“We have seen an improvement in terms of traffic, and seven out of the past eight months have showed positive traffic,” Edgar continues. “We haven't seen that since mid-2011. Further good news is that November was better than October and for the year to date, we've been projecting 1.15% [currently 1.2% through November]. So the year will be positive, and I haven't been able to say that for quite a while. It has been very stagnant in terms of RTKs. There's been a historical debate over whether air cargo is a leading or lagging indicator. But it is an indicator and, although there is still some uncertainty that's tending to constrain air cargo, there are certainly reasons for feeling optimistic about the future. Generally, we're in agreement with [the International Air Transport Association] that we'll see a return to more historic growth patterns in 2014.”
There are even glimmers of hope in the Asia-Pacific region, where operators have borne the brunt of much of the recent downturn. “Asia-Pacific carriers have generally not enjoyed the same degree of positive results, but they have recently reported similar strengthening, with the rebound dependent on improving global economic conditions and trade,” Edgar says. The improvement “is reflective of a strengthening of the Asian economies and trade volume. China, for instance, has shown strong growth recently,” he adds.
The distances and volumes involved in both trading to and within the Asia-Pacific region have helped drive the gradual adoption of larger freighter models. “When it comes to freighters, it is all about economic efficiency—it's very straightforward. Thus, those with the latest, most efficient aircraft are going to be the beneficiaries as things improve. The 777F and 747-8F users tend to look forward. [They] make decisions for the long term because they realize it's a long-term investment. Many of the carriers are building these fleets,” he adds.
However, over the darkest days during the past two years, with the threat of “white tail” 747-8Fs potentially stacking up in desert storage or in Everett, Wash., alongside growing numbers of undelivered 787s, Boeing also made some tough decisions to protect its own long-term investment in the 747 line.
“Since we have 90 percent of the world's capacity, I believe we have an obligation to help the industry when there are challenges,” Edgar says. “Our most recent campaigns have involved trade-outs.” Citing an agreement with Cathay Pacific Airways as a “most recent” example, he adds: “We're doing our part. As the freighter business goes, so goes Boeing.”
Under the terms of a complex agreement hammered out in March 2013 between Boeing, Cathay and Air China Cargo (in which the Hong Kong-based carrier controls equity interest), the collective “group” purchased three additional 747-8Fs while canceling orders for eight 777Fs. At the same time, it acquired purchase options on five 777Fs and sold four 747-400BCF converted freighters. Air China Cargo meanwhile acquired eight 777Fs and sold seven -400BCFs. In addition to the used freighters, Boeing also took ex-Cathay passenger models.
“We've taken both. If the aircraft is older and the values written down, then we part-out some. It's a business decision,” Edgar says.
It is also a decision that keeps customers loyal when better times return. On Dec. 27, just a few days after Cathay took delivery of the 747-8F to be—powered with the performance-improvement-package-version (PIP) of the GEnx-2B67, the airline revealed it was taking an additional -8F to increase its eventual fleet to 14.
Overall, Boeing now holds 68 firm orders for the 747-8F, 47 of which had been delivered by the start of this year. Asian-based carriers still in the undelivered backlog include Korean Air, Nippon Cargo and Cathay. Boeing also holds orders for 128 777Fs, 86 of which had been delivered within the same period, with China Cargo, China Southern Airlines, Korean Air and Hong Kong Airlines among those with undelivered units.