It might not look like it now, but this stripped down
Boeing 777 used to be a passenger plane for one of
the world's biggest airlines. The galleys have
been dismantled. The overhead bins are gone and
the more than 300 seats that carried travelers
around the world for more than a decade have been
unbolted and carted away.
This plane is getting turned into a cargo
aircraft.
Nothing like some rivet guns going off.
Delta retired the plane in 2020 when travel demand
collapsed in the Covid 19 pandemic.
It's just one of hundreds of older jets.
Airlines retired during the industry's biggest crisis.
Others were simply replaced with newer planes.
The old jets are being put to a new lucrative use
hauling goods from produce to pharmaceuticals or even
cars around the world.
Demand to convert passenger planes into cargo haulers
surged over the past few years, with companies from
Amazon to small factories racing to get items
delivered as fast as possible.
And instead of scrapping it or tearing it apart for
parts, we actually can give it a very meaningful second
life that can serve in a whole new mission for for
well over 20 years or the life cycle that the customer
needs.
The air cargo market has moderated from record highs,
but the business of turning passenger planes to cargo
aircraft is still booming, with slots to convert planes
sold out for several years.
We turn customers away pretty much on a daily
basis.
CNBC traveled to one of the biggest hangars in the
country in Fort Worth, Texas to see how older
passenger planes get turned into cargo jets, a process
that can cost more than $30 million per plane.
Airplanes carry high value and time sensitive goods
around the world. Air cargo makes up less than 1% of
global trade volumes, but accounts for 35% of the
value. And customers pay a premium to fly their goods,
compared with ocean freight, which can take
weeks. These flown goods fly in the bellies of
passenger planes in aircraft built specially to
haul cargo and passenger planes like these that get
converted into freighters.
Passenger freighter conversion market has been
around for for 35 years.
I mean, it's there's always been a need for freighter
airplanes and there's never been an adequate supply of
aircraft that come from the manufacturers as new
products. So the it's a good second life for
airplanes.
Converted freighters make up 67% of the world's cargo
planes. Boeing, which along with Airbus, dominates the
commercial airplane market, has been converting
passenger planes into cargo aircraft for more than 40
years.
We can take an aircraft that a passenger paying customer
is is essentially complete with.
We give it a second life.
During the pandemic, air cargo rates soared to a
record. Port congestion in the Los Angeles area,
coupled with anemic passenger airline schedules,
put a chokehold on air freight capacity while
consumers kept buying goods online and supply chain
strains continued.
In December 2021, just before the holidays, the
cost to fly cargo from Hong Kong to Los Angeles hit a
record. At that same time, companies that convert
passenger planes to cargo jets like Singapore's ST,
Israel Aerospace Industries, Precision, Pemco
and Boeing saw a slew of new orders.
We don't see it as being peaked.
We're on a growth trajectory and we know that
we've got a competitive set of options today in the
marketplace.
Last year, a record 164 of them were converted.
It's been extremely high on uncharacteristically high
since Covid occurred.
I mean, you know, companies that were doing 7 to 10
airplanes a year are now doing 25 to 30 airplanes a
year on in the conversion market, if not more.
So it's just absolutely exploded since that event.
Converting a passenger plane into a cargo plane is a big
job. It takes months.
Dozens of people are involved, engineers and
technicians and regulators who have to approve the
design. The process for a 777 can cost more than $30
million and take longer than four months.
Here at Aspire MRO in North Fort Worth, Texas,
technicians are working on converting Boeing 777
passenger planes into giant freighters, which can carry
more than 100 tons.
Mammoth Freighters converts passenger planes into cargo
aircraft. Working with companies like Aspire MRO.
The two companies are backed by New York
investment firm Fortress Investment Group.
Converting an airplane like the 777 includes lots of
time consuming tasks.
One of them is getting all the passenger seats out as
they leave behind debris in their wake, like pistachio
shells and small children's toys.
The typical 777 has somewhere around 400 seats.
You could see it close to 500.
You could see it as few as 300.
Based on do you have a first class, a business
class and economy or just just your economy?
Seats are bundled up and resold.
If not discarded.
Other parts come out to from the siding to
lavatories to galleys and insulation.
So much is stripped out, it looks unrecognizable from
its days as a passenger aircraft.
Then comes the hard part.
The floor is reinforced with aluminum beams to
handle the weight of cargo containers, and then the
cargo door is cut.
The most time consuming job is the actual installation
of the cargo door itself, cutting that that large
section out of the aircraft and time consuming is
probably reinforcing the floor, preparing that
because the aircraft is so large.
The price to send goods by air is just a fraction of
what it was at its peak.
Supply chain shortages have eased.
Consumers are no longer quarantined, and some
companies are warning of an economic pullback as the
public grapples with higher interest rates.
Fedex, for example, under pressure to cut costs, said
it would park some aircraft and reduce routes.
But many companies are still betting on strong
demand for air cargo planes in the future.
Boeing has increased capacity to ramp up cargo
conversions.
We've got strong order base for our three sevens.
We've got over 250 orders and we've already delivered
130 plus into service.
Our delivery last year was a two fold of the year
prior. And as we look at our six sevens, also very,
very strong order base with over 100 secured orders,
we've just crossed over 70 plus into service.
And both Boeing and its rival Airbus are developing
new wide body freighters that use less fuel than
older models.
Costa Rica, China, Singapore, United Kingdom.
And then this last year, we we announced reopening of a
conversion line in Canada that is just now starting.
And then most recently, we made a public announcement
of our intent to place conversion line into India.
So we we definitely are looking at what we currently
have, the demographic of that and how do we best
respond to the needs of the market, both from a capacity
and a geographical location.
Amazon in 2016 launched its own air cargo unit using
converted freighters.
It plans to start having Airbus A330 join its fleet.
Those wide body planes will be operated by Hawaiian Air,
the latest airline to operate flights for the
division at the e-commerce giant.
And anyone wanting to snag a new freighter, at least a
777 will have a long wait ahead.
It would be approximately three years at this point in
time. Any program will go through a ramp up and a bell
curve type, you know, peak requirement.
And then it'll then it'll fall down to more of a
steady state.