ATSG ramps up to lease A321 converted freighters

The leasing arm of Air Transport Services Group, an aviation services and air cargo transport provider, said Tuesday it has committed to purchase two Airbus A321 passenger planes and convert them into freighters to meet growing demand from express delivery companies.

Tampa, Florida-based PEMCO, another ATSG subsidiary that specializes in passenger-to-freighter conversions, will do the retrofits. Overhaul of the first plane will begin in the fourth quarter and Cargo Aircraft Management will lease the aircraft to an unidentified customer in the second quarter of 2022. The second A321-200 will go in the engineering shop about the same time, with redelivery projected during the fourth quarter, according to the parent company.

The A321 is a new entrant into the converted freighter market. The first plane was converted last year by an Airbus affiliate for Qantas Freight and only a handful are in operation so far. The narrowbody aircraft is going head-to-head against the Boeing 737-800 in the regional cargo and express delivery market and is also seen as a strong candidate to replace older Boeing 757 freighters as they get retired in the coming years.

“We have accelerated our plans to invest in and offer this midsize, midrange freighter type because our express-network customers have expressed strong interest in adding it to their fleets,” said Mike Berger, ATSG’s chief commercial officer, in a statement. “It is very well suited for air-express service and e-commerce fulfillment over shorter routes and with smaller payloads as a complement to our existing fleet of more than 85 larger Boeing 767 converted freighters, and with better performance than Boeing 757 freighters or any Boeing 737 freighter variants. The time is right to launch this milestone initiative for ATSG and its aircraft leasing customers.”

CFO Quint Turner declined to identify specific customers for the aircraft, but said multiple parties have expressed interest in both aircraft.

PEMCO’s conversion work is based on a design by 321 Precision Conversions, a U.S. joint venture between Portland, Oregon-based Precision Aircraft Solutions and ATSG. In late April, the Federal Aviation Administration approved the company’s program for modifying the A321. 321 Precision Conversions has licensed PEMCO to install its conversion kits.

Cut-out view of the A321 converted freighter. (Image: Air Transport Services Group)

ATSG (NASDAQ: ATSG) will make money through 321 Precision Conversions selling the conversion kits and royalties for the supplemental type certificate required for each aircraft, as well as PEMCO’s engineering work.

Converting used passenger planes to freighters is a complex engineering task that involves stripping out the cabin interior, covering windows, cutting the frame and adding a large cargo door, reinforcing the floor for heavy containers and installing a hard barrier in front of the cockpit and a cargo-handling system.

321 PC earlier this year delivered its first converted freighter to Vallair, an aviation services company in Luxembourg. The plane is now in operation for SmartLynx Malta, a new cargo airline owned by a Latvian passenger carrier that began flying parcels for DHL Express in Europe. The manufacturing work for that aircraft was done by Avocet, also based in Florida.

The company’s second conversion is underway at PEMCO and the third aircraft will be inducted into Avocet’s facility in the second half of July, said Zachary Young, 321 Precision’s director of sales. Customers, or end users, have not been publicly identified yet.

SmartLynx Cargo’s new A321 freighter. (Photo: Vallair)

Allocating conversion work to different maintenance, repair and overhaul partners is based on timing, scheduled delivery, geographical location and other customer preferences, Young said.

Vallair, which arranged the delivery to Qantas, recently said its third A321 freighter is scheduled for delivery in the third quarter.

Aviation experts say the A321 converted freighter has excellent characteristics for the short- and medium-haul market. Express carriers are rapidly adding to their fleets as volume from e-commerce shipments soars. Narrowbody planes are ideal for shuttle routes because the planes can be easily filled without wasting space and require less fuel than larger aircraft.

The A321 is about 25% more fuel efficient than older freighters in its size class, with better range, payload and volume capacity. Its ability to carry containers in the lower hold gives it an advantage over the 737-800, which is limited to loose cargo. Analysts say the main reason sales might lag is if carriers that operate Boeing fleets want to stick with the same aircraft.

The 321 Precision Conversions and Airbus versions differ slightly in weight and other characteristics.

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

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