The economics of passenger freighters

Last week , we took a look at the pax freighters currently in operation. Since then, the tally compiled by our colleagues at Cargo Facts has increased and now stands at 1,650, including 115 units operated by 32 airlines with seats removed to improve loadability and bring down weights. Taking a closer look at the economics of such operations this week, we find that passenger aircraft make rotten freighters and can only make money under very specific circumstances: low fuel, high rates, crew costs paid by others, and by ignoring aircraft capital and lease expenses. The map below shows an overview of which carriers have removed seats and which have been operating passenger aircraft on cargo only missions, as of 6 July [updated]. .embed-container {position: relative; padding-bottom: 80%; height: 0; max-width: 100%;} .embed-container iframe, .embed-container object, .embed-container iframe{position: absolute; top: 0; left: 0; width: 100%; height: 100%;} small{position: absolute; z-index: 40; bottom: 0; margin-bottom: -15px;} <iframe title="Passenger Freighters May 2020" src="//www.arcgis.com/apps/Embed/index.html?webmap=11535e262af24ef087d045203caadd0a&extent=-180,-77.3818,180,84.578&zoom=true&previewImage=false&scale=true&details=true&legendlayers=true&active_panel=details&basemap_gallery=true&disable_scroll=true&theme=light" width="500" height="400" frameborder="0" marginwidth="0" marginheight="0" scrolling="no" data-mce-fragment="1"> The most popular passenger freighter is the 777-300ER, followed by the 787-9, A330-300 and A350-900. These are all aircraft that have substantial cargo space, even without loading boxes onto seats. Table 1 below gives an overview of the payloads that can be achieved on such missions. Table 1 - Passenger Freighter Payloads (in metric tonnes)

Aircraft Type Passenger Aircraft A330-200 10-15t belly + 8t on seats = 18-23t A330-300 14-20t belly + 10t on seats = 24-30t A350-900 16-25t belly + 10t on seats = 26-35t 787-9 16-25t belly + 10t on seats = 26-35t 777-300ER 18-29t belly + 11t on seats =29-40t Source: Cargo Facts Consulting Analysis. Calculations assume boxes atop and underneath seats, and inside overhead bins. Given the density of the typical PPE cargo on these missions, actual weights tend to be at the lower end. We assume about 50 lbs. (23 kg) on top of seats, and 20 lbs. (9 kg) underneath seats and inside overhead bins in the economy class cabin only. We find that taking seats out does not substantially improve payloads but does impact loading times. Table 2 provides an overview of the contribution of such flights under various scenarios. Only one is profitable. We are already starting to see charter rates drop; once loan subsidies expire, even with a continuation of low fuel prices, these operations will no longer make economic sense. In fact, they hardly make sense today, but as long as government clients are willing to subsidize carriers with high charter rates, these operations can continue for a little longer. Table 2 - 777-300ER Passenger Freighter Economics Calculation.

777-300ER

PVG-LAX Return

Base Case ($6/kg, 70c per gallon)

High rates, normal fuel ($6/kg, $2/gallon)

Low rates, low fuel ($3.50/kg, 70c/gallon)

Normal rates and fuel ($3.50/kg, $2 gallon)

Revenue $190,000

$190,000

$115,000

Total Round-trip Cost $245,000

$334,000

$244,000

$334,000

Profit (after all Direct Operating Costs) -$55,000

-$144,000

-$129,000

-$219,000

Profit (excl Aircraft cost) -$9,000

-$99,000

-$84,000

-$174,000

Profit (excl. Aircraft and Crew Cost) $67,500

-$22,500

-$7,500

-$97,500

Source: Cargo Facts Consulting analysis. See below for assumptions. With a 33% fuel burn advantage, the 787-9 performs better as a passenger freighter and offers similar capacity to a 777-300ER. That brings down costs by about $15,000 per PVG-LAX round trip. 777-300ER Cost and Revenue Assumptions: Shanghai – Los Angeles Round trip (25.5h) Bellies full and boxes under and atop seats, and inside overhead bins for a 30-35 metric tonne payload. Eastbound revenue $190,000 (=$5.50-$6.50/ kg). This is about 70% higher than normal. No westbound revenue. Fuel: 70 cents per gallon (compared to $2/gallon a year ago). Fuel cost increased by 15% in the last week and is already over 80 cents/gallon. Typical American Airlines 2019 per hour costs for the 777-300ER (Source Form 41 financial filings) Aircraft expenses: $1,800/hour Flight crew cost: $3,000/ hour Direct Maintenance expenses: $2700/hour Fuel burn: 2,700 gallons/hour Other costs: $200/hour Pilot salaries covered by CARES Act, or equivalent Aircraft capital or lease expenses are treated as sunk

The economics of passenger freighters

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The economics of passenger freighters

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Passenger-freighter ops strive to meet demand

Manufacturing decline slows in May, some countries see growth

Related Posts

Amazon air network spend exceeds $1B per year as dedicated fleet grows

Exploring international, regional and domestic airfreight vaccine flows (updated)

Japanese air exports up in December and January, imports down

EU online sales grew 25% as consumers clicked their way through 2020

Manufacturing decline slows in May, some countries see growth

Privacy Terms

ADA Compliance