Ethiopian Airlines is leasing three Boeing 767 freighters to augment its rapidly growing all-cargo fleet as it pursues a strategic road map to make the cargo division a stand-alone profit center with revenue of $2.9 billion by 2035.
Titan Aircraft Investments, the joint venture between Atlas Air Worldwide’s (NASDAQ: AAWW) aircraft leasing subsidiary and Bain Capital Credit, announced Monday it has placed three 767-300 Extended Range converted freighters on long-term leases with Ethiopian Airlines Group. The 767 is a new aircraft type for Ethiopian Cargo, which currently operates nine Boeing 777 freighters and four 737-800 converted freighters.
The medium widebody aircraft were owned by Ethiopian. The transaction was structured as a sale leaseback, an Atlas Air spokesperson confirmed. Ethiopian sold the aircraft to Titan and will lease them back in a creative financial transaction to raise capital.
Ethiopian is remodeling the aircraft to carry heavy containers on the main deck at its maintenance repair facility in Addis Ababa under a partnership struck last year with Israel Aircraft Industries, which developed the modification kit.
Africa’s largest cargo network operator will take delivery of one reconfigured freighter this month, with the second planned for delivery by year’s end and the third scheduled to be completed in 2023, said Titan Aircraft Investments.
The production schedule slipped by about two months as Israel Aircraft Industries and other conversion specialists cope with supply chain delays for materials and components.
Atlas Air Worldwide is a major provider of outsourced aircraft and aviation operation services. It is best known for cargo airline Atlas Air, which flies the world’s largest fleet of Boeing 747s and other cargo jets for airlines, logistics providers, express delivery companies, e-commerce platforms and some retailers. It also is the majority shareholder of Polar Air Cargo.
Titan Aircraft Investments’ freighter fleet now stands at 10 aircraft, five of which are Boeing 767 passenger-to-freighter conversions.
Scaling up cargo business
In May, Ethiopian placed an order with Boeing (NYSE: BA) for five factory-built 777 freighters, scheduled for delivery between September 2023 and 2025, and is officially evaluating the purchase of five next-generation 777-8 cargo jets due to enter the market in 2027.
Expanding the freighter fleet is part of Ethiopian Airlines’ 15-year strategy for growing its cargo and logistics business to provide multimodal logistics services worldwide. The company has started construction in Addis Ababa of what it calls the largest e-commerce air terminal in Africa and expanded its refrigerated handling capabilities for pharmaceutical products.
Ethiopian envisions a fleet of 24 freighters serving 70 destinations, up from 66 today, that will carry 1 million tons of cargo by 2035. Last fiscal year it transported more than 750,000 tons of cargo.
Cargo was instrumental for the airline during the pandemic, generating nearly 50% of the company’s revenue in 2021, Abel Alemu, managing director of Ethiopian Cargo and Logistics Services, said on a recent episode of STAT Media Group’s “Cargo Masterminds” podcast.
When COVID essentially stopped passenger flying, Ethiopian’s maintenance facility reconfigured 25 jets without seats to carry cargo in the cabin. The auxiliary freighters have gradually been returned to passenger service, with “preighter” operations winding down further after the European Union’s temporary exemption for cabin cargo without approved safety features expired July 31.
Alemu said Ethiopian is also considering the A350 freighter, Airbus’ answer to the Boeing 777-8.