Baby Boeing converts as China’s express market takes off

Baby Boeing converts as China’s express market takes off

The enormous growth in China’s e-commerce market has driven up demand for domestic air express services and encouraged Boeing Co. to offer freighter conversions for its popular B737 passenger plane.

So far the U.S. firm has received 30 orders and 25 commitments for the 737-800BCF (Boeing converted freighter), mostly from China airline customers.

"While the recovery of the global cargo market has been slow, we see demand for freighters, such as the 737-800BCF, that will carry express cargo on domestic routes," said Stan Deal, senior vice president, commercial aviation services at Boeing Commercial Airplanes.

"Over the next 20 years, Boeing forecasts customers will need more than 1,000 converted freighters the size of the 737, with China's domestic air freight carriers accounting for nearly one-third of the total market."

Seven customers are waiting for the converter single-aisle freighter, including the biggest names in China’s express aviation sector. YTO Airlines, based in Hangzhou near Shanghai, has ordered 10 conversions with commitments for 10 additional conversions. China Postal Airlines, based in Beijing, has ordered 10 conversions, and SF Airlines in Shenzhen has committed to acquiring the plane, although Boeing did not give the number. Other customers include leasing outfit GE Capital Aviation, Bulgaria’s Cargo Air and several unnamed airlines.

There is still some time before the first 737BCF opens its side door and begins accepting cargo. The first 737-800BCF is expected to be delivered in the fourth quarter of 2017.

The 737-800BCF carries up to 52,800 pounds (23.9 metric tons) of cargo, flying routes of nearly 2,000 nautical miles (2,292 miles). Twelve pallet positions — 11 standard pallets and one half-pallet — provide 5,000 cubic feet of cargo space on the main deck.

Existing passenger airplanes will be modified at facilities located near conversion demand, including Boeing Shanghai. Modifications include installing a large main-deck cargo door, a cargo-handling system and accommodation for up to four non-flying crew members or passengers.

E-commerce has shrugged off the slowdown of China’s economy, with online retailers grabbing an increasing share of domestic consumption. While high-speed rail links are developing fast, there is limited capacity and air express remains the most efficient way of transporting courier packages around the vast country.

Yet even the air express business was facing capacity constraints. At a ceremony in Shanghai to introduce the conversion program, Ihssane Mounir, Boeing’s senior vice president for sales in Northeast Asia, said the growth rate of China’s e-commerce market would exceed that of the air express market, so there would be plenty of freighter demand going forward.

Express air services in China now rely mostly on excess capacity in the bellies of passenger aircraft. Fewer than 120 all-cargo planes operate within China, and only a small portion of those serve express markets.

This growing sector is driving investment by integrators such as UPS, which late last year expanded its presence in 13 cities across China, improving transit times and extending shipment cut-off times.

“Chinese exporters are now adopting a more customer-centric approach, which requires more collaborative partnerships and logistics support. Our latest enhancements is a response to this demand,” said Richard Loi, president of UPS China.

The demand has also seen a new all-cargo airline planning to tackle the domestic express market. United Star Express Airlines has been established as a joint venture between Okay Airlines, leasing company ATSG West Limited and retailer Vipshop. The new freighter operator was registered in Tianjin’s free trade zone with $63 million start-up capital.

Within the first year of its flight operations, United Star Express expects to have six small and midsize freighter aircraft, including Boeing 737, Boeing 757 and Boeing 767 planes, to provide safe, high quality, reliable domestic and international air cargo services, the statement said.

Contact Greg Knowler at greg.knowler@ihs.com and follow him on Twitter: @greg_knowler.