Posted September 21, 2009 10:43 AM
By Jake Reppert
Observations Around the Freighter Market
With the Cargo Facts Symposium in Seattle just around the corner I thought it would be appropriate to share a bit of ad-hoc analysis I’ve been looking at around the freighter market. In reaction to the current downturn (and off the back of the widely discussed theory that freight recovers ahead of passenger markets) and the reported softening in demand contraction in both the passenger and freighter market, one of the items we’ve been looking at has been the freighter market and how it compares to the passenger market.
This will admittedly be a bit disjointed as I feel last years blog season proved our audience was more interested in digesting the charts for themselves and following up with me when they found something interesting.
As a note, I’ve displayed 1992 YoB aircraft in this blog.
Freighter Arbitrage/Extended Life Benefits
With this bit of analysis I’ve taken a look at the initial arbitrage that could be enjoyed on a conversion and then compared it to the difference of our increased Market Lease Rate opinion, and taken into account an extended life enjoyed by freighter aircraft.
Following this I thought it would be interesting to take a look at the Forecast Base Lease Rates for the Freighter and Passenger types as a guide for expected increased Lease Rates.
Market Demand for Freighters
I’d like to put forward the graph below as (at least) an interesting way of looking at the demand for the 737-300SF. What I’ve done is combine the Fleets and Values pictures. The Fleets picture is based on the number of conversions completed, while the Values picture is focused on the percentage of original CMV when the aircraft was built. For both values I’ve used the Passenger version of the aircraft.
Source: Ascend Online Fleets and V1 Values Database
Values Explanation: % Conversion values calculated by dividing market value at time of conversion by market value at delivery (all values are generic)
For the purposes of this analysis its best to turn your attention to the 2002-2009 section of the chart. What we see is that although the 737-300 values at generally less than 50% of their delivery value, there is a noticeable willingness to convert 737-300s at an increasing percentage of their original value.
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