While air travel has been severely hit by the COVID-19 pandemic and online shopping soared, converting passenger planes into cargo jets has become an opportunity.
For Israel Aerospace Industries, a state-owned aerospace company, the growth of e-commerce and shipping industry is an opportunity. It converts grounded passenger planes into cargo jets for global giants like Amazon, DHL and UPS.
According to the company, it now transforms 25 planes every year, up from the 18 metamorphoses it operated annually before the COVID-19 pandemic. Officials say they are fully booked for the next four years.
The company argues the conversion, about $35 million an aircraft, is much more economical than buying a new cargo jet four or five times that price. They can recycle Boeing 737s as well as the much larger 767s. The company announced on February 15 it had completed its 100th conversion of a B767-300, claiming the world leadership in conversions of this model. The first conversion of a Boeing 777 will soon take place in Abu Dhabi as the U.A.E. and Israel relations have been warmer since the Abraham Accords.
Converting a plane takes about 3 months. The process is more than removing seats and installing new doors. After its conversion, a B-767 is able to carry 60 tons of goods on two floors.
Online buying has exploded during the pandemic, demand for shipping has skyrocketed and costs as well. Amazon for instance increased its Prime membership from February 18 in the United States, from $119 to $139, which was partly justified by rising shipping costs.
A long-term viable market?
Before the crisis, 50% of all global air cargo traveled in passenger planes. But when the pandemic began, some 80% of passenger planes stopped flying. The price of freight shipped by sea soared. Air freighters needed a workaround and grounded passenger planes provided one.
As the pandemic wanes, it’s still unsure if people would lose their online shopping habits even if travel restrictions fade.
Despite a rebound in passenger air travel, the international tourism industry doesn’t expect a return to pre-pandemic levels before 2024. It regularly postponed its forecast to another six months.
“We don’t anticipate passenger network recovery to be for several years,” said Glyn Hughes, director general of the International Air Transport Association. Air cargo demand, he said, is expected to grow by as much as 5% per year. Meanwhile, the International Trade Administration, part of the U.S. Commerce Department, forecasts that worldwide e-commerce sales will continue to grow steadily by about 8% per year through 2024.
IAI is not the sole player in the market, competing for example with Boeing, but as emerged as a top player.
However, Richard Aboulafia, managing director of the consulting firm Aerodynamic Advisory based in Michigan said that while demand for refitted planes is robust, there is a danger that IAI and others are betting too heavily on the market. “There’s that risk of, will demand stay high?” he said.