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Leasing companies secure slots to convert aircraft for cargo

AviaAM signs with Mammoth Freighters for B777 makeover; others agree to Airbus A321 conversions

SmartLynx Airlines is building up a cargo fleet that will eventually have 20 Airbus A321 aircraft. (Photo: SmartLynx Airlines)

Several aircraft leasing companies on Thursday reserved production slots with aftermarket overhaul specialists to convert used passenger aircraft to cargo jets. 

The flurry of transactions illustrates that cargo operators continue to have an appetite for large and standard freighters even as demand for air shipping cools off in a murky economic environment.

Lessors and investors have shown greater interest in freighters since the pandemic as airlines downsized and turned to more modern aircraft to save money. Conversions are a way for leasing companies to give assets a second life and continue generating returns at a lower cost point than a fresh factory freighter.

Early stage aviation engineering firm Mammoth Freighters said Thursday AviaAM Leasing has committed to cargo conversions for six Boeing 777 passenger jets, bringing the total of firm orders to 29. 

AviaAM Leasing, part of Cyprus-based aviation services conglomerate Avia Solutions Group, is the launch customer for Mammoth’s 777-300 aftermarket redesign. Cargojet, a large all-cargo carrier based in Canada, has signed agreements for four 777-200 converted freighters, and Mammoth says it has 19 orders from undisclosed customers. Twelve more units have nonbinding letters of intent attached to them.

AviaAM did not indicate where the modified jets will be placed, but Mammoth Freighters said they will be deployed on European Union-U.S. or China-EU routes. The planes will be able to carry nearly 100 tons of cargo, slightly less than the maximum payload for production freighters. The 777-300s are slightly longer and have more volume than the 777-200s, which is beneficial for carriers that specialize in parcels.

All the 777 freighters flying today were originally built by Boeing (NYSE: BA) at its factory in Washington. Mammoth and Israel Aircraft Industries are the first companies that have developed programs to convert retired 777 passenger aircraft and remodel them to carry cargo containers on the main deck. Retrofits include gutting the cabin interiors, adding a large cargo door, reinforcing the floor and installing new fuselage skins and cargo-handling systems. Aviation safety authorities must certify the structural design changes before the planes can enter commercial service.

Mammoth, backed by funds managed by Fortress Investment Group, said it will begin reconstructing the first AviaAm aircraft in early 2023 at sister company Aspire MRO. Fortress Investment bought the heavy maintenance shop last year and renamed it. The former American Airlines maintenance facility is located at Fort Worth Alliance Airport in Texas and has 840,000 square feet of space, six widebody hangar bays and overhead cranes for modification and maintenance work. 

A Mammoth Freighters 777 being retrofitted at the Aspire MRO facility. (Photo: Mammoth Freighters)

Mammoth has already secured additional facilities at the airport, which it says are being used to accommodate the company’s warehousing, assembly for main cargo doors, logistics and kitting requirements. The 2-year-old company is developing plans for additional conversion sites in other parts of the world.

IAI has indicated the first 777-300 will roll off its production line during the first half of next year. IAI says it has more than 50 orders, including four from Cargojet.

Airlines permanently discontinued flying older widebody planes during the pandemic. The extra supply lowered values and made purchases of previously owned assets more economical for leasing companies and cargo airlines interested in transforming them.

The addition of 777 converted freighters expands and diversifies Avia Solutions’ portfolio of assets as it looks to expand air cargo business over the long haul. Chairman and CEO Tadas Goberis said the new aircraft will replace aging freighters and accommodate growth. Earlier this year, the company said it plans to have 25 converted aircraft of different types within four years. 

AviaAm is already active in the narrowbody freighter segment. It is sending 10 737-800s to Boeing’s aftermarket conversion program. So far, three have been delivered to Icelandic air cargo company Bluebird Nordic, another Avia Solutions Group holding. 

A321 cargo makeovers

Avia Solutions is already actively converting freighters in the narrowbody segment. 

On the same day as AviaAM’s deal with Mammoth was announced, Latvia-based SmartLynx Airlines, another Avia Solutions subsidiary, revealed it will lease four Airbus A321 passenger-to-freighter aircraft from Aero Capital Solutions.  

Under the arrangement, SmartLynx sold the planes to the Austin, Texas-based lessor and will lease them back once conversion is completed. In May, SmartLynx partnered with APOC Aviation, a leasing and spare parts provider, to buy four A321s from Finnair for the express purpose of making them freighters. 

The conversions are expected to be completed by the middle of next year, bringing SmartLynx’s A321 freighter fleet to 15 units. There are four aircraft currently certified for commercial operations, all flying for DHL Express, said spokeswoman Arnita Beinarovica. Company officials have set a goal of being the largest A321 freighter operator in the world and say they plan to have 20 A321 cargo jets by the end of 2023. 

Two of the SmartLynx aircraft recycled through Aero Capital will go to Elbe Flugzeugwerke GmbH (EFW), an Airbus joint venture based in Dresden, Germany, and two will be converted by U.S.-based 321 Precision Conversions, a joint venture between a conversion shop and Air Transport Services Group (NASDAQ: ATSG), Beinarovica said via email. The production slots are controlled by SmartLynx.

SmartLynx has a preexisting order with EFW for six passenger-to-cargo changeovers, with the first one scheduled for redelivery in November. 

“The current demand for this type of aircraft is very high — even higher than the conversion capacity, and we are happy to be one of the first airlines to believe in the program and secure multiple P2F conversion slots,” SmartLynx CEO Zygimantas Surintas said in news release Friday. “I can admit that at the beginning there were doubts if it was the right move for SmartLynx, but from today’s perspective, taking that risk and diversifying our business portfolio with cargo operations has proven to be the right choice, In addition to tapping into a market that has grown during the pandemic, the addition of freight business helps offset the seasonal issues that [passenger charter operators] typically face.”

SmartLynx said its main focus will remain passenger operations, but cargo’s share of business is expected to grow from 10% to around 40% in the next two to three years.

The A321 conversion represents a new freighter option that first became available two years ago. EFW was first to market and boasts a sales lead over 321 Precision Conversions. Aviation experts say the aircraft has many upsides as a successor to aging Boeing 757s and competitor with the more established 737-800 converted freighter. The A321 and the 737-800 are both much more fuel efficient than previous generations of standard freighters, but the A321 has more capacity because it can carry small containers in the belly hold.

With a gross payload capability of about 61,800 pounds and a range of 2,300 nautical miles, the A321 is highly prized for domestic and regional express operations.

“The new Airbus A321 freighters have helped us reduce flight operational costs by up to 15% and ensure up to 20% lower fuel consumption as compared to other aircraft in the class,” said Surintas.

Aero Capital Solutions is adopting a hybrid strategy by adopting the A321 converted freighter after previously ordering conversion jobs for 40 737-800s

“We are eager to break into the A321 market with SmartLynx being our kickoff customer,” said Jason Barany, CEO and founder of ACS. 

A330 conversions

Meanwhile, AerCap, the largest aircraft leasing company in the world, announced Thursday it has placed a firm order with EFW for 15 A321 converted freighters, with an option for 15 additional units. The feedstock for the conversions will come from passenger aircraft in AerCap’s existing portfolio.

AerCap already has placed a dozen previously modified freighters with cargo operators. 

To meet rising demand for freighter conversions, EFW and Singapore-based partner ST Engineering, have set up new conversion sites in China and the U.S. for all their conversion programs, including ones for the new A320, the smaller sister to the A321, and the medium widebody A330.

EFW last week added Turkish Technic, the maintenance, repair and overhaul center of Turkish Airlines, to its roster of conversion contractors for the Airbus A330. The first conversion for EFW is planned to be carried out at Turkish Technic’s facility in Istanbul in the third quarter of 2023.  

The A330-200 converted freighter has a gross payload of 67 tons, while the larger A330-300 can carry up to 69 tons.

EFW and other conversion specialists have a strong orderbook, forcing some customers to wait one to two years for deliveries.

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


Mammoth Freighters to convert 1st 777s for Cargojet

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. He won Environmental Journalist of the Year from the Seahorse Freight Association in 2014 and was the group's 2013 Supply Chain Journalist of the Year. In December 2022, Eric 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. He has appeared on Marketplace, ABC News and National Public Radio to talk about logistics issues in the news. Eric is based in Vancouver, Washington. He can be reached for comments and tips at [email protected]