Cannot fly diversify: Upskilling the 777-300ER for the freight market - 777 P2F Market Potential
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53 I FREIGHT BUSINESS
Many passenger 777-300ERs will soon facing their first lease renewals,
but a thin secondary market means its prospects are bleak. This is good
news for IAI as they develop the first -300ER cargo conversion programme
to replace uneconomical freighters and meet increasing freight demand.
Cannot fly diversify:
Upskilling the 777-300ER
for the freight market
H
igh demand for a new have 10 more main deck pallet positions passenger service after Covid-19. That
generation freighter in the than the 777-200LRF, making it well leaves 747 combination carriers in a
100-ton category with suited to the high-volume and low-density situation where their 747 freighters no
improved cargo volume and shipments that is typically characterised by longer have commonality with their
operating economics over legacy freighter e-commerce cargo. Because of the passenger fleet.”
types is the main impetus behind the combination of the -300’s long fuselage The 777-300ERSF is expected to have
development by Israel Aerospace Industries and long range, it will service 90% spares and tools commonality with
(IAI) of a 777-300ER passenger-to- intercontinental routes, for general cargo the 777-300ER, and 90% commonality in
freighter (P-to-F) conversion programme. operators and find a place with integrators maintenance tasks.
The 777-300ERSF, ‘Big Twin’, P-to-F and their contract carriers by augmenting One disadvantage of the 777 freighter,
programme is a joint venture between IAI and eventually replacing ageing 747-400Fs compared to the 747F, is the absence of a
and its co-founder and launch customer and McDonnell Douglas MD-11Fs.” nose loading door. This is useful for heavy
GECAS. To date, GECAS has committed Taking the 747-8F out of the equation, oversized cargo, such as petroleum
to 15 firm orders and 15 additional because of its young age and high payload production material or drilling equipment.
options for the type. US cargo operator capability, it is forecast that about 550 Although most 747-400 passenger to
Kalitta Air has signed a deal for three 777- large freighters will need to be replaced freighter conversions (P-to-F) ceased years
300ERSFs to complement its existing large over the next 20 years. ago, IAI plans to convert two 747-400s for
freighter fleet that includes both 777- The average age profile for the MD- customers in 2021. This is due to the
200LRF and 747-400F aircraft. 11F and 747-400F is almost 28 years. It is current circumstances, and a shortage of
The 777-300ER is the largest derivative expected that most 747 freighters will cargo capacity globally, and due to large
of the highly successful 777 series of remain in active service until they reach 30- numbers of passenger aircraft retirements.
passenger aircraft to date. The first -300ER 35 years of age. “I believe this will be a stopgap. I
was delivered to Air France in 2004, and As the 747-400 freighter fleet ages, it is would be very surprised to see further 747-
so far after a total of 821 deliveries, it is the expected that the aircraft will become more 400 conversion activity once the 777-
highest selling 777 variant. costly to maintain, and generally become 300ERSF becomes operational,” says
Compared to the -300, the extended less economic because they have four Diamond. “There will be a higher demand
range (ER) variant has a higher maximum engines against the 777’s two. IAI and for freight capacity to replace the loss of
take-off weight (MTOW) and increased GECAS claim the 777-300ERSF fuel burn belly capacity during the Covid-19
fuel capacity. When it is launched in 2022, per tonne of payload is about 21% lower passenger downturn for some time to come
the 777-300ERSF will be the largest twin- than the 747-400F. The additional weight after the pandemic is over. But there
engine freighter in existence. of the large passenger upper deck means should be an increasing number of
converted 747 freighters are the less passenger 777-300ER’s available on the
efficient than the purpose built freighters market at reasonable acquisition prices,
Replacements and are likely to be parked first. that would be superior candidates for
The 777-300 ERSF is expected to be For combination carriers operating conversion due to their operating cost and
the successor to the 747-400 series of both freighter and passenger aircraft, the efficiency advantages”
freighter, which is successful and popular increasing retirements of 747-400 Post pandemic when economies begin
with its operators. Moreover, the 777- passenger aircraft negate the economic to recover, air cargo demand is expected to
300ERSF has a high volumetric capacity benefits of fleet commonality, and further grow rapidly, driven by burgeoning
and similar weight payload capability to exacerbates the type’s operating costs. demand for eCommerce shipments.
the 777-200LRF, which is based on 777- “Since the beginning of the pandemic a Yet there is expected to be a persistent
200 platform and is 33 feet shorter. huge number of passenger 747-400s have cargo capacity shortage in the industry
According to Mark Diamond, vice been parked, leaving only a handful of because passenger demand is unlikely to
president, Strategic Aviation Solutions them still in operation,” says Diamond. “It return to pre pandemic levels quickly,
International: “The 777-300ERSF will is unlikely that these aircraft will re-enter leaving a shortage of cargo belly capacity.
ISSUE NO. 132 • OCTOBER/NOVEMBER 2020 AIRCRAFT COMMERCE
54 I FREIGHT BUSINESS
PAYLOAD WEIGHT SPECIFICATIONS & PAYLOAD CHARACTERISTICS OF MD11F, 777 & 747-400 FREIGHTERS
Aircraft
type MD-11F 777-200LRF 777-300ERSF 747-400BDSF
MTOW - lbs 630,500 766,800 775,000 870,000
MZFW - lbs 461,300 547,000 558,000 610,000
OEW - lbs 259,260 318,300 336,000 358,000
Gross structural payload - lbs 202,040 228,700 222,000 252,000
Main deck volume - cu.ft 19,734 19,008 23,232 21,412
Main deck pallets 26 AMD 27 AMX 33 AMX 21 M1H
Main deck tare - lbs 17,472 17,145 20,955 19,554
Lower deck bulk - cu.ft 600 600
Lower deck pallets 16 LD6 10 PMC 96x125 14 PMC 96x125 32 LD1
Lower deck tare - lbs 5,680 2,000 2,800 5,760
Lower deck volume - cu.ft 5,024 4,700 6,340 5,600
Total volume - cu.ft 24,758 23,708 29,572 27,012
Total tare - lbs 23,152 19,145 23,755 25,314
Net structural payload - lbs 178,888 209,555 198,245 226,686
Max revenue packing density -
lbs/cu.ft 7.23 8.84 6.70 8.39
Volumetric payload @ 6.5lbs/cu.ft 160,927 154,102 192,218 175,578
Volumetric payload @ 7.5lbs/cu.ft 178,888 177,810 198,245 202,590
Volumetric payload @ 8.5lbs/cu.ft 178,888 209,191 198,245 226,686
524,000lbs to 529,000lbs, where the IAI 7.5lbs, but on a on a flight-by-flight basis,
777-300ERSF specifications version increased it to 558,000lbs. Using a it could be 8.5lbs, or it could be 6.5lbs.”
The 777-300ERSF will have a feedstock aircraft with an operating empty “When you look at the carrying
maximum structural payload of about 100 weight (OEW) of 336,000lbs and an different loading scenarios, for example,
metric tons and a corresponding 4,600nm MZFW of 529,000lbs will give the 80% express and 20% general cargo, you
range. assessment aircraft a gross structural get a better understanding of the aircraft’s
It is expected that the 777-300ERSF payload of 193,000lbs: 29,000lbs less than capabilities. When we reviewed the 777-
will develop traction within the integrator the -300ERSF. 300ERSF, it competes very well against
and consolidator markets, including It is believed that once the IAI aircraft other aircraft in this segment,” adds
eCommerce and express freight. The 777- has been developed at its stated weights, Greener.
300ERSF has a main deck volume of then any subsequent configuration The cargo running loads of the 777-
23,232 cu ft and a lower deck volume of assessment will have an MZFW reflective 300ERSF are expected to match those of
6,340 cu ft (see table, this page). The 777- of the IAI conversion. the 777-200LRF.
300ERSF’s main deck can be configured to A number of compelling arguments Over the past five years, e-commerce
carry 33 96 X 125 AMX containers, which indicate that a freight aircraft operating at revenue has increased by $2 trillion, and is
is six more than the 777-200LRFs. The low eCommerce revenue packing densities expect to grow to $3 trillion over the next
converted freighter’s belly hold can be will not need a high gross structural four years. It is this high level of growth
configured to carry 14 96 x 125 PMC or payload requirement, asking whether that is expected to be a key driver of air
44 LD-3 containers. This is four PMCs and significantly increasing the MZFW is cargo or cargo demand, especially in the
12 LD-3s more than the 777-200LRF. necessary. On the other hand, a high express segment of the market.
As the 777-300ERSF is volumetrically MZFW and gross structural payload will
larger and can carry more pallets and give the freight operator more operational
containers than the 777-200LRF, its tare flexibility, as well as increasing Feedstock values
load is higher. When both aircraft are marketability for the lessor. 777-300ER values are diminishing, but
configured with 96 X 125 pallets on the eCommerce has been identified as a are not in a wholesale freefall. Until the
main deck, there is a difference in tare major growth market within the global economic climate improves, many lessors
weight of 4,610lbs between the two. The airfreight sector, yet it is debatable whether and owners are holding off selling their
777-300ERSF has a 5,864 cu ft volumetric aircraft with high operating weights and assets in an attempt to preserve book-
advantage over the 777-200LRF. higher densities are needed to carry values.
In the above configuration, maximum lightweight volume-based freight. The investors that bought the 777-
revenue packing density for the 777- “You need to take blended densities 300ER did not expect to sell it after 12
300ERSF is about 6.7lbs per cu ft and the into account,” says Richard Greener, years at such a low price, since it was
777-200LRF is 8.84lbs per cu ft. The senior vice president & manager Cargo supposed to be released into the secondary
maximum net structural payload of the Aircraft Group, at GE Capital Aviation market, and much later on be sold. It is
777-300ERSF is 198,242lbs, and the 777- Services (GECAS). “This is something not unlikely lessors will want to sell the aircraft
200LRF is 209,555lbs (see table, this a lot of people are looking at. Express cheap for somebody else to buy it and
page). carriers calculate their gross densities to be complete a conversion.
Early 777-300ER P-to-F configuration 7.2-7.5lbs per cu ft, but in most cases, they Marketing the asset today will mean its
assessments by Boeing increase the do not fly at these densities all the time, it is upside value will be unrecoverable.
maximum zero fuel weight (MZFW) from a mix. Operators might have an average of Furthermore, selling an aircraft at a
AIRCRAFT COMMERCE ISSUE NO. 132 • OCTOBER/NOVEMBER 2020
56 I FREIGHT BUSINESS
The 777-200LRF has a gross structural payload
of 228,700lbs, 6,700lbs more than the
777-300ERSF. The -300ERSF, however, has a
larger fuselage and so a higher volumetric
capacity of 29,572 cu ft compared to 23,708 cu ft
for the 777-200LRF.
incarnations of the A350. This means
airlines now have more choice.
“The 777 has been a perfect aircraft
for a very dense long-haul passenger
routes. The 777-300ER in many respects
performed a similar mission to the 747, but
over time long haul passenger markets
have become increasingly disaggregated,
with a lot more point-to-point service
bypassing traditional hub gateways and
trunk routes, as well as more focus on
service frequency,” says Diamond.
Smaller long haul aircraft types such as
the 787 and A350 are better suited to such
operations with lower traffic density. It is
possible that the post Covid passenger
market may well accelerate to these aircraft
depressed value will set a precedent, from low as $25 million. Adding $35 million for types.
which there is no way back, so it is much the total conversion cost means the total “It is in a market segment that has a
better to wait until the market improves. on-ramp cost is low enough to compete limited number of users. The 777-300ER is
But there may also be carriers that are against the 777-200LRF. a large aircraft so it needs to be filled with
in a vulnerable financial position needing “We have also looked at the direct lots of passengers, and airlines must have
to dispose of their unneeded aircraft at operating cost (DOC) of the 777-300ERSF the traffic to support it. Therefore, if the
below market prices. which encompasses its ownership,” operation is between two big hubs, such
Due to Covid-19, all widebody values explains Greener. “When you look at a Hong Kong to the Middle East or London
have fallen and since the beginning of the new build freighter, such as the 777- to the US, then aircraft does not have as
pandemic, appraisers have indicated a net 200LRF and 747-8F, we believe that the much flexibility compared to a narrow
value reduction of 19-30% for the 777- 777-300ERSF’s unit cost is competitive body,” agrees ICF vice president managing
300ER. The 775,000lbs MTOW version is against the other aircraft in that field.” director aviation, Stuart Rubin. “To some
by far the most popular weight selection, With a gross structural payload of extent, the 777-300ER has suffered of a
because operators can use excess belly 292,400lbs, the 747-8F is a capable change in how airlines operate. There are
capacity to generate significant freight aircraft. Operators must first agree to high still a lot of hub and spoke airlines,
yields. loans, however, and then fill the aircraft however there are a lot of airlines flying
It has been reported that there are with cargo for each mission for it to be point-to-point and overflying hubs.”
some unrealistic price expectations for economically viable. The airlines like the aircraft because it
777-300ERs that are simply correlated to Because the 777-300ER is a derivative is very reliable and performs well and is
the age of the aircraft and based on of the -200ER that had been in service for efficient. Some of the first lease transitions
original appraisals. about seven years prior to the -300ERs were taken out of the Emirates and Cathay
Values for a new 777-300ER have service entry. There are no performance Pacific fleet and redelivered to Azure Air,
dropped from a peak of $170 million to issues with early line numbers, unlike the Nordwind and Rossiya.
less than $100 million, this is a 787 that was initially delivered overweight In almost all cases the secondary airline
compounding factor for the recent decline and less capable in terms of payload range. operates in the high-capacity charter
in market values. Typically, a 2003 777- market, and immediately retrofitted with
300ER is valued at $26.4 million, and 15- high-capacity interiors; usually this market
year-old examples are valued at $34.2 Secondary market segment operates a twin class cabin instead
million. The secondary market for the 777- of a three-class arrangement. These aircraft
“The pending introduction of the 300ER in the passenger market is fly long sectors, but there are not many
777X to the market may also have an competitive, and many 777-300ER’s are more operators in Russia that need such
effect on -300ER market values” says coming off lease after 12-years without any large high-capacity aircraft. Before Covid-
Diamond. “The 777X has greater seating extensions. The lack of a resilient 19, Azure Air was interested in increasing
capacity and improved operating secondary market is believed to be a main its fleet with one or two aircraft, yet is
economics, and is likely to replace older - impetus for GECAS to develop the P-to-F unlikely it will need to increase its capacity
300ERs in some carriers’ fleets rather than conversion programme. in the near term.
aggregate them. This means that more When the 777 was launched, there was The 777-300ER primary market is
777-300ER passenger aircraft may be little competition and diversification mainly suited to major carriers operating a
available on the market, further depressing between aircraft types, and airlines chose hub-and-spoke network. The first aircraft
their market values.” between the 747, 767 and 777. Today coming off lease were placed into tertiary
When the conversion is available in many interim types exist, such as the 787 credits, instead of secondary type credits as
2023, initial acquisition costs could be as -8, -9 -10, A330-900neo, and various forecast.
AIRCRAFT COMMERCE ISSUE NO. 132 • OCTOBER/NOVEMBER 2020
57 I FREIGHT BUSINESS
The 747-400BDSF has about 2,560 cu ft smaller
total freight volume than the 777-300ERSF. The
747-400BDSF’s structural payload is, however,
30,000lbs higher.
According to John Mowry, managing
director, Alton: “There is definitely
oversupply at the moment, and it is not a
liquid market for these aircraft. We do not
see them actively trading. Investors and
lessors have capital to buy the aircraft,
although they would be likely to
underwrite 24-36 months of downtime for
any off-lease aircraft, and a conservative
re-lease rate. This significantly reduces the
price they are willing to pay.”
Emirates is flying its 777-300ERs more
heavily than the A380, because the 777-
300ER is more fuel-efficient and has better
capacity for the current demand. Almost
all of Emirates’ A380 fleet is parked, yet all
of its 777s are flying.
“There is some possibility that if lease after 12 years. life, then that is three reconfiguration
passenger demand were to rebound more There will also be availability coming budgets you need to pay for, although a P-
quickly than anticipated, demand for the from other carriers that operate older to-F conversion is a one-off investment.”
777-300ER could accelerate and values aircraft that are due to be phased out. One Low secondary tier lease rates for the
and lease rates could increase,” says of these airlines will be Cathey Pacific, and 777-300ER mean the asset must be placed
Mowry. “This will depend on the pace of there are potentially going to be availability for a long period of time to recuperate the
the recovery.” from Air France and KLM. Assumed interior reconfiguration costs.
Historically the typical P-to-F feedstock availability is also expected from “Many aircraft will be returned to
conversion candidate is 15-20 years old. Philippine Airlines, EgyptAir and Kenya lessors over the next few years. The
According to Mowry, it is possible that the Airways, including Singapore Airlines. expected prolonged recovery in
typical conversion age for the 777-300ER Many 777-300ERs that may not be international business traffic will further
will gravitate to younger aircraft because placed back into the market can generate add stress on the type, and 777-300ER
of the excess supply and depressed values. revenue as converted freighters. fleet retirements will likely accelerate,” says
From 2005 to 2010, 40-50 777- “This is where Boeing is seeing some Stephen Fortune, principal at Fortune
300ERs were built each year. It is believed opportunity,” says Rubin. “It is a challenge Aviation Services.
that 40% of these aircraft are leased, so keeping an aircraft of that size in service; “Given the costly passenger interior
there will be 15-20 probable lease expiries especially when its replacement, the 777 X, refurbishment and replacement cost, and
every year. is in development. I think there is an the limited long-haul secondary market
“Generally, few extensions are incentive for Boeing to keep the 777- and credits of potential lessees, means
anticipated in the current market, except in 300ER product in play and market the lessors will then be challenged to find
the context of a lessor providing near-term 777X to the larger audience.” profitable follow-on passenger leases. They
rent deferrals in exchange for term. Boeing can generate revenue on will need to look for other ways to
Otherwise, extensions that materialise are maintenance by keeping the 777-300ER in monetise their investment, with freighter
likely to be under pretty challenging service longer. A successful P-to-F conversion and part-out being potential
terms,” explains Mowry. “Once the conversion programme will give existing options,” adds Fortune.
conversion programme gains momentum, 777-300ER operators an exit strategy that The completion of a P-to-F conversion
there is going to be a plentiful supply of Boeing can fill with new 777Xs. will improve the future residual value of
feedstock.” the asset. Fundamentally, leasing
The 777-300ER fleet demographic is companies list their assets on their books at
highly concentrated amongst a few Transition cost high net book values because they have
carriers. Emirates operates the highest If a lessor can get away with low or no conservative depreciation policies. Because
number of 777-300ERs with 131 in its transition costs it will. To reconfigure the the rental income for a freighter is higher
fleet, next is Cathay Pacific and Qatar cabin and to brand the aircraft for the next than a transition, leasing companies look
Airways with 48 aircraft each, and Air lessee is costly, and slots with vendors need at this as an opportunity to keep the
France operates 43. In 2017 Emirates to be scheduled well in advance. aircraft on their books.
retired one 777-300ER, followed by two According to Justin Goatcher, ICF “Cargo operators do not think twice
more as of May 2018 and by 2020 a total technical: “You are looking at $15 million about operating an aircraft with an
of ten 777-300ERs have been retired. At to reconfigure a 777-300ER cabin. If it is economic life for 35 years. DHL is
15 years old, it is believed that these possible to extend the lease, then it is well operating freighters that are 35 years old.
aircraft were coming off lease after having worth doing so, because then there no Feedstock within the 12-15-year age range
their initial term extended, this is because upfront transition costs. If you transition will yield an economic life of at least 20
Emirates 777-300ERs typically come off an aircraft three times during its economic years as a freighter,” says Goatcher. “That
ISSUE NO. 132 • OCTOBER/NOVEMBER 2020 AIRCRAFT COMMERCE
58 I FREIGHT BUSINESS
GE Capital Aviation Services (GECAS) has
delivered the first Boeing 777-300ER to Israel
Aerospace Industries (IAI) for the prototype
passenger-to-freighter conversion. The 15-year-
old aircraft (MSN 32789) was initially operated
by Emirates and the conversion is expected to
be completed by late 2022.
IAI: challenges
The first challenge is that this is the first
777 type that IAI has entered. The
conversion facility has a high level of
engineering expertise within the P-to-F
sector, including developing a 747 P-to-F
conversion programme for the past 40
years.
“We have gained a lot of experience
over the past 40 years, and we can achieve
many things that the customer did not
believe,” says Rafi Matalon, aviation
group vice president of marketing, at IAI.
“IAI is the only player in the field of
widebody conversions at the moment, and
we are still continuing to convert the 747-
is an attractive proposition, because there tonnes of cargo loaded on 12 pallets and 400s, a programme that has been recently
is a long period of time to recover the six containers. rejuvenated because of the impact of
investment.” High cargo yields and low initial 777- Covid-19.”
The longer-term lease will make it 300ER acquisition prices make it feasible The assertion is that the 777-300ER is
possible to recover the conversion cost and for investors interested in converting a a newer generation of aircraft compared to
the outstanding residual value of the 777-300ER to operate the feedstock IAI’s past P-to-F conversion programmes,
aircraft. Currently passenger-configured aircraft in a preighter capacity, before such as the 767 and the 747. IAI has not
777s and A330s are being leased for sending it for cargo conversion. publicised a list price for the conversion
$250,000 to $300,000 dollars a month, Acquiring feedstock aircraft at such an because of its complexities. An estimated
while a converted 777-300ER is expected early stage has the potential to secure an list price is expected to be higher than the
to yield a lease rate of $400,000-500,000 early conversion slot. cost of a 747 P-to-F conversion.
per month. “It is more expensive because it is a
Even if the second half of the lease widebody and tantamount to the 747.
period is discounted, the rental incomes for Design review Therefore, a big difference is cost and
a 777-300ER freighter are likely to be The prototype aircraft is in the US workscope compared to converting 767s,
more attractive than for a passenger finalising flight tests, and IAI and GECAS and narrowbodies, such as the 737-700
aircraft. have just completed the Critical Design and -800 which IAI is currently
Review (CDR). This is the final review that converting,” explains Matalon. “The 777-
encompasses the floor strengthening and 300ER is a long aircraft, the kit is different,
Preighters loads derived from the design and Finite and it will take more time to convert. The
Thanks to its ability to carry a large Element Model (FEM), before the parts total conversion time will be greater than
amount of cargo within its lower-hold in and main deck door kits are manufactured. the 120 days needed for a 767, and it is
passenger configuration, the 777-300ER “It is a similar process as for a new likely be achieved at around 150 days,
has been called a freighter in disguise. Since aircraft programme, but centred around similar to converting a 747.”
the beginning of the Covid-19 pandemic, the conversion aspects of the aircraft,” says To achieve a maximum structural
many passenger operators have used their Greener. “With a conversion programme, payload of 222,000lbs, IAI is reducing the
777-300ERs as freighters. such as the 777-300ERSF, you need a OEW and increasing the MZFW from
Called ‘Preighters’, these aircraft carry partner like IAI that will be around in 25 524,000lbs to 558,000lbs. This is part of
lightweight cargo on passenger seats, and years’ time to support the aircraft with a the formula to increase the maximum
carry heavier cargo in their lower holds. long history and experience of certifying payload. According to IAI, it normally
Emirates SkyCargo has converted 10 and converting aircraft. There are only a aims to achieve an MZFW increase of 8-
Emirates passenger 777-300ERs to few companies in the world like this that 10% for each of its conversions.
preighter specification by removing 305 can deliver. IAI and Boeing completed the All IAI-converted aircraft are included
economy seats, and then fixing safety licence agreement for the 777-300ERSF within its Boeing licence agreement. “This
equipment to secure cargo nets. The conversion in August 2020.” means Boeing has a commitment to the
modification process takes about 640 man- The prototype will be ferried to IAI’s operator to continue to support all areas of
hours (MH) to complete. conversion facility at Ben Gurion Airport, the aircraft that are not affected by the
Passenger deck cargo, such as Tel Aviv in May 2021, where the first cut conversion,” says Matalon. “IAI can
pharmaceuticals, can be maintained within of the conversion will begin. IAI is provide the customer with maintenance,
a temperature range of 15 to 25 degrees expecting to have the supplemental type repair and overhaul (MRO) services and
Celsius. Emirates SkyCargo operates a certificate (STC) completed by the end of engineering agreements post-conversion to
777-300ER preighter loaded with 66 2022, and begin production soon after. enable the customer to have a single point
AIRCRAFT COMMERCE ISSUE NO. 132 • OCTOBER/NOVEMBER 202059 I FREIGHT BUSINESS
Widebody freighter utilisation rates are higher
when compared to passenger utilisation rates,
which is a big concern for potential operators of
the 777-300ERSF. Higher utilisation rates will
increase the fundamentally expensive
maintenance costs of the GE90-115B, and take
the engine out of the role it was designed to
perform in.
of contact for all of the aircraft’s
maintenance requirements. Normally if a
customer signs with a competitor for a
conversion they will have to sign a second
contract with an MRO provider.”
IAI decided to convert the 777-300ER,
rather than the smaller -200, partly
because of the quantity of the feedstock,
and partly to instil longevity into the
programme by creating a freighter that has
both the volumetric and structural payload
needed to precede its market for 25 years.
Wichita State University
Sequoia Aircraft Conversions and the
Kansas Modification Centre, the National utilisation rate between a narrowbody
Institute for Aviation Research (NIAR) at converted freighter compared to a Maintenance
Wichita State University, have announced widebody converted freighter. The Many second- and third-tier cargo
that they will be developing a 777-300ER utilisation rate of a narrowbody freighter airlines do not have the infrastructure to
P-to-F conversion programme. reduces significantly once the aircraft operate an engine of this magnitude. It is
NIAR provides research, testing, comes out of passenger service, while the expected to be a challenge for many
certification and training for aviation and utilisation rate of a converted widebody airlines to ‘tool and gear up’, both
manufacturing technologies. It has been increases. technically and from an engineering
reported that the programme will be The 777-300ER with its GE90 engines perspective. “Most GE90 engines are
headed by the institute’s engineering design is designed for long-haul inter-continental under a PBH maintenance agreement that
and modification (EDM) team. operations, so the typical freight mission is essentially contrived around large
Sequoia Aircraft Conversions will will take the engine out of the role it was passenger airlines,” says Goatcher. “If they
market the P-to-F conversions. Kansas designed to do. Increasing the aircraft were not signed to a GE OnPoint PBH
Modification Center will own the STC and utilisation will reduce the engines’ shop agreement, then they were on a fixed price
license the conversions. visit (SV) interval times, and increase agreement. While not on a true OnPoint
engine overhaul costs. programme, many GE90 agreements
Operators can ‘spin’ routes to optimise granted the airline a fixed price when the
Utilisation aircraft utilisation. For example, it is engine went into the shop.”
The General Electric GE90 is a family possible for operators with multiple assets If an engine (prematurely) leaves such a
of engines developed for the 777, and is to alternate them on different routes to programme, a reconciliation mechanism is
available in thrust ratings ranging from increase individual aircraft utilisation rates, used to assess what was charged/paid for
81,000 lbs to 115,000 lbs. The highest which will increase the FH:FC ratios per and what was spent by GE on the engine.
thrust version GE90-115B powers the 777 engine. The first performance restoration is
-300ER, -200LR and -200LRF aircraft. “GECAS Engines owns a significant completed at about 3,000 engine flight
The higher-thrust variants, GE90-110B1 number of GE90s in our pool, typically 30 cycle (EFC) intervals and is dependent on
and -115B, have a different architecture to to 50 depending on how many are out on its operating environment. Operators that
earlier GE90 versions. lease and sold,” says Greener. “We are are based in harsh environments will
“One of the major issues with the developing support packages for the GE90 experience shorter intervals between
aircraft is the maintenance costs of the and working with GE aviation on a True performance restorations, although some
GE90-110/-115. Although the engine is Choice programme for the engine, so operators may reach 3,500EFCs before
capable of staying on wing for many years, operators pay a PBH rate that is fully removals. Engine operating loads also
when an overhaul is required it can cost serviced by GE Aviation,” says Greener. influence SV intervals, and the shorter the
$12-14 million. Lessors of returning “In addition, GECAS is working with EFH:EFC ratio, the higher the frequency of
aircraft will be seeking ways to harvest GE Aviation to de-rate the thrust rating performance restorations for a given
engine green time in lieu of an overhaul, from 115,000lbs to 110,000lbs. This could number of engine hours.
while potential new passenger or converted extend the on-wing life of the engine During the first performance
freighter operators will need to address this (depending on utilisation/operation). restoration SV, improvements were made
operating cost burden via lessor top-ups Operators can also rotate aircraft to by replacing some of the engine’s
and/or power-by-the-hour (PBH) optimise utilisation on the engines and components with higher quality material.
programmes,” says Fortune. maintain a higher FH:FC ratio,” adds This means the difference between first and
There is a noticeable difference in the Greener. second intervals results in a 10% shorter
ISSUE NO. 132 • OCTOBER/NOVEMBER 2020 AIRCRAFT COMMERCE60 I FREIGHT BUSINESS
With many 747-400s being retired and unlikely
to be returned to service, combination carriers
operating these aircraft will lose the benefit of
fleet commonality. The 777-300ERSF shares
many parts and maintenance tasks with 777
passenger aircraft that help lower cash
operating costs.
US. The prime reason to buy these 777-
200LR freighters was to part them out and
sell the engines.
The quantity of used serviceable
material (USM) will depend on the number
of GE90 engines that are parted out and
the number of operational 777-300ERs
post-conversion. There will come a time
when operators will be trying to drive
down costs.
Conclusion
The 777-300ERSF is expected to be an
excellent freighter in terms of its payload
and range. In passenger service the 777-
300ER has proven to be popular with its
life for the second run. The life limited Fleet data shows that some of the early operators thanks to its operating
parts (LLP) limits of the engine will begin production aircraft have accumulated economics and reliability. Importantly,
to deplete between 8,800EFC and 13,000FC, although many of the LLPs do there is high availability of feedstock
15,000EFC, meaning LLP replacements have long limits. It is believed that GE aircraft, and values are forecast to be at the
will be required. hoped the engine would remain with its correct pricing points for conversion.
The first LLP replacement is in the high first operator longer. Many engines are For both aircraft operators and
pressure compressor (HPC) at 8,800EFC, coming off lease, however, and are investors, the conversion programme will
followed by two other HPC replacements currently grounded, and GE is losing breathe new life into ageing 777-300ER
at 11,500EFC. The LPT requires LLP revenue from SVs and parts. Many GE90 airframes. It is a viable alternative
replacements at 13,000EFC and SVs forecasted over a 25-year period are compared to a lacklustre passenger
15,000EFC, while the complete fan section unlikely to happen, and it is linked to the secondary market.
also needs replacing at 15,000EFC. fact that the secondary market for the 777 The major uncertainty is the
A full shipset of all rotating LLPs is is thin. Furthermore, GE expected to maintenance cost and the complexity of
reported to cost $14 million and this recuperate development costs over time the 777’s large GE90 engines. This includes
includes fan blades. Each fan blade has a with flight-hour agreements that were its operating economics by increasing its
long LLP life, while the complete fan expected to last for 20 years. FH:FC ratio for typical freighter
comprises of a total of 22 blades that are Since upkeep of the GE90 is high, it is operations. Nevertheless, it is expected that
valued at $187,000 each. These are all thought that GE must redevelop its cost solutions will become available in the
static LLPs, which have life limits business model or be faced with an engine form of USM, or by amending engine
reportedly from 13,000EFC upwards. that will become less marketable. If there is operating contracts and agreements.
“A utilisation rate of 12FH per day an influx of used engines entering the So far Boeing has not announced a
and six hours per FC will total 730FC per marketplace, then the demand for SVs and 777-300ER P-to-F conversion programme
year. At this rate of utilisation, it will be 20 performance restorations will fall as of its own, and commentators are unsure if
years before the engine reaches 15,000EFC operators will replace any time expired it will. It is possible that an additional 777-
and the need to replace its LLPs,” says engines with a spare. It is crucial that GE 300ER conversion programme could
Rubin. “In the meantime, the engine will provides financial support and attractive saturate the market. Furthermore, it will be
suffer from exhaust gas temperature (EGT) maintenance programmes to operators and a direct competition to its successful 777-
margin degradation, which will also lessors to prevent this from happening. 200LRF. Nevertheless, the IAI programme
indicate when an engine needs to be Many operators committed to 10- to will benefit the original equipment
overhauled.” 15-year FH agreements. Reconciliation manufacturer (OEM) because of the
Over a lease period of 12 years and clauses within the agreement state that if revenue it will yield from these operational
operating at a utilisation rate of 60FC per an airline wants to exit the agreement early aircraft.
month, a 777-300ER will have completed then GE has the right to recover its costs. In the meantime, it is expected that the
a total of 8,640FC. Many 777-300ERs GE will make an assessment on the 777-300ERSF will be available at the
approaching the end of their leases will be amount it has invested in the engine over correct cross-over in time, where many
nearing their third performance restoration the period of time, versus its yield from the ageing three- and four-engine freighters are
SV, and their first LLP replacements. This FH agreement. Subsequent deficits must reaching the end of their economic life, and
means that the subsequent operator may then be settled by the airline. eCommerce and air cargo are booming.
have to perform the expensive performance There have been investors acquiring
restoration SV during the aircraft’s term as 777-200LR freighters; five ex-Etihad To download more than 1,200
the aircraft and its engines approach aircraft have been bought by Altavair, articles like this, visit:
15,000FC. previously Guggenheim Partners, in the www.aircraft-commerce.com
AIRCRAFT COMMERCE ISSUE NO. 132 • OCTOBER/NOVEMBER 2020You can also read
