Aircraft valuation and conversion economics aligning

While demand for air cargo capacity has waned with global economic woes and record high oil prices, conversion experts believe there is still sufficient demand to place converted freighters with carriers.

BlurDart Brian C. McCarthy CAM CargoKet Ethiopian Airlines Cargo Gestair Vargilog Icelandair Cargo Precision Conversions Shanghai Airllines International Cargo

The conversion market is shifting. Whereas several years ago airlines held onto productive assets such as the B757, added by the fact original equipment manufacturers (OEMs) were slow to deliver new aircraft, companies that converted aircraft found their feedstock largely unavailable.

“This was also a time when air cargo demand was strong,” says Brian C. McCa-for Portland, Oregon-based Precision Conversions. “Consequently, the conversion market was met with not much enthusiasm. Currently, we are starting to see feedstock aircraft come available, but the deals are taking longer to materialise because of the tight capital markets.”

While the demand for air cargo has waned, executives at Precision Conversions, a company formed in 2001, believe there is still sufficient demand to place converted aircraft with operators. If fact, now that the airline industry needs to be concerned about the cost of every drop of fuel it takes to fly every cubic foot of an aircraft, filling a aircraft with cargo matters.

“The question I’m asking to anyone looking at cargo freighters in the future is: Does the aircraft have enough cargo on board to pay for the airplane,” states McCarthy.

He predicts that carriers will begin to look at purchasing aircraft that are bigger so that they can carry a maximum amount of payload to pay for its operating costs. Having a fleet of “sister ships” will be particularly attractive since like-aircraft save money in training pilots and crew as well as for maintenance and repair.