Small fly

Cargo is mainly an overnight delivery market and the demand of smaller freighters or feeder aircraft, particularly in India, means competition is hotting up.

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By  Mark Foxwell Published  August 20, 2006

Cargo is mainly an overnight delivery market and the demand of smaller freighters or feeder aircraft, particularly in India, means competition is hotting up.

India seems to be near the top of every airframe manufacturers’ list of targets, and the regional aircraft end of the air freighter market is no exception.

“We see a similar situation to that which can be seen in the passenger aircraft sector,” says Jean-Luc Establie, sales director at turboprop manufacturer ATR.

“In the five-to-eight tonnes market, I see demand for between 50 to 60, or even 80 freighters,” he adds.

Rob Morris, director of market development at BAE Systems’ regional aircraft division also sees huge potential. “Cargo was previously transported as belly freight. Now you have just-in-time delivery, and an overnight delivery market.” He notes that as the cargo market grows, so will the need for feeder aircraft.

Despite the fact that there are around 70 cities with more than one million inhabitants in India, there is very little in the way of small freighter services, according to Establie.

If his predictions are true, there is a fair way to go. There are currently only a handful of dedicated freighter operators in the Indian market.

Chennai-based Crescent Air Cargo launched last year with a three-strong Fokker 50 fleet, each with a seven tonne payload capacity. The carrier’s destinations include Mumbai, Bangalore, Hyderabad and Delhi, as well as the Maldives and Colombo in Sri Lanka.

The other main regional freight aircraft operator is Mumbai-based courier company First Flight Couriers, which opted to buy three ATPs from BAE Systems earlier this year, in something of a breakthrough for the UK company, which beat off stiff competition from ATR to win the order.

First Flight is basing the aircraft in Amritsar, Bangalore, and Chennai, covering the west, north and southern regions of India.

First Flight Couriers will use the ATPs to start its own Indian domestic freighter operations. The three aircraft (formerly operated by British World Airlines, Manx Airlines and Air Europa Express) will be configured as E-Class bulk freighters.

In addition to leasing the aircraft, First Flight has signed up for a material and component repair and overhaul (MACRO) support contract, as well as a full suite of customer training packages from Regional Aircraft.

Founded in 1986, First Flight has developed into India’s largest courier company by volume, with 721 offices spanning 1800 destinations in the country and serving 229 countries worldwide. First Flight has over 8000 employees and handles more than 150 million shipments every year.

Currently, shipments within India are carried on belly-hold space on Indian domestic airlines and then transported to their final destinations on a large fleet of trucks, vans and small delivery vehicles (including motorbikes).

A full range of price and delivery-time differential service modes are offered, such as Express (document and non-document), Domestic Cargo (air or surface) and International (express document or non-document).

R.K. Saboo, deputy managing director of First Flight, comments: “Our company has grown dramatically in the past 19 years and we are now poised to enter a new phase of growth and development with the creation of our own domestic freight airline. By having our own aircraft, dedicated to carrying our own shipments, we can tailor our products to offer an even better level of service to our customers.”

Commenting on the ATP transaction, Paul Stirling, senior vice president, asset management at BAE Systems, regional aircraft, says: “We look forward to hopefully supplying them with additional aircraft over the years as their freight airline operation grows. At a time of sustained economic growth and new prosperity in India, First Flight’s timing looks to be perfect as it seeks to provide a new level of customer service to the growing industrial and commercial base in the country.”

First Flight, which is more used to utilising belly cargo from existing airlines, has hired Indian general aviation company Taneja Aerospace and Aviation to operate the new ATP fleet.

Taneja was also involved in the aircraft selection process and will be taking care of maintenance and the day-to-day operations. Maintenance will be undertaken at Air Deccan’s facility for its ATR42/72 turboprops.

Despite losing out to BAE for the First Flight order, Establie is far from downhearted. “The ATPs were cheaper, but I think First Flight will take another look at ATR soon,” he predicts. First Flight has made no secret of the fact that it is looking to expand, and is also looking at the narrow body market.

Establie, meanwhile, says he has three-to-five clients that are interested in turboprop freighters, although ATR is not on the brink of announcing orders. “People are not quite ready yet. But if you look at the passenger market, I think we can do something quite similar,” he says.

ATR has already seen major success in the Indian passenger market, with Air Deccan ordering 30 new ATR 72-500 aircraft and six second-hand aircraft (three ATR 42-500s and three ATR 72-500s).

Kingfisher Airlines, signed up for twenty new ATR 72-500s last November 2005, an order that was subsequently increased in February 2006 when Kingfisher Airlines exercised options for 15 additional ATR 72-500.

Establie at ATR admits that the lower price of the ATP was hard to argue against, but says that the ATR 72, which offers a payload of between 7.5 tonnes to eight tonnes, has other advantages. “The ATP may be cheaper to purchase, but it is not cheaper to operate,” he says.

He points to the more modern design of the ATR, with the result that the aircraft is lighter, helping to reduce operating costs. He also points to the support on offer - India is the only area outside of Europe and the US with two ATR training centres, located in Bangalore and Mumbai. The critical mass provided by the Air Deccan and Kingfisher orders is clearly paying dividends.

Within the next couple of months, ATR will have a spare parts distribution facility open in Delhi, while an ATR office in Bangalore opened in July. In the medium-term, the manufacturer plans to open an maintenance repair operation facility, probably located in southern India.

Undoubtedly, the lower purchase price of the ATP, which has a relatively low residual value since it is no longer in production, has a small worldwide fleet and is supplied by BAE on a leased basis. This proved attractive to First Flight.

Between 1987 and 1996, 63 ATP were built with twin PW126 engines fitted with six bladed Hamilton Standard propellers. In 2001, BAE launched a passenger to freighter conversion programme and is now able to offer both bulk ‘E’ class and large freight door versions with a potential for in excess of
eight tonnes payload.

Morris at BAE says lease rates for an ATP come in at around US$50,000 per month, with average values of just over $1 million. In contrast, an ATR 42-300F will go for around $2.5 million, and an ATR 72-200F for $5 million to $6 million.

Both operators have cargo doors conversion programmes, although First Flight has not gone for this option.

Romanian commercial aerostructures manufacturer, Romaero, has a large freighter door programme for the ATP, with work carried out at its Baneasa facility, near Bucharest.

Large cargo door installation for ATRs is carried out by firms including the French firm Aeroconseil, Italy’s Aeronavali and M7 of the US. Future demand is particularly anticipated from the Indian market, says Bagnato.

There are over 700 aircraft in the global ATR fleet, of which around 10% are freighters.

Around 10-12 ATRs are converted for freighter use every year, mainly for the European market, but the Indian market is picked out by the company as a key market.

BAE Systems, meanwhile, is also looking to relaunch a cargo conversion programme for the BAE 146. “We are evaluating the market situation. We have been in negotiations with conversion partners, and have a preferred partner lined up,” says Morris.

A 146 freighter production programme launched in the 1980s came to an end in 1993, with around 30 of the type in service. TNT Express and Australian Air Express still operate cargo variants from this era.

The manufacturer is also looking at the possibility of a programme for the 30-seater J41, which could have a payload of around three and a half tonnes.

Also being considered for a conversion programme is the Bombardier CRJ100/200 regional jets, as the Canadian manufacturer tries to improve the residual value of a fleet which is beginning to age.

A study is under way into a potential package freighter programme for second-hand aircraft, evaluating whether the modification would require the installation of a cargo door. The expected payload, if the programme is launched, is expected to be around seven tonnes.

Elsewhere, Brazilian regional jet manufacturer Embraer is looking at the possibility of launching a freighter conversion programme for the ERJ-145 family. The ERJ-145 has been in production for ten years, and the manufacturer is trying to establish whether a programme would be viable.

Meanwhile, US-based M7 (which also carries out conversion programmes on ATR turboprops) acquired Worldwide Aircraft last year, expanding its Fairchild Dornier maintenance and freighter conversion.

M7 Aerospace is the type certificate holder for the Fairchild Metro and Merlin series and is the legacy original equipment manufacturer for these aircraft, having acquired the assets late in 2002 as part of the liquidation of Fairchild Dornier.

There may still be life left for the Fokker F50 (the type acquired by Crescent Air Cargo) cargo variant, despite the fact that, like the ATP, there is a limited amount of supply.

As for Aircraft Conversions, it launched a freighter door programme for the type last year, aimed at operators looking to replace ageing Fokker F27 Cargo and other similar variants. The company says that the F50 conversion will have twice the range of the Fokker F27 and bulk payloads of up to 7.7 tonnes.

The eight-week conversion is done either at the company site or the freight doors and technicians can travel to carry out the work. The forward large door of the Fokker 50 Freighter is 70 x 90.5 inches, opening to 110 degrees or 170 degree positions to enable loaders to back right up to the fuselage, allowing both containers and pallets to be easily loaded.

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