Atlas Air Worldwide (NASDQ: AAWW) and DHL Express on Tuesday announced significant purchases of production freighters from Boeing Co. (NYSE: BA) to help stay ahead of demand trends for the air cargo market.
Atlas Air ordered four 747-8 cargo planes, adding to the world’s largest fleet of 747s, while Deutsche Post DHL’s (DIX: DPW) express delivery arm said it will purchase eight 777 freighters.
The 747-8s earmarked for Atlas will be the last ones off the production line in Everett, Washington. Boeing previously announced plans to deliver the final 747 in 2022.
First deliveries of 777s to DHL are scheduled for 2022.
The investments come as the air cargo sector experiences a boom, rising from the market bottom in June when the coronavirus pandemic wiped out swaths of global transportation, manufacturing and retail activity. Demand has grown rapidly nearly every month since amid a severe capacity squeeze — once more than 35% and now closer to 20% short of last year’s level — because so many passenger flights remain sidelined.
Last week, Amazon confirmed that its air logistics group purchased 11 previously owned Boeing 767 aircraft and will do a makeover to convert them into freighters.
One of the key drivers behind the rise in air cargo volumes in the past year has been e-commerce. DHL Express said its global e-commerce volume grew more than 40% in the fourth quarter. Rakutan Intelligence reported a 51% increase in U.S. online sales during the fall compared to 2019. Adobe Analytics estimates that $189 billion was spent online during the holiday shopping season, and predicts e-commerce sales will reach record heights of $6.54 trillion in 2022, up from $3.53 trillion in 2019.
Many retailers said their online sales in recent months have topped 50% of their total sales.
“With the order of eight new widebody freighter aircraft, we underline our conviction that e-commerce is an enduring megatrend. This is why we decided to act early and kick off 2021 with this investment in our future,” DHL Express CEO John Pearson said.
Boeing recently forecast that air cargo volumes will grow at a 4% compound annual growth rate for the next 20 years because of increased cross-border trade and e-commerce, creating a need for 60% growth in the worldwide cargo fleet, including 930 factory-built freighters.
DHL Express placed an order for 14 777 cargo aircraft in 2018 and has already taken delivery of the first 10 units, which the company said helped it accommodate unprecedented demand during the peak shipping season last year. The 777s are mostly replacing leased 747-400s being returned to their owners.
The 777 provides long-range and heavy-lift capability, with a maximum payload of 225,000 pounds, allowing operators to make fewer stops and reduce associated landing fees.
DHL Express operates over 260 dedicated aircraft with 17 partner airlines.
Atlas Air has 53 747s in its fleet, including 10 747-8s and 34 747-400 all-cargo aircraft. The 747-8 is externally similar to the 747-400 but has a higher gross weight, a longer fuselage and wider wingspan, updated systems, and improved aerodynamics. With a maximum payload capacity of 303,686 pounds, it offers 20% more available load capability while using 16% less fuel compared to the -400 version. The GE engines, which are used on the 787 Dreamliner as well, are also 30% quieter, according to Boeing.
Several passenger airlines last year permanently retired their four-engine 747s in response to the airline industry’s depression, opting to rely on more modern twin-engine aircraft.
Atlas’ operating units — Atlas Air, Polar Air Cargo and Southern Air — operate 117 aircraft, including Boeing 737s, 767s and 777s.
Both the 747s and 777s are capable of carrying tall and outsized cargo loads on 10-foot-tall pallets, giving operators great versatility for main-deck carriage.
The 777’s fuel efficiency also reduces carbon dioxide emissions by 18% compared to the legacy 747-400.
“The 747-8F is the best and most versatile widebody freighter in the market, and we are excited to bolster our fleet with the acquisition of these four aircraft,” said Atlas Air CEO John W. Dietrich, in a statement. “This significant growth opportunity will enable us to capitalize on strong demand and deliver value for our existing and prospective customers.”
Boeing has produced 1,560 freighters since the jumbo jet program began more than 50 years ago.
The airframer announced Tuesday it finished 2020 with 184 orders, a drop of 471 orders from 2019 when cancellations are combined. Airlines are downsizing to adjust to much lower expectations for air travel in the next few years and many have put capital expenditures on hold.