Passenger to Freight(P2F) Aircraft Conversion Model Trend
New world-wide changes require quick and efficient answers in all COVID-19 struck industries, especially aviation.
As we have witnessed COVID-19 pandemic has changed the way people live. Due to the change of living many industries have seen an impact on global demand. One of those industries is the travel industry which was not only impacted by the passenger numbers drop but has seen an increase in the cargo demand as well.
Airline Passenger Numbers Drop
Passenger airlines have been impacted with the sharpest passenger shortage in history with a drop of revenue passenger kilometers (RPK) metrics by 52.9% year-on-year in March 2020.
Available seat kilometers (ASK) declined by 36.2% in the same period, dropping the load factor (LF) to 60.6% on a world-wide level indicated in the Air Passenger Market Analysis by the International Air Transport Association (IATA).
The RPK was an immediate impact of COVID-19 pandemic world-wide lockdowns as broadcasted by many news media companies.
Furthermore, to respond to that shortage and travel policy changes, airlines were forced to ground aircraft and cut on frequencies, as well as deploy smaller aircraft types due to the drop in demand.
Impact of Airline Frequency Cuts on Other Related Industries
Although the airline industry normally represents a smaller Gross Domestic Product (GDP) share of any economy it is highly interconnected with various sectors.
Hospitality services, such as hotels, restaurants, tourism agencies among the few have been directly impacted although the biggest burden of all has been seen in airports and aircraft manufacturing.
The hospitality industry has been impacted by the shortage of airline travel demand but has also indicated an increase in other passenger travel types, such as by road, train, or boat.
Aircraft manufacturing and airports are directly impacted, as they charge by the landing, aircraft maintenance check, or building new planes.
On the other hand, airports have seen an increasing demand in the apron parking space which was not possible to cover due to its big demand.
Therefore, airlines have started to deploy their non-used aircraft to other airports in the country or outside of it.
Due to a worldwide virtual switch and isolation regulations, companies started to implement e-commerce shopping platforms which fueled the overall cargo demand.
Airline Cargo Companies Variation and Market Insight
To fully understand there are distinctions in airline cargo carriage
Special fully dedicated freight carriers
Freight companies that have their logistic network and possess planes and vehicles to distribute cargo worldwide.
Such companies have full cargo version modified aircraft that have only one task — to distribute and transfer cargo. A couple of companies in that field include big names as DHL, FEDEX, UPS, etc.
Belly cargo
Jet aircraft can transport cargo beneath their passenger level which in many cases is a large part of their flight revenue.
Therefore, certain routes might be unprofitable or at zero profit point in a passenger revenue source, but have a big demand in cargo and thus make the flight profitable.
On the other hand, the same belly space allows only certain volume dimensions as well as has weight limitations considering passenger numbers and therefore is only possible to cater only a part of the cargo demand of a certain route.
Due to that reason certain routes have both passenger and full cargo aircraft service.
Passenger to freighter conversions
What do airlines do with old aircraft if they own them?
They either scrap them or reconfigure them from passenger to freight (P2F) variants to meet the demand for cargo flights if it exists. By this P2F conversion aircraft’s age is being prolonged while the task is a little bit different.
Any airline will firstly choose a P2F than invest in a completely new cargo aircraft as the initial investment costs are lower although fuel and maintenance costs might be higher.
According to the AirCargopedia business intelligence air cargo analytics company, 90% of narrowbody freighter are converted from passenger aircraft, while only one-third of large-widebody is used on the P2F model.
Furthermore, small size jets might also be converted into combi (cargo&passengers together) or quick change (fast conversion of the aircraft hull from passenger to cargo variation).
When the world-wide data for November 2020 is incorporated
The cargo industry is still in recovery from the COVID-19 pandemic hit, although it is not far behind the same last period numbers. Cargo tonne-kilometres (CTKs) fell by 6.6% year-on-year, while it had a 1.6% growth on a month-to-month basis in favor of 2020.
Although the CTKs are on relatively solid ground, available cargo tonne-kilometers (ACTKs) are showing a -20.0% on a year-on-year basis which can be explained as a shortage of supply over demand.
The lack of capacity is the main reason why cargo numbers did not „explode“ although it had all-time high cargo LFs.
The Future of Air Travel Demand
The switch from passenger to cargo revenue impacted the airline industry while the future might also continue in that way.
Although revenue numbers are not listed, recording an all-time high LFs on the cargo level in 2020 and all-time lows on the passenger LF level confirm the above statement of the switch.
Airlines are aware of the situation and have implemented certain goals and policy changes for older aircraft which were mainly used for leisure charter on a seasonal basis or as a spare aircraft in case of a default of a newer one.
Air Canada has sold two of its Boeing 767s to be converted into freighters on a P2F model and will lease them back when they will be full freight aircraft.
The main reason for this is their chance in the policy and market demand which needs to be catered for.
Furthermore, KLM, the owner of a couple of B747 Combi aircraft (which were supposed to be phased out in April 2020) will deploy them to meet the rising demand in the air cargo market, especially in medical supplies transportation.
Therefore, the future of air transportation will see higher utilization of older aircraft through P2F conversion as the belly cargo will be slightly declining until the passenger levels are not on the pre-COVID-19 numbers.
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