Air freight market turns positive for Boeing in China

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BEIJING / SYDNEY (Reuters) – Boeing Co, struggling with passenger aircraft sales in China over trade tensions and the grounding of its 737 MAX, is optimistic about the outlook for cargo aircraft sales there. low as e-commerce demand explodes.

FILE PHOTO: The Boeing logo is pictured at the Latin American Business Aviation Conference and Exhibitions Fair at Congonhas Airport in Sao Paulo, Brazil, August 14, 2018. REUTERS / Paulo Whitaker

A three-year deadlock on Boeing aircraft orders was broken last May when China Cargo Airlines, owned by China Eastern Airlines Corp Ltd, placed an order for two 777 jumbo freighters. The Boeing website shows that 24 of these guys have been delivered to China.

“We saw this really explosive demand for dedicated cargo planes last year,” said Richard Wynne, general manager of China marketing at Boeing Commercial Airplanes.

Although political friction between China and the United States has not resulted in any Chinese orders for new Boeing passenger jets since 2017, Boeing’s dominance in the cargo market makes it harder to circumvent.

About 90% of the world’s cargo ships are Boeing planes. Sources have said, however, that rival Airbus SE is seeking interest in a cargo version of its A350 passenger plane.

Boeing’s products include new-build cargo ships like the 747, 777 and 767 as well as conversions of older 737 and 767 passenger planes.

He predicts that China, including Hong Kong, will need 750 additional freighters over the next 20 years, including 350 jumbo jets.

Much of the current demand is driven by a pandemic-induced expansion in online shopping. Alibaba Group Holding and major e-commerce rivals JD.Com and Pinduoduo have all recently reported higher than expected revenue growth.

YTO Cargo Airlines, owned by YTO Express, backed by Alibaba, introduces 767 converted aircraft to its fleet.

Boeing has eight 737 passenger-cargo production lines in China that allow one conversion at a time.

China’s air cargo market is less than half the size of the United States in tonnage, but growing at a faster rate, Wynne said.

Chinese airlines also carry relatively less air cargo in and out of the country than carriers from other parts of Asia, leaving room for market share growth, he added.

Air freight rates have skyrocketed as demand has returned to pre-pandemic levels, while overall capacity is drastically reduced due to the decline in passenger flights carrying cargo in the bellies of planes.

Wynne said rates are expected to remain high for the foreseeable future, while international travel remains low.

“You imagine a more gradual downtrend (for freight rates) as more jumbo jets come back online, but they should stay robust for a while,” he said. .

Reporting by Stella Qiu in Beijing and Jamie Freed in Sydney; Edited by Edwina Gibbs

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