How do macroeconomic factors influence the narrowbody and widebody freighter markets? IBA’s intelligence discloses weakening cargo load factors and air freight yields. It summarises the active freighter fleet and market supply and demand, highlighting the 737-800’s enduring domination of narrowbody conversions with a potential risk of oversupply. The 767-300ER’s lead will continue for at least three years until the A330 takes over. Finally, IBA shares the relative performance of different conversion programmes and anticipated values and lease rate trends for popular freighter types.
2020 and 2021 saw increased cargo load factors. The Covid pandemic caused a lack of capacity, with much of the global fleet absent. Belly capacity grew with aircraft returning to service leading to lower load factors and, consequently, freight yields will suffer. 2023’s yields will remain about 50% - 60% above pre-pandemic levels, a marked fall from the 104% increase between 2019 and 2022. IBA expect to be at pre-Covid levels by 2024. Boeing’s 737-800 will continue to dominate narrowbody conversion trends, 2023 is set to be a record year. Numbers are likely to be around 60; risking potential oversupply. IBA predicts around 20 A321 conversions this year, with demand strengthening. Widebody conversions are starkly led by the 767-300ER. However, enthusiasm for the A330 is growing and IBA foresees more conversions from 2024 and 2025. It is unlikely to topple the 767 until 2026 at the earliest; 2027 is more probable. The relative conservativism of Airbus’ conversion programmes will limit numbers in the region of 18-20.
The narrowbody active fleet is 737-800 heavy, the pace at which it has overtaken the 737-400 is a surprise. Huge demand has resulted in 200 conversions of -800s in just 5-6 years. In contrast, the 737-400 would have taken 20 years to produce equivalent volumes. The 757-200 still eclipses other P2F conversions but in time the 737-800 will replace it. A321-200 production is growing but it is still early days. As the magnificent 747-8F’s 12-year contribution towards 51 years and 4 generations of 747 production concludes, it is unclear what will replace it in the widebody conversion space. The Boeing 767 family remains strong as does the 777F. The A330P2F continues to grow, and numbers will proliferate over the next decade alongside the A350 factory freighter once that programme gets its “decollage”.
Half-life market values of a 20-year-old aircraft differ little between January and June 2023 reflecting natural depreciation but IBA urges slight caution over potential market weakening. Converted narrowbody values and lease rates have softened compared to widebodies which are in tighter supply. Lease rates on the A321-200 are still wide-ranging. Recent years’ rates of over $200K are now dipping below that; yet at the same time rates of around $230K are still being seen, variances reflecting greater differences in age, operator and country risk. Buoyant rates on the A330-200 and 300 P2Fs as high as the mid $400Ks can be achieved due to younger aircraft being converted.
Click here for slides and the recording of the latest IBA Insights on the narrowbody and widebody freighter markets.