Qantas converting more aircraft for freight to meet e-commerce demand

A white with a red tail and Qantas kangaroo logo sitting an an airport apron.

Australian flag carrier Qantas said Monday it will procure six Airbus A321 standard aircraft and convert them to freighters as replacements for smaller, older Boeing cargo jets to keep pace with the huge upswing in cargo volumes powered by e-commerce.

Qantas Freight was the first airline to operate the A321 converted freighter when it entered the commercial market in October 2020 as a competitor to the Boeing 737-800 and younger alternative to the slightly larger Boeing 757 conversion aircraft. The airline’s cargo division currently flies three A321s on behalf of Australia Post.

“This investment will grow our operations so they can support increased demand for next-day delivery,” said Qantas Group CEO Alan Joyce. “Qantas Freight has been one of the standout performers for the Group during the pandemic as Australians rapidly shifted to online shopping. While some of that shift is temporary, demand remains well-above pre-pandemic levels, even with the lifting of almost all COVID-related restrictions. 

“This is one of the largest-ever investments in our domestic freight fleet, that will enable Qantas Freight to capture more of that demand and will provide the opportunity to help Freight further grow revenue and earnings.”

Qantas said it expects to receive the six passenger-to-freighter conversions between early 2024 and mid-2026 after sourcing the used jets in the secondary market. It didn’t identify which company would carry out the retrofits, but the likely candidate is Elbe Flugzeugwerke (EFW), a joint venture between Airbus (DXE: AIR) and ST Engineering in Singapore. 

EFW converted the three A321 leased freighters in Qantas’ fleet and is converting two Airbus A330s for the Australian carrier. Passenger-to-freighter programs involve a major overhaul, including stripping the cabin interior, adding a wide cargo door, reinforcing the flooring and wing box, and installing a system for easy maneuvering of heavy containers on the main deck.

The new tranche of A321 cargo jets will increase capacity and fuel efficiency for Qantas and its customers. 

The Airbus units will replace three 737-300 and one 737-400 currently in service, as well as one 737-300 retired in July after 36 years of flying. Each freighter can carry 25.3 tons, 10 tons more than the older 737s, and is about 30% more fuel efficient per ton of freight transported. And Qantas is adding one additional narrowbody freighter beyond the five replacements. 

Having a mostly Airbus fleet will also simplify operations, maintenance and training for Qantas. When all orders are fulfilled, Qantas will have 10 freighters in its domestic network.

The airline also operates one Boeing 767 freighter as well as two Boeing 747s on an outsourced basis internationally. Last week, Qantas Freight renewed a long-standing contract with Atlas Air for the turnkey lease of two Boeing 747 freighters linking Australia with Asia and the U.S. Under the extension, Atlas Air (NASDAQ: AAWW) will also fly an additional one-way route from the U.S. to Hong Kong via Australia.

One of the A330 converted freighters will be operated domestically for Australia Post and the other will be deployed in international operations. 

The airline supplied EFW with the A330s and one A321 from its own passenger fleet.

E-commerce lifts air cargo

Since the start of COVID, Qantas Freight has handled a much higher volume of cargo, much of it due to a consumer shift to digital shopping. E-commerce in Australia has grown by more than 76% compared to 2019.

E-commerce continues to be the main force propelling air cargo growth around the world and record demand for passenger-to-freighter conversions. Conversion facilities have waiting lists of 18 months or more, especially for narrowbody freighters utilized on short and medium shuttle routes that support next-day delivery.

“Cargo airlines, especially widebody freighter operators, continue to achieve unprecedented high returns as a legacy of the pandemic induced capacity shortages. We expect this level of cargo demand to be sustained. …  And we are also seeing strong demand on the narrowbody freighter side,” said Aengus Kelly, CEO of aircraft leasing giant AerCap, during last week’s second-quarter earnings briefing.

Airbus, in its recent 20-year market outlook, forecast freight traffic will grow at a 3.2% compound annual rate buoyed by 4.7% growth in express airfreight.  

Qantas Freight had record results in the first half of fiscal year 2022 due to increased demand for e-commerce, as well as higher yields attributed to supply chain disruption and reduced capacity on passenger flights.

Qantas is scheduled to issue full-year results on Aug. 25. 

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