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Air CargoAmerican ShipperE-commerce & FulfillmentModern ShipperNewsTop Stories

Eastern Airlines enters air cargo market with ‘freighter-light’ model

In aggressive move, passenger carrier buys 35 Boeing 777s to move e-commerce shipments

Eastern Airlines, a small, relatively unknown passenger carrier, is making a significant play to join the air cargo big league with an unusual business model centered on stripping out seats from used aircraft rather than converting them to a traditional freighter that can carry heavy shipments on the main deck.

The Wayne, Pennsylvania-based company on Wednesday announced it has purchased 35 Boeing 777 widebody aircraft and plans to launch service targeted at the e-commerce and express delivery market in the first quarter of 2022.

In an interview, CEO Steve Harfst explained that Eastern opted against fully reconfiguring the aircraft to handle all cargo types because it is focusing on low-density freight — light boxes with items such as face masks, apparel, makeup and electronic devices — often ordered from online platforms and manufactured in Asia. The plan builds on the concept many passenger airlines adopted of temporarily repurposing aircraft for cargo-only operations when travel dried up during the pandemic and there was huge demand for airlift to move goods.

“If you’re gonna go that far, why not take out the seats, the lavatories, the galleys and the overhead bins and turn it into a Class E freighter?” Harfst told American Shipper.

And the Boeing 777 has so much usable space on the main deck that there is “no need to spend the significant time, effort and money to figure out how to restructure the carbon-fiber floor of the 777 and rebuild the wing box to support jet engines, heavy machinery, cars and horses,” he said.

Initially, the planes will all be operated by Eastern under leases that include crews, maintenance and insurance. Potential customers run the gamut from express carriers that need extra capacity, logistics providers looking for capacity on secondary and tertiary trade lanes with limited access to freighters, and passenger airlines with freight ambitions.

Many airlines that are discontinuing the use of passenger planes as auxiliary freighters, but want to increase cargo business without the commitment of operating a pure freighter fleet, could opt to outsource that service.

Harfst said putting cargo in the cabin is risky for airlines because the interiors are expensive and can be damaged by cargo. Eastern could operate freighters on their behalf at lower unit costs because the 777s will have three to four times the volume of so-called “preighters,” even those that carry cargo on the seats or floor.

But cabin-loading by hand is much more labor-intensive than filling the main deck with big containers that are pushed through a wide cargo door and rolled in place with the help of a cargo handling system. And airport services companies that handle cargo for airlines have suffered serious staffing shortages because of COVID and the loss of business from airlines cutting expenses.

“It’s going to be costly to operate. Even if you can find ground handlers that want to do that, it’s going to cost you probably two to three times as much to load and unload those airplanes,” said Michael White, who retired last year as the International Air Transport Association’s top cargo official in the U.S. and currently is president of Trade Network Consultants.

Efficiency schemes some airlines and ground handlers use include portable roller beds to slide boxes through the cabin and food catering trucks to lift containers to the door and then pass them through one by one. 

Harfst downplayed any concerns, saying aviation services companies have gotten better over time at figuring out how to load through the narrow passenger doors and that the unit-cost savings Eastern can provide “can help absorb some of that inefficiency.”

Eastern is acquiring a mix of 777-200, 777-200 Extended Range and 777-300 twin-aisle airplanes. The company has already taken delivery of 10 of them, and the remainder will be delivered over the next eight to 12 weeks, the CEO said.

Officials declined to identify the sellers, but Michael Duggan, director of international cargo business development, said most of the aircraft are from Asian airlines that have recently retired 777s as part of downsizing and modernization programs. 

Features of Eastern 777 floor-loaded freighter

  • Main deck cargo area provides 10,000-18,200 cubic feet of volume and 80,000-103,000 pounds of payload, depending on variant.
  • Full interior cargo wall and ceiling linings.
  • 9G cargo restraint system and smoke barrier.
  • Class-E Certified cargo aircraft.
  • 21-28 reinforced freight carrying zones.
  • Full lower deck capacity providing 4,750 to 6,925 cubic feet of volume and 122,000-166,500 pounds of payload.

Japan Airlines, for example, in April removed 13 777-200s after authorities issued a no-fly order for all carriers until issues with the Pratt & Whitney engines are resolved. Singapore Airlines also retired four 777-300ERs ahead of schedule in May. Neither airline responded to messages about whether Eastern had purchased any of their aircraft. 

The increased number of decommissioned aircraft has caused values in the secondary market to drop in the past year. Eastern wouldn’t disclose how much it paid for the 35 777s, but officials said they received an attractive price.

Harfst said Eastern was developing its plan even before COVID-19 turned the global economy upside down, but the 44% jump in U.S. online retail sales and 27% growth globally in 2020 validated the company’s strategy of building a fleet with capacity tailored to volume rather than weight. The airline began purchasing aircraft last fall.

Eastern’s CEO said the plan is to deploy eight to 10 cargo planes a year and didn’t rule out picking up more aircraft under the right circumstances.

Many airlines lease all-cargo aircraft for financial and other reasons, but Eastern’s model is to own its assets. The company is privately held by a group of individual investors who made the capital investment to expand into cargo. Harfst said ownership gives the company flexibility in deciding when and where to operate compared to feeling pressure to deploy aircraft in markets that may not be profitable just to cover lease payments.

“We don’t intend to grow too quickly. By owning the aircraft, especially at the prices we pay, we don’t have to put them to work all at once. And we’re obviously going to have to manage the equipment, the pilots and the training cycles to make sure they can feed that growth,” he said.

Do-it-yourself conversions

Eastern is also bucking tradition by developing the engineering design and transforming the 777s in-house rather than sending them to a third-party aviation maintenance and remodeling facility. 

It owns an aviation engineering firm, Foxtrot Aero, that is in the process of obtaining a supplemental-type certificate from the Federal Aviation Administration that allows the recipient to modify an aircraft from its original design. And last month Eastern acquired a repair station in Kansas City, Missouri, with six hangar bays that will remodel the 777s.

Controlling the conversion process gives Eastern the ability to quickly get aircraft into commercial service because aviation maintenance shops have long order backlogs for converted freighters as investors, leasing companies and operators rush to meet a surge in demand for air shipping driven by the explosion in e-commerce sales and severe congestion in ocean shipping.

A full passenger-to-freighter conversion typically takes three to four months. Eastern will be able to put its 777s in a cargo configuration within two weeks.

Israel Aircraft Industries and lessor GE Capital Aviation Services are partnering on the first full conversion program for the Boeing 777, but the first plane won’t be ready for delivery until 2023 because of the extensive engineering required to redesign a plane for heavy freight. 

“We’ve been able to take a very capable airframe and turn it into what we call an express freighter very quickly. The pandemic really gave us a sense of urgency about getting this kind of capacity into the market,” Harfst said.

The prototype model is currently being converted and two other aircraft are on-site, ready to go, he added.

The FAA’s emergency exemption for U.S. carriers to fly with cargo in the cabin expires at the end of the year, although none have removed seats, and stowing boxes on seats and overhead bins has been limited. Eastern’s certificate would give it permanent authority to operate a large commercial freighter that isn’t subject to commodity restrictions imposed on conventional passenger aircraft.

Who is Eastern Airlines?

Eastern Airlines, one of the Big Four domestic carriers during its heyday in the 1970s and 1980s, relaunched with new ownership in 2018 and began flying in January 2020. 

It primarily offers scheduled non-stop passenger service from New York and Miami to cities in Ecuador, Paraguay and Uruguay with a fleet of 10 Boeing 767 medium widebody aircraft. The target markets aren’t big enough for daily service offered by large legacy carriers. 

Eastern, American Airlines (NASDAQ: AAL), Delta Air LInes (NYSE: DAL), United Airlines (NASDAQ: UAL) and Hawaiian Airlines (NASDAQ: HA) are the only U.S. passenger airlines that have scheduled service authority with widebody aircraft. 

As a participating carrier in the U.S. Defense Department’s Civil Reserve Air Fleet, Eastern has been ferrying evacuees from Afghanistan to Philadelphia and Washington-Dulles International Airport for nearly two weeks. Under the program, carriers that volunteer for missions during national emergencies are eligible for peacetime contracts from the military. Eastern was already operating flights when the Pentagon called up aircraft from several carriers on Aug. 22.

 Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

RELATED NEWS:

NATO withdrawal from Afghanistan could further crimp airfreight supply

Stranger things: Air cargo becomes value play over ocean freight

Eric Kulisch, Air Cargo Editor

Eric is the Air Cargo Market 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 from the American Society of Business Publication Editors for government coverage and news analysis, and was voted best for feature writing and commentary in the Trade/Newsletter category by the D.C. Chapter of the Society of Professional Journalists. 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 ekulisch@freightwaves.com

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