Air Transport Services Group, the world's largest lessor of freighter aircraft and a contract cargo airline for customers such as Amazon and DHL Express, has dissolved its joint venture converting Airbus A321 passenger aircraft to all-cargo configuration because demand for A321 freighters has collapsed. The move marks a significant shift in the market, with many industry specialists pointing to a slowdown in airfreight demand and a glut of narrowbody freighters as key factors contributing to the collapse. As a result, airlines are now holding onto mid-age A321neo passenger aircraft, which are being converted into cargo planes due to maintenance delays caused by a defect in Pratt & Whitney gear turbofan engines.
Beaverton, Oregon-based Erickson Group Ltd. announced on Tuesday that it had acquired full ownership of 321 Precision Conversions from ATSG through its subsidiary Precision Aircraft Solutions, an overhaul specialist that designs and markets conversion kits. The price paid for ATSG's 49% stake was not disclosed, but industry sources indicate it was minimal, suggesting a lack of urgency in the transaction.
The conversion process involves teardown of the passenger compartment and installation of new features, such as a wide cargo door, heavy-duty floor beams, and a loading system. This process requires significant investment and expertise, highlighting the complexity and challenges involved in converting passenger aircraft into freighters. The A321's ability to offer improved fuel efficiency compared to other narrowbody aircraft has made it an attractive option for cargo operations.
Precision Aircraft Solutions through its history has focused on passenger-to-freighter conversions of the Boeing 757 aircraft. With a dwindling supply of age-appropriate 757s available for retrofit, Precision targeted the A321 as its next business opportunity. Many industry specialists have likened the A321 to a suitable replacement for the 757 in cargo operations due to its similar capacity and improved fuel efficiency.
Precision and ATSG, which exclusively leased Boeing 767 medium widebody converted freighters until 30 months ago, formed their joint venture in 2017. The partnership aimed to capitalize on the growing demand for narrowbody freighters, but ultimately failed to meet expectations. The joint venture has completed more than 30 cargo reconfigurations, according to Precision spokespersons.
Current operators of A321 freighters include Blue Dart in India and Miami-based Global Crossing Airlines. ATSG has separately leased at least two A321 freighters to Raya Airways in Malaysia. However, the A321 freighter market has struggled to gain traction, with many aircraft being dumped in the market at low lease rates or put in storage when lessors couldn't find airline customers.
Elbe Flugzeugwerke, a joint venture between Airbus and Singapore-based ST Engineering, is the only other company that carries out A321 cargo conversions. Despite this, the A321 had trouble displacing the better-known Boeing 737-800 as a cargo aircraft, resulting in record-levels of conversions that led to oversupply and subsequent market correction.
The collapse of the A321 cargo conversion joint venture highlights the challenges faced by the industry in adapting to changing demand patterns. As e-commerce growth slows down, leasing companies and private equity firms are reassessing their investment strategies, leading to a shift towards more established aircraft types.
Erickson Group President Dylan Garner expressed confidence in the long-term demand for narrowbody freighters, stating that the company is excited to build on this foundation and continue investing in the program's next phase of growth. However, ATSG has indicated that it will continue to market the A321 converted freighter to cargo airlines, suggesting a cautious approach to exiting the market.
