Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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Is FedEx poised to order 777Fs?
FedEx Boeing 777. Airplane-Pictures.net via Google images.
Oct. 20, 2015. (c) Leeham Co.: Two developments at FedEx may give a boost to Boeing’s slow-selling 777 Classic program.
Pilots approved a six year contract that had been open for some time. Pay increases an average of 10% and other contract benefits were achieved.
Separately, The European Union may be ready to approve FedEx’s acquisition of TNT Express, with a target closing date in the first half of next year.
These two elements are key to the prospective order for 10 777Fs we reported July 8. We understood at the time that the 777F order was contingent on a new pilot contract and EU clearance of the TNT deal.
Concurrent with that timing, Boeing on its 2Q earnings call a few weeks later indicated it had 44 orders and commitments for the 777 Classic YTD. At the time, Boeing’s website showed firm orders for 34 777 Classics. We speculated then that the 10 commitments might be FedEx, but never were able to confirm this.
Well that’s a month of production seen too. Every little bit helps. Where are the rest of the little bits coming from though? And I don’t mean the 1 777X = 3 777 Classics jive being spun out of Chi-town.
Lufthansa Cargo has 14 “old” but late build MD-11F, and 5 777F.
I would expect Them to order at least 10 new, I am not quite sure if they have any options.
KR/
I forgot a link to LH flået overview:
http://lh-taufnamen.de/cargo/
I forgot a link to LH fleet overview:
http://lh-taufnamen.de/cargo/
Lufthansa Cargo has a quite young fleet of five 777F (about 1.5 years old) and also the option for 5 more aircraft. The MD11 fleet is also just 16 years old with the last MD-11 ever built.
I can imagine Boeing will made a rather nice price for one of the two first costumers of the 777-9X. Lufthansa itself will gain a lot of belly space by this type so is there a real need for more freighters?
So the problem for Lufthansa Cargo would be the rather early delivery date. Boeing has to offset this problem by pricing.
There was also speculation that emirates will order 10-15 777-200LR
Tim Clark has since said that they could extend the current leases and apply upgrades to the 77Ls to extend their life by an extra 3-5 years until the 777X arrives.
http://www.bloomberg.com/news/articles/2015-10-05/emirates-steps-up-a380neo-campaign-with-20-year-utilization-plan
I am talking about firm orders.
http://www.wsj.com/articles/emirates-considers-new-boeing-777-order-1433864803
So have they ordered it?
I just made the observation that they are now considering lease and life extension upgrades on existing frames, which in my opinion are the alternatives in bridging their needs until the 777X arrives. Tim Clark also said there won’t be any orders at this years Dubai Air Show. Of course, you are entitled to your own opinion on this however.
The 777 is a very capable aircraft. If enough young cheap used aircraft hit the market, the time has come to start cargo conversions. Around now.
A 10 year old 777-200ER does around 15 million. A heavy check combined with cargo conversion about $40 million? Total 55 Million. That’s the competition. Fedex has mostly converted freighters.
https://en.wikipedia.org/wiki/FedEx_Express#Fleet
I think even 50% off list price for 777-200LRF’s is a pipe dream at this stage.
http://www.boeing.com/company/about-bca/
A 10 year old 777-200ER does around 15 million. A heavy check combined with cargo conversion about $40 million? Total 55 Million.
Only checked somewhat superficially, but ~20-30 million seems to be more realistic for a 10 year-old 772ER. So that brings us to a total of ~60-70m for buying and converting a 772ER. That’s a long shot from the new-built 777F list price of ~318m. However, I would expect Boeing to be willing to give any new-built 777 buyer significant discounts, beyond the ~50% that’s a standard discount for large buyers anyway. If Boieng can sell a bunch of 777s even at cost, i.e with no or very little profit per frame, it’ll at least help them keep the line going before the 777X comes on line. In that context I do think that ~120m per 777F for FedEx isn’t a completely unrealistic proposition.
Personally, if I was FedEx I would definitely consider ~120m for a new-built 777F over ~70m for a 10 year-old converted pax plane, especially as delivery slots for new-builts aren’t really a problem any more.
I think part of the ‘problem’ for ordering 777F is that they have to take delivery fairly quickly. They arent staying in production much longer. This would tie in nicely with the expected surge of passenger planes coming out of fleets and not having much choices when it comes to new owners other than cargo conversion.
Vitriol. Hatred.
Basic responses to Boeing selling 777W from some corners.
They have a huge customer base and it’s a competitive aircraft for anyone shopping for a delivery in the next few years. Wholly unsurprising the end of any Boeing production run will be heavy on freighter models. FedEx might operate new builds for over 30 years.
Even still, I’m surprised (and disappointed, frankly) the sitting/scrapped fleet of (relatively young) A340’s haven’t found more conversions a la DC8 of yesteryear. Slow, safe, cheap available quads seem like prime targets vs new 777’s if the engine makers cared to push the issue w conversion companies.
There was some talk a few years back about A340 conversion without inserting large door in upper fuselage. They would use front and rear belly doors and transfer to main deck using a ‘lift system’.
It lowers the cost and time taken and avoids extra weight from strengthened floor beams.
The process would produce a freighter able to carry 60-90 t depending on model, and with overall cost , including donor aircraft of US$15m
It taps into the existing reduced height freight that travels in holds of passenger craft.
Nothing has come of it since 2012, maybe an idea too soon ?
Heres a video simulation of the A340-LCF belly lift cargo loading
https://www.youtube.com/watch?v=NzCp2Sk2X00
Interesting, has any aircraft used such a system before?
It should be noted that this isn’t an official Airbus proposal.
The same people that uploaded that A330/A340 video also uploaded a video showing the same type of conversion for a 777:
https://www.youtube.com/watch?v=ddE2dVCKeBo
Airbus themselves have an A330P2F programme (which I assume could easily be applied to A340s as well), but that does include a main deck cargo door.
Conversion of the first example has started and is expected to be completed in 2017.
http://airwaysnews.com/blog/2015/03/25/eads-efw-receives-first-airbus-a330-for-p2f-conversion/
Completed in 2017 ? No real urgency then or no customers ?
How does it work to get around the A330 slight forward tilt when on the ramp? A cargo door at the front means you are pushing the pallets up hill !
I understand the new build A330F had a longer forward undercarriage leg ( with a visible outside fairing) to alleviate this. But have any been built yet .
Well that can be pretty funny. I was once tasked with finding out what a ramp slope was because of can issues. I had to do it by myself, so I was the stadia holder and instrument guy.
Upsh9ot was I profiled the center stripes and came up with a slope (forget what it was, degree or degree and a half. )
Latter I found the plans and it was supposed to be sloped for drainage. Hmmm.
So the right ramp with the right slope and the gear would not be an issue!
“Vitriol. Hatred. ”
? From Leeham, Delta ?
https://staging-leehamnews.kinsta.cloud/2014/03/03/boeings-plan-to-bridge-777-production-gap-includes-a-777-200-p2f-strategy-were-skeptical-of-the-idea/
http://gulfnews.com/business/aviation/boeing-plunges-as-delta-sees-bubble-of-used-wide-body-jets-1.1601259
Market realities put aside?
Leeham’s comments are valid, but the consensus view is Anderson’s were purely self-serving (and hit Airbus too).
http://www.bloomberg.com/news/articles/2015-10-14/boeing-plunges-as-delta-sees-bubble-of-used-wide-body-jets
A lot of A340(-5/600?) seem to have been sold on guaranteed buy back values. Obviously customers will take Airbus up on this.
What is an A340 worth in spares ?
( look to “just run in” A318s being scrapped for parts )
Just wait till 777-200 come onto market , there were 88 made between 1995 to about 2005. These would be the ones worth ‘only $10m’. There is a whole lot of 200ER built before 2005 not worth much either when they have had high usage.
“Emirates has phased out the Boeing 777-200 from its fleet with the final aircraft now resting at the so-called aircraft graveyard in Arizona.
The aircraft delivered in 1996 clocked up 60 million kilometres, enough to fly to the moon and back nearly 80 times, Emirates said.” UAE National
Doesnt even seem to have any buyers, even for $10m
“I can imagine Boeing will made a rather nice price for one of the two first costumers of the 777-9X. Lufthansa itself will gain a lot of belly space by this type so is there a real need for more freighters?
So the problem for Lufthansa Cargo would be the rather early delivery date. Boeing has to offset this problem by pricing.”
Good point. I am of the opinion that Boeing would have to weigh if changing the rate of production to _____ is worth losing ____% margin on steeply dropping the 777F price. With the 779 and 778 entering the market, the use for future dedicated twin engine freighters will be questionable unless your freight is over sized and needs a 747 nose entry.
“A 10 year old 777-200ER does around 15 million. A heavy check combined with cargo conversion about $40 million? Total 55 Million. That’s the competition. Fedex has mostly converted freighters.”
????Where can you get a BCF???? Unless I missed something, there’s no 777 conversion passenger to freighter program.
777 BCF ?
HAECO, TAECO, PEMCO, AEI, IAI, Precision are ready to go if the market is there. (cheap 777 availability & cargo demand). There a large pool of cheap 744 freighters available at this stage. The 777 probably provides superior costs for medium requirements.
http://oi59.tinypic.com/iwjd6c.jpg
Wasn’t there some major issue with rather limited floor loading capability of the pax version making conversions prohibitively expensive?
That means no, a cargo airline cannot buy a BCF right now, nor within the next 2-3 years. Speculation(HAECO, TAECO, PEMCO, AEI, IAI, Precision) means nothing as we are speaking of a topic that is in the present tense. FX was poised to order 777F’s when they ordered their last batch of 767F’s. The 777F order never evolved and based on the Leeham article, FX could pull the trigger on 10 777F’s. No where in the text above does it mention BCF or the like. Just to reiterate, nobody, not even Captain Planet can order or buy a BCF. Good day.
Maybe the Boeing team doesn’t like the kick-off of the 777BCF program at this stage? The market can push it through non the less. Exact the same situation for the A330’s. Airbus like everybody to buy new ones, but can’t dictate.
Maybe? Just stop. The answer is no. Just leave it at that. It’s also no coincidence that the link you provided is the same one in describing the 777 BCF in a another aviation-forum. As it has been said, repeatedly, the cost of reinforced floors outweighs that of the frame being converted.
That graphic is at least 4 years old. There’s no evidence of Boeing trying to start a BCF for the 777 now or in the future.
Boeing and FedEx were prepare to pull the4 trigger on a 777BCF until Singapore backed out and turned the planes over to Scoot (not feedstock)
While I think Boeing will buy more of the current 777F, I also think that they do not need that range and size and the old 777s would fit in where the MD11s are flying.
UPS would be a candidate as well. Not a hot potato but long term is 777BCF would be a really good replacement.
I can see FedEx running a mixed fleet as well as UPS for a flat one for one MD11 replacement.
The reason Singapore kept the planes is because the willing buyer wanted to pay a price well below the book value at SQ.
Residual values of a used B777-200ER are probably varying widely depending on the actual status of the aircraft. With freshly “zeroed” engines (fresh out of the shop) and recent D-Check a 30 million price-tag appears appropriate.
$30 -40 Million seems a reasonable assumption. At some point the engines are more valuable than the airframe. After 15 yrs for a 300ER/GE90-11x according to this report. Significantly earlier for a 777-200ER/GE/PW/RR.
http://www.airfinancejournal.com/docs/events/4gdenginefinanceroundtable07-04-09.pdf
In the next few year many 777-200ER operators will start introducing A350-900/1000s. AA, UA, DL, AF, BA, SQ, CX, QR, EY, JAL to name a few. This will improve availability of used 777-200ER’s.
Interesting choice of plane. Given that Boeing is just as desperate to shift the 747-8F’s – I wonder if that model was even considered. The running costs of the quad will of course be higher than the 777F, but the all-round capabilities and the hot weather performance should count for something.
It also can carry more freight.
Everyone has their own profile as tow hat does or does not work.
Nary an issue with the 747-8 so its been very reliable despite being close to all new.
What about Iran Air for several passenger 777?
They may want to replace their rather ancient 747-200…