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Lufthansa invests in next-gen Boeing 777-8 freighters

Large cargo jet order coincides with Embraer freighter conversion milestone amid strong shipping growth

Lufthansa Cargo will be the second customer for Boeing’s next-generation freighter, the 777-8, after announcing on Monday the largest investment in company history with an order for 10 large cargo jets that will increase capacity by two-thirds over the next decade.

Down a level, aircraft manufacturer Embraer said the first sale of converted E190 regional jets will go to Nordic Aviation Capital, which will send 10 passenger aircraft from its fleet to Brazil to be modified.

The decisions reflect optimism by suppliers and operators in the continued growth of the air cargo market beyond the pandemic-fueled boom of the past two years. 

Deutsche Lufthansa’s cargo division said it will purchase three current-model 777 freighters to meet short- and medium-term demand, and seven 777-8s. The German flag carrier also said it is extending leases on two existing Boeing 777 cargo jets, which expire after 2024, for another seven years.

The multipronged approach involves acquiring one pre-owned freighter as soon as July and placing orders with Boeing for two factory-built 777s. Boeing will also build the seven 777-8s, which are scheduled for delivery between 2027 and 2030.

Lufthansa (DXE: LHA) also is the launch customer for the passenger version of the technically enhanced 777, now called the 777-9, with a firm order for 20 aircraft. During the development phase the plane was referred to as the 777-X.

Lufthansa Cargo, ranked in the top 15 cargo carriers in the world, currently controls 15 777 freighters, four of which are operated by DHL Express joint venture AeroLogic. This spring It also began utilizing two Airbus A321 converted freighters, a narrowbody aircraft that aviation engineering companies only recently introduced to the market. The cargo airline also manages booking and handling for shipments carried in the parent company’s vast global passenger network, as well as by Lufthansa subsidiaries Austrian Airlines, Brussels Airlines and Eurowings Discover.

The German carrier’s order for the 777-8 revives momentum for the product after Boeing’s (NYSE: BA) large deal in late January with Qatar Airways. European rival Airbus last year launched an A350 freighter model based on its popular widebody passenger aircraft and has secured 29 orders and tentative commitments from five airlines since November. 

Boeing last month pushed back expected delivery of the 777-9 until 2025, more than a year later than forecast, and said it will pause production until the end of this year after reassessing how long it will take to meet certification requirements. The production pause is designed to prevent an inventory buildup that could require changes to meet the final certification, but it will add $1.2 billion to the project’s cost. Boeing has been building 777Xs for a couple of years and has several stored at its Everett, Washington, facility.

Boeing previously wrote off $6.5 billion on the 777X program because of development problems. The plane is five years behind Boeing’s original due date.

At an airline industry conference in Dublin on Monday, Air Lease Corp. (NYSE: AL) Executive Chairman Steven Udvar-Hazy said the company decided against buying the 777X because there are too many uncertainties and delays with the program. Instead it became the launch customer for the A350 freighter. CEO John Plueger separately noted that Air Lease Corp. received requests from two airlines interested in the 777-X about the availability of the A350 freighter.

Boeing said the 777-9 production pause opened the door to make more current model 777 freighters. International emission regulations require Boeing to stop production of the current 777 variant in 2027. 

The new 777s complement Lufthansa’s fleet of large cargo jets. Company officials said cargo capacity, fuel efficiency and maintaining a single-fleet type were key factors in Lufthansa’s investment decision.

Lufthansa also purchased seven 787-9 passenger jets as part of its fleet modernization effort. Boeing agreed to move up their production to compensate for the 777-9 delays. With the new investments, net capital expenditures will be about $2.6 billion through 2024.

The 777-8 has a payload capacity about the same as a 747-400 freighter while offering a 25% improvement in fuel efficiency, emissions and operating costs, according to Boeing. It also will have 17% more cargo volume than the legacy 777 freighter, along with a 15% fuel benefit. Technological improvements include a new carbon-fiber composite wing and fuel-efficient GE engines. With a range of 4,410 nautical miles, the 777-8 will enable airlines to make fewer stops and reduce landing fees on long-haul routes. 

“These major investments in Lufthansa Cargo are a sign of confidence in the future development of the airfreight market and the role that Lufthansa Cargo will continue to play in it,” said CEO Dorothea von Boxberg in a news release about the fleet upgrade.

The 2021 Boeing Commercial Market Outlook projects a 70% increase in the global freighter fleet by 2040, including about 450 new large widebody freighters.

Embraer lands first freighter order

Meanwhile, Nordic Aviation Capital, which specializes in leasing regional aircraft, has agreed in principle to take up to 10 production slots for converting the E190/E195 jet to a freighter, the companies announced Monday. First deliveries will begin in 2024. 

Nordic Aviation said passenger-to-freighter conversions are a new element of its portfolio strategy, allowing it to continue receiving investment returns by extending the useful life of older aircraft.

Embraer launched the E-Jet conversion program in early March. The Brazilian airframer projects a market of about 700 aircraft that could be retrofitted for dedicated cargo operation over the next 20 years. It says there are a number of 10-to-15-year-old E190/195 aircraft that are already good candidates for cargo transformation.

“There is unprecedented demand for airfreight, especially for same-day deliveries and decentralized operation, the perfect mission for E-Jet-sized freighters,” said Embraer President and CEO Johann Bordais. 

Embraer says the E-Jet freighters will fill the gap in the freighter market between turboprops and narrowbodies such as the 737 and A321. The E-Jet offers 50% more volume and three times the range of large cargo turboprops, and up to 30% lower operating costs than standard jets. 

Data from IBA, a London-based aviation consulting and aircraft valuation firm, shows that Nordic Aviation Capital owns 145 E-Jet series aircraft, including 105 E-190s. Nordic is the largest owner in the world of the E-190, with almost twice the number of aircraft belonging to lessor AerCap.

Embraer’s venture into reconfiguring aircraft for cargo “should also help fill quite a substantial capacity chasm between the ATR72F/Q400F and Boeing 737 Classics. Clearly there are routes out there which may be a bit of a stretch for turboprops but don’t quite justify use of a Boeing 737 or other narrowbodies. That’s where the E190F and 195F fit in,” said Jonathan McDonald, IBA’s manager of classic and cargo aircraft.

Conversions will include the installation of a large main deck front cargo door, reinforced flooring, a protective shield behind the cockpit, a smoke detection system and fire extinguishers in the upper compartment, and a cargo handling system. 

The E190F will have a payload of 23,600 pounds, while the E195F will carry up to 27,100 pounds. 

Embraer is the latest aircraft maker to launch a freighter program. In addition to the new Boeing and Airbus freighters, Textron recently began production of the Cessna SkyCourier large turboprop freighter and announced its first delivery to FedEx Express (NYSE: FDX) on Monday.

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


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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 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 [email protected]