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Eastern Airlines Makes an Unrivaled Bet on Continued Cargo Growth

Madhu Unnikrishnan

September 2nd, 2021

Eastern 777P2F Conversion

Eastern Airlines is making a bet — a very big bet — that the seemingly insatiable demand for package freight is here to stay and will only grow. The Wayne, Pa.-based airline’s bet is to the tune of 35 Boeing 777 passenger-to-freighter conversions, expected to join its fleet in the next few weeks.

The carrier has taken delivery of 10 of the 35 aircraft and expects the next 25 to be delivered in the next 8-12 weeks, CEO Steve Harfst told Airline Weekly. The passenger 777s will be converted in-house at Eastern’s wholly owned maintenance facility, FMS, based at the Kansas City International Airport. Each conversion is expected to take about two weeks.

Harfst declined to disclose the terms of the deal, but said Eastern bought the aircraft directly from airlines downsizing the widebodies from their fleets. Values for used 777s vary, and the widebody’s value has taken a hit as airlines retire their larger aircraft in response to the Covid-19 pandemic. But even at the low end, if Eastern paid less than $10 million per aircraft — a price Delta Air Lines is reported to have paid for a used 777 in 2016 — its deal would be worth $350 million or, more likely, even more.

Harfst said the deal has been fully financed by the privately held company’s investors but declined to elaborate.

Eastern is putting its chips squarely on package freight. “We wanted to get into the market quickly,” Harfst said. “There’s a huge imbalance right now between supply and demand.” The carrier is not making any structural changes to the airframe nor will it cut cargo doors into the aircraft — which explains why the conversion process takes only two weeks. Because of this, Eastern’s 777 freighters cannot carry heavy cargo, like cars, but will accommodate a package payload of 80,000-103,000 pounds on the main deck and 122,000-166,000 on the lower deck, according to the company’s website for prospective cargo customers. Range varies, with the -200s capable of 5,165 miles full payload, the -200ERs with a range of 7,665 miles, and the -300s, 6,000 miles. “These aircraft can do short range and long range with a lot of volume,” Harfst said.

When the pandemic struck, belly-hold cargo capacity plummeted as airlines grounded international flights. Airlines rushed to fill the void by temporarily converting passenger aircraft to carry cargo, and about 2,500 of these “preighters” continue to operate worldwide. But as travelers return, airlines are reconverting preighters back to passenger operations. Eastern’s approach is more permanent: The airline is stripping out the seats, lavatories, galleys, overhead bins — any passenger amenity — but keeping the airframe’s structure intact. “We aim to take a slice of that preighter market,” Harfst said.

In fact, four of the 35 aircraft — two -200ERs and two -300s — will remain in passenger configuration and are expected to join the fleet later this year. Eastern now operates scheduled and charter passenger flights with a fleet of 10 Boeing 767s. Eastern operates primarily low-frequency visiting friends and relatives (VFR) markets from New York and Miami to South America, but the range of the 777s opens up new VFR markets beyond South America, although Harfst said the carrier has not disclosed plans on future destinations.

The cargo aircraft are expected to start joining the fleet in the first quarter of next year, pending regulatory approval. Eastern plans to operate 8-10 of the aircraft by the end of 2022 and expects to add up to 10 additional freighters to its active fleet each subsequent year, depending on demand, until all 35 are in service.

The International Air Transport Association (IATA) reports that cargo demand in July, the latest month for which it has data, was up 9 percent from July 2019. Meanwhile, cargo capacity is down 10 percent, due to the shortage of belly-hold capacity. Any airline that has freighters is pressing them to their fullest possible capacity and utilization, a Qatar Airways executive told Airline Weekly earlier this year.

As the world’s economy recovers from the pandemic, demand for air freight is expected to grow even faster, IATA predicts. Maritime shipping’s travails — including backed-up ports on both sides of the Pacific and shortages of shipping containers — only will fuel air cargo’s near-term growth. And the trend toward e-commerce, which saw explosive growth during the pandemic, is only expected to stay, further boosting air freight’s prospects.

Harfst is optimistic that demand will only grow. The carrier is in talks with freight forwarders and retailers, but Harfst did not disclose who the first customers will be. “There’s a fundamental shift in the cargo market,” He said. “Belly-hold cargo is not coming back tomorrow, and even when it returns to pre-pandemic levels, cargo demand is expected to grow,” he said. “The market reaction has been very positive.”

This market has proved irresistible to airlines as the pandemic scythed through passenger demand. Regional carrier Mesa Air Group last year added its first three mainline aircraft, Boeing 737-400s, to carry cargo for DHL. Sun Country flies Boeing 737-800Fs for Amazon and recently increased that fleet to 13 aircraft. WestJet expects its first 737-800Fs to join its fleet next year, and Air Canada is converting some of its 767-300ERs into freighters. Cargo has provided a vital source of revenue during the pandemic, and some, like Korean Air, have been profitable throughout the crisis on the strength of freight.

Harst acknowledged that the market has become crowded, but stressed that demand far outstrips supply. And unlike the carriers that have added 737Fs, Eastern’s 777 freighters are capable of flying both shorthaul and transcontinental routes. “Our 777s can carry three times as much freight as a 737 freighter,” and are capable of flying between the U.S. and Asia, he said. “This gives us a unique capability.”

Madhu Unnikrishnan

September 2nd, 2021

Photo credit: Eastern Airlines is betting big on cargo with 35 Boeing 777 freighters. Eastern Airlines

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