International growth prompts new freighter advisory practice

International growth prompts new freighter advisory practice

Improving world trade and surging freight volumes have prompted aviation consultancy IBA to set up a new freighter advisory practice.

The practice is headed by Moshe Haimovich (pictured), and aims to guide clients through the complicated process of buying a freighter aircraft or converting an old passenger aircraft into a freighter.

The company says that figures showing the freighter market is enjoying its fastest growth since 2010, and that it will continue to grow over the next two decades, was the catalyst for the new team.

Phil Seymour, IBA’s CEO, explained why IBA is providing an advisory service to the freight sector. “According to IATA’s latest June Freight Analysis report, global freight volumes rose by nearly 11% year-on-year in the first half of 2017 – this is the fastest pace of growth since October 2010,” he said.

“With Boeing and Airbus forecasting that the freighter market will require 2,480 and 1,950 additional freighters respectively over the next 20 years, in this positive environment we felt it was the right time to supplement our internal resources with a highly experienced and knowledgeable industry expert. We’re very pleased to welcome Moshe to the management team.”

Haimovich has more than 30 years’ experience within aviation engineering, project management, consulting and marketing with Aldav Engineering and Israel Aerospace Industries, and specialises in aircraft cargo conversions. He has supported major operators, airlines, lessors and investors in developing cargo conversion supplementary type certificates and in converting more than 100 aircraft.

He told Aircraft Investor that, historically, the air freight sector had grown at twice the rate of the world’s GDP. That rate had slowed since the financial crash of 2008, to about the same as the world’s GDP and trade growth rates, but had been “increasing and improving” in recent years. In 2016, for example, the sector grew by 3.6% and it was the fourth year of consecutive growth.

According to Seymour, airlines based in Europe and Asia Pacific accounted for around two thirds of the annual increase in freight volumes, with the remainder split almost equally between North American and Middle Eastern carriers.

He said: “This can all be measured against improved world trade conditions, which have picked up since the middle of last year, and business surveys continue to indicate healthy export order books for global manufacturers.

“IBA concurs with IATA in noting that the global airfreight tonne kilometres grew by 12.7% year-on-year in May 2017, up from 8.7% the previous month. Driven by the growth of e-commerce and by industries reliant on the movement of time sensitive and high-value goods such as consumer electronics and perishables, demand for freighter aircraft has significantly increased from 2015.”

Haimovich said he and IBA were “combining forces” to offer a bundle of services to players in the freighter market, including airlines, lessors and investors, to help them make the most of this environment. These services include market intelligence and analysis, valuations, consulting on cargo conversions, and investment evaluations.

Describing aircraft conversion as “the most complex route”, Haimovich said operators, lessors and investors had to pay “particular attention” to how they entered the market. “It’s not a simple area. We’re talking about huge investment. Narrow body conversion is in the range of $4-6 million; medium and wide body conversions are in the range of $13-16 million, and more; and the very large aircraft are more than $20 million per conversion. And that’s without the extra costs of aircraft acquisition, maintenance and additional cost during the conversion.

“But on the other hand, it’s an opportunity. A passenger aircraft that is in the middle of its life or older, rather than ending its life by the age of 25, can extend its life by about 15 to 20 years of operation as a freighter and generate revenue.

“The start point is always to consider what aircraft you acquire, what condition, what price. Make your business plan and see if it’s a sound investment for you.”

Elizabeth Eyre
By Elizabeth Eyre August 21, 2017 13:50