Welcoming the addition of Boeing as a competitor in the B737-800 Next Gen passenger-to-freighter conversion market, Robert Convey, senior VP of sales & marketing at Aeronautical Engineers, Inc. (AEI) said that with a market demand for up to 400 of the converted B737-800s there is room more players.
AEI was the first to market with a conversion product for this aircraft type when it announced in mid-2015 that GE Capital Aviation Services (GECAS) would be the launch customer for the AEI B737-800SF programme with up to 20 conversions on order.
“The market, I believe, is going to be the 200 to 400 quantity, so the room for multiple players is there – this isn’t a market where one player is going to get everything,” Convey told Payload Asia on the sidelines of the recent Air Cargo India event.
Boeing’s launch of its Next-Generation B737-800 Boeing Converted Freighter (BCF) is based on orders and commitments for up to 55 conversions from seven customers – most of which are China-based.
“Boeing will serve a certain demographic – right now it seems to be China and certain operators will pay a premium for the OEM Tier 1 support, others will not. I think its going to be an AEI-Boeing market split – there may be a few other players but I think the primary players will be AEI and Boeing given AEI’s history in narrowbody conversion.”
Convey notes that AEI sees a very large market for its product initially in Europe, having made inroads with orders from GECAS and ACG, alongside orders from another three customers that AEI is getting ready to announce.
“We see penetration in China, but we also see penetration in Europe. I think the Americas will hold off a little bit longer just like thay did with the -400.” He also noted that the -800 will likely show up in age-restricted markets like Thailand, India and Russia. But Convey added that the irony here is that these countries with the strictest age restrictions are also the ones who can least afford a high lease rate, or very expensive freighter.
“We’ve got three aircraft in Russia and when we signed that deal three or four years ago we thought there would 20-25 airplanes by now. The truth is, the freight doesn’t justify a US$130,000 per month lease rate and the AN12 is cheap – free in some cases – and that’s where the freight moves on.
“So it will be interesting to see how those countries play,” he said, adding that China certainly has a strong demand for the B737-800 with its big Internet culture that demands next day service. This has fueled the growth of companies like SF Express, YTO and China Post. “I see India having the same demands, the question is whether the freight will justify the cost.”
“So I think its good, we needed a competitor and we knew we weren’t going to alone in the market and we’re happy to have Boeing there. Boeing will be a tough competitor, but I think it’s good for the market – it keeps everybody honest and makes us work harder,” he added.