Airbus arrives
Until recently, with the brief exception of an abandoned program for the Airbus A320, the narrowbody conversion space has been an exclusively Boeing-dominated affair, with the 737 and 757 variants taking the lion’s share. That changed last fall when Dresden-based PACAVI took the industry by surprise by announcing that they were going to launch a “Freighter Lite” program for the A320, and eventually the A321 (see sidebar).
From the start, Dr. Stephan Hollmann, CEO of PACAVI Group, didn’t want to do conversions the way anyone else did. After years studying the freighter conversion market, Hollmann said he wanted to turn the conversions business into a “product market,” which focuses on the needs of individual customers. “We bought a prototype aircraft to bring it around to airshows to show off its capabilities,” he said. “We want to create a show room, like in the automotive industry.”
Currently, there are about 500 older A320s on the market that need to be replaced and are ripe for conversion, he said. More than 5,000 A320 and A321 passenger aircraft have been built by Airbus since the A320 Family launched in 1988, so the feedstock is seemingly limitless at this point. There are some problems that PACAVI acknowledges, such as the A320 Family’s high-tech systems – unlike the 737, which relies on mostly mechanical systems. “They have called the A320 the Flying Xbox,” Hollmann said. “It’s full of software system integration throughout the aircraft.”
But the true prize of the PACAVI approach may come in 2018, when the larger, younger, more cargo-friendly A321s become available. Because Airbus models are based on a “family approach,” the supplementary type certificates (STCs, the certification required for all aircraft modifications) for both models are nearly identical, so most of the work will already be done and the A321s will be “automatic successors,” Hollmann said.
In May, PACAVI and GAMECO (Guangzhou Aircraft Maintenance Engineering, Co., Ltd.) launched a strategic partnership to produce and jointly market A320 and A321 P-to-F conversions at GAMECO’s facility in Guangzhou, China. A prototype for the A321 conversions is expected to enter conversion at the Guangzhou plant before the end of this year.
Given the huge head start Boeing aircraft have in the narrowbody conversion business, Precision’s McCarthy said the PACAVI A320 program will likely face some tough challenges getting started, including the fact that the A321’s cross-section is a bit wider that the 737’s, for which most ULDs were designed. “When you make a change from Boeing, you have to change to a whole new tooling arrangement, a new MRO setup, new ground support – new everything,” he said. But he added that the A321 conversions have a great future ahead because “it’s a good size for the integrators.” Generation gap
Beyond the never-ending Boeing vs. Airbus debate, there is a gray area looming in the conversion business concerning feedstock, and the transition from older to newer aircraft models. As the workhorse 737 Classics – the -300 and -400 variants – start coming to the end of their life cycles, the conversion industry is preparing for the 737 “Next Generation” series, or 737NGs, particularly the -700 and -800 variants.
The first of the NGs hit the market in 1997, and they are more efficient, fly farther and carry more payload than the Classics – but they come at a cost. The initial price tag for converting a 737NG will be higher than the costs to convert a Classic variant. But the 737 Classics, while less expensive to acquire and convert, have higher maintenance costs and are less fuel-efficient. It’s the age-old quandary of whether to trade up-front costs for operational costs, amortized over several years.
So, as the 737 Classics begin their slow fade from the freighter scene, there will be a brief period during which those who want converted freighters will delay their purchases until the price of the younger, more fuel-efficient NGs begins to drop. The length of this transition between the Classics and the NGs is anyone’s guess, but most of the conversion houses estimate it will last several years, at least.
“The NG program is an exciting thing for us,” said PEMCO’s Fedeanis. “In the next couple of years, we will start to see the 737 Classics run out, and the Next Generation -700 models will begin to emerge. It’s the right size and has the right economics. The -800s will also become popular, but they’re not ready yet – they’re still too expensive.” During the segue period for the NG, there are still about five hundred -737-400s around and about 1,100 737-300s that are suitable candidates to bridge the gap.
AEI’s Convey, however, was not as optimistic for the 737-700. “I’ve heard that some leasing companies are passing on them,” he said. “It’s about the same size as a -300, and there is a problem of finding room for a front cargo door that won’t interfere with the engine nacelles.” The 737-700 P-to-F business, he predicted, will be minimal, with “maybe 20 to 30” being converted. The 737-800, he added, will likely be the first star of the NG family, with its increased payload compared to the Classics and a “virtually unlimited feedstock.”
Chris Damianos, executive vice president, marketing – specialty markets, for aircraft lessor GE Capital Aviation Services (GECAS), said the 737-800s and 757s will both have a big role to play among the integrators over the next few years. But he also said he doesn’t see any immediate shortage coming for 737-400s. “You still see some of our customers flying Classics for 30 years,” he said. “The 737-800s will roll into growth routes and the 737 Classics are staying in service. They’re not in a hurry to retire them.”