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.
“Having a block of sister ships with close serial numbers is a dream come true for fl ight operators,” he exclaims. Consequently, McCarthy expects that beginning in late 2009 and into 2010 that the feedstock, demand and capital issues will finally meld and that the conversion market will pick up pace.
“We will see a new breed of operators emerging in small pockets of the world, rather than the traditional cargo operators who have stagnated in their fleet renewal plan,” he says.
Best-in-class
While a number of companies are in the conversion business, Precision Conversions entered the market with a focus on building a best-in-class freighter product that meets the needs of operators and owners alike.
“We believe that the current success of the full 15 pallet 757-200PCF demonstrates a unique focus and commitment to our mission,” McCarthy emphasizes. “And, with the recent introduction of the High Payload 757-200PCF, we have maximized the utility of the 757-200, which will benefit high-density cargo operators.”
Currently, Precision Conversions is the only conversion company that off ers a full 15 pallet position 757-200 freighter. Modifi cation work on the aircraft is currently carried out at Flightstar Aircraft Services in Jacksonville, Florida.
On order
To date, the company has re-delivered 20 conversions and currently has one undergoing modification for Capital Aircraft Management (CAM) at the Flightstar Aircraft Services facility in Jacksonville, Florida.
“We have agreements in place for 47 options on our conversion with our existing customer base and are in discussions with several new customers,” McCarthy reveals.
The initial downtime to production was 110 days. However, the company has since reduced that time to under 90 days.
“Of course, other customer driven requirements, such as maintenance, may extend the overall downtime of an aircraft,” McCarthy adds. “But the conversion requirements will stay between 85 and 90 days.”
Clients are always concerned about delivery and cost factors.
“From a production side, there can be a risk of delay in the modification,” he admits. “This generally will hold true for a new program. However, the Precision Conversions program is established, so this minimizes any concern of delay.”
With today’s market making financing tighter, some operators find raising the capital necessary for a new generation freighter may be a problem.
“Consequently, we will most likely see more aircraft leasing based around freighters,” he says.
Current focus
For now Precision Conversions is entirely focused on building and supporting the best 757-200 freighter in terms of conversion functionality, operating economics and reliability. Its current operator base includes Icelandair Cargo, Shanghai Airlines International Cargo, Ethiopian Airlines Cargo, Gestair, Vargilog, CargoJet, Blue Dart and CAM.
“As you can see, the reach and demand for our conversion is global,” McCarthy remarks. “Th ere is no one specifi c region that favors this freighter over another region. It is entirely dependent upon the nature of each individual cargo business no matter where they are located.”
Precision executives contend, however, that the Chinese market will be a perfect fit for the 757-200PCF given that country’s continued economic growth, westward expansion, and need for intra-country and regional shipments. For that reasons, the company maintains a director of Business Development, David Chen, specifically for the People’s Republic of China.
A replacement for other types
Overall, Precision executives believe the 757-200PCF is a replacement for several freighter types, including the B- 727, DC-8, DC-9, and B-707.
“There are currently over 490 of these aircraft still in service but they are rapidly becoming obsolete due to the general aircraft age that leads to excessive maintenance costs and more importantly, the skyrocketing fuel prices,” McCarthy says. “Operators of the older aircraft have added fuel surcharges to help cover operating expenses, but we question how long the industry will continue to pay such surcharges when more efficient freighters are available.”
Precision executives also see operators such as Icelandair, which does not operate older generation aircraft, simply add the 757-200PCF platform to their fleet because of their favorable operating economics.
“Additionally, we are seeing new entrants to the 757-200 freighter market because of the aircraft operating economics,” he says.
Customers may face higher capital acquisition costs for newer generation aircraft, but soon find these aircraft are more productive and cheaper to operate over the long term.
