With cargo traffic back on an upturn, Boeing believes there is renewed demand for the 767-300ER freighter conversion program, labeled BCF. But “feedstock” for the program—available passenger 767s—is not so ample, so the OEM is offering help in the form of data and financing to potential BCF customers.

Boeing launched the BCF program more than a decade ago, in 2004. It then expected the 787 Dreamliner to begin deliveries in 2008, replacing some 767-300ERs in passenger service and thus freeing up the older jets for conversion to cargo transport.

“That didn’t happen,” Boeing VP freighters and modifications Dan da Silva told ATW. The 787 was late and, more importantly, the 2008 financial crisis caused a devastating and long-lasting drop in international trade, cargo shipments and demand for any kind of cargo aircraft.

The unfavorable economic winds have finally been reversed and demand for cargo is once more on a growth trend, albeit slow. Boeing is particularly optimistic for the express freight market within China and Asia generally, driven by the explosion in internet commerce and Asia’s immense population of consumers.

So demand is heating up, and the BCFs are starting to roll. The OEM’s latest delivery was to Uzbekistan Airways. All Nippon Airways is taking a BCF for its intra-Asian express freight service. Two aircraft from Guggenheim Aviation have been converted for Cargojet to support its service to the Canadian post office. In all, Boeing has redelivered 12 converted 767-300ERs as freighters and has a backlog of six more ordered. Five of these are for SF Express, the largest express delivery company in China.

All this is nice, but da Silva thinks business would be even better if there were a more ready and visible supply of 767-300ERs.

“The reality is that the passenger 767 is still a hot commodity,” he said. Large operators of the aircraft like Delta Air Lines, American Airlines and United Airlines are holding on to their fleets, even though the latter two carriers are taking delivery of 787s. Indeed, there are about 480 767-300ERs still flying and Boeing is still producing them. “Feedstock is available, but in a trickle,” da Silva said. “Current operators that have the big fleets are not freeing them up in big blocks.”

To help potential customers navigate this fragmented market, Boeing is doing three things. The BCF program maintains a database on 767-300ERs that has all the technical characteristics of each aircraft. Finding 767s with similar technical attributes makes them easier to convert in a block. Boeing Capital Corp. tracks which 767s are for sale or lease. And BCC can also step in, as it did on the Guggenheim deal, to provide short-term financing of aircraft for conversion. 

The BCF fits in the large- and medium-sized cargo market, for which Boeing forecasts a robust growth. Da Silva says the program is especially suited to express-freight carriers such as FedEx, UPS, DHL and SF Express. But Boeing has already sold 52 new 767 freighters to FedEx, of which 12 have been delivered.

Da Silva sees demand for BCF as strong, provided some 767s are freed up. He notes that DHL still flies older Airbus A300s, which guzzle fuel, and FedEx flies similar jets, plus MD-10s and MD-11s. “They could step down to a 767 or up to 777,” he said.

Boeing’s partner in Singapore, SASCO, is capable of doing two to eight conversions a year, so capacity is not a problem. With a license and data from Boeing, Israel’s IAI also converts 767s, getting 42% of the market to the OEM’s 58%. IAI has also done 767-200 conversions, a largely complete program. “It is not as attractive on ton-miles, with the same metal and lower volume,” da Silva said.

Old or New?

The BCF program competes partly with Boeing’s new 767 freighters, but da Silva says this is a win-win competition for Boeing. “The customer can select what is best for him, given cost, fuel, maintenance and longevity.”

The choice between new or converted often depends on utilization rate and business model. List price for a new 767-300F–and Boeing has sold 84 of these so far—is nearly $194 million.  The BCF list price, by comparison, is $18 million and Boeing recommends it for aircraft acquired for $10 million or less.

New aircraft, therefore, are much more expensive to acquire, but they are also more economic to maintain and operate, and they will last longer. The acquisition difference will be much more important in aircraft operated just two or three hours per day. For aircraft flown eight to 14 hours a day, operating savings on new jets will be more important. Express carriers tend to fly jets fewer hours per day, and by doing so seem to be the best candidates for the BCF.