Air Atlanta Icelandic is looking to add Boeing 747-400 freighters to its fleet. The Reykjavik-based airline currently has five 747-400Fs in operation and wants to add one or two more.

Demand has been strong over the past 18 months and looks set to continue in this vein, said Baldvin Hermannsson, the airline’s vice president of sales and marketing. He expects maindeck capacity to lag demand for the remainder of this year and probably throughout 2019 as well.

“We will see continued demand that we will be unable to meet,” he predicted.

This marks a radical turn in the fortunes of the 747-400 freighter. Two years ago, airlines were still taking such planes out of service in an effort to arrest yield decline brought on by overcapacity. Moreover, the pool of widebody operators shrank from 95 to 75 between 2012 and 2016.

First and foremost, 747 operators divested themselves of those aircraft that had been converted into all-cargo configuration after earlier spells in passenger service, as those have lower payload and range capabilities than the production freighters. Moreover, they do not have the nose door that allow the 747-400F to load outsize shipments. Still, some production freighters were also parked during the downturn.

While carriers like Japan Airlines walked away from freighters altogether, others like EVA Air reconfigured their fleets, replacing 747 and MD-11 freighters with a smaller number of 777-200Fs.

Few carriers – notably AirBridgeCargo, Nippon Cargo Airlines and Cargolux – have taken on 747-8 freighters in recent years. In February, UPS signed an order for 14 747-8Fs, which was widely seen as a lifeline for Boeing’s programme for the 140-ton aircraft. Last year the plane maker throttled its production of the type down to one plane every two months.

Most operators do not have the 747-8 on their radar. “The 747-8 is expensive. It suits some carriers more than others,” said Hermannsson. Air Atlanta is not pursuing the aircraft at the moment.

“We’ve had the view that the 747-400 freighter has a role to play, both for the production and the converted versions. That was our position when people forecast doom for the 747,” he said.

The recovery in demand over the past two years and the ensuing tight capacity situation brought those 747-400Fs back into service that were viable to operate again. The 747-400s that remain parked would require extensive work.

As freighter capacity remains short of demand, operators and leasing firms are looking for feedstock for conversions again – years after many pundits had declared the 747 conversion scheme dead and buried. Asiana had two 747-400 combis converted into freighters last year, but this was generally seen as an exception borne out of unique circumstances.

Sydney-based aviation consulting firm CAPA – Centre for Aviation recently noted that carriers may have to embrace 747-400 conversions again after all, despite misgivings about the lower efficiency and cost disadvantage vis-à-vis production units. Although feedstock is not very expensive, the relatively high conversion cost and the limited lifespan of available candidates undermine the appeal of conversions, but lack of alternatives leave operators with little choice, CAPA argued.

Some carriers have already phased out their 747 passenger fleets. United and Delta have already phased out their 747s. Qantas and IAG have signalled their desire to accelerate the retirement of their 747 contingents.

Hermannsson said that some of the feedstock is not attractive. Not many candidates are appealing, and these are in hot demand.

“There are a few out there. The market is very competitive at the moment,” he said.

Not surprisingly, the combination of limited supply and strong interest has pushed up the asking prices for suitable aircraft, he noted. “Some price tags don’t make sense,” he commented.

One factor that could deal an additional blow to the appeal of older 747-400s is the oil price. It kept climbing over the past year, but lately suffered another set-back. Boeing does not anticipate a significant further rise in kerosene prices. A hike in the price of oil would prompt increased output from shale oil producers, resulting in a downward correction, it forecasts.

By Ian Putzger

Air Freight Correspondent | Toronto