manage through, as part of the perpetuation of the business model,” he said in the interview.
The Avensis modification is reversible if AELF wants to return the aircraft to their former role in passenger transport.