21 Jan 2021

Market Insights: Amazon activity places the spotlight on freighter conversion opportunities

US e-commerce specialist Amazon recently announced the acquisition of seven Boeing 767s from Delta Airlines and four more from Westjet as part of its strategy to grow to a fleet of 85 aircraft by the end of 2022 to keep pace with rising demand.  Amazon's strategy is to own the asset and contract out flying to a third party under the Prime Air brand . Acumen Chief Commercial Officer (CCO) Eamonn Cronin commented “As asset owners look at extending revenue generating options and with the development of the freighter supply chain, conversion becomes a real attractive solution”. Amazon is well positioned to take advantage of the residual fall out in value of the  Boeing 767-300 and the low fuel price environment aided by the accelerated retirement of the type by North American carriers American Airlines, Delta Airlines and Westjet which has created a pipeline of feedstock as they are replaced in the post Covid environment by fuel efficient Airbus A330Neo and Boeing 787-9 aircraft.  The B767-300F has 50 tonnes of structural payload at a range of some 3,000 nautical miles (5,556 kilometres),  almost the same cargo capability as the 767-300 production freighter. Last November Amazon launched its first-ever international air hub at Leipzig/Halle Airport in Germany with Boeing 737-800F's operated by ASL Airlines (Ireland). This will be an interesting development to watch to see if Prime Air will exploit the B767’s range capabilities to join Leipzig with its existing US hubs to create a thoroughly global network. Acumen Chief Intelligence Officer (CIO) Amit Tyagi commented “Availability of sufficient feedstock at attractive prices makes the 767-300 freighter conversion a good option to keep the ownership cost lower and take full advantage of lower fuel price regime” Amazon is in early stages of its fleet development with 59 aircraft currently in service versus FedEx and UPS operating 459 and 263 aircraft respectively.  In the long-term Prime Air could expand through continued acquisitions of B767 feedstock and upgauge to converted Boeing 777-300 feedstock and M&A activity to meet ever growing globally e-commerce demand which will be fuelled by economic growth post pandemic. Talk to Acumen’s Commercial Lease Management and Technical Asset Management teams about exploring and managing the freighter conversion programme contact us at connect@acumen.aero Acumen Aviation © 21 January 2021 All Rights Reserved.