The end of the e-commerce hype train is bad news for airplanes

There will be a price for believing the pandemic e-commerce trend could last forever. Aviation could be one of the unexpected casualties.

On Wednesday, Meta chief executive Mark Zuckerberg said he would lay off 11,000 workers and admitted he was wrong if he thought the surge in online purchases would be permanent. The mistake, repeated by companies like Shopify and Wayfair, is widespread: according to data from Bank of America,

Online penetration of European clothing and footwear sales is expected to be 22% this year, in line with the pre-Covid trend and well below the 26% recorded in 2021.

But not only online retailers and advertisers have fallen victim to the hyped e-commerce forecasts: Breathtaking sums of money have also flowed into cargo planes.,


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Both UPS and DHL have announced fleet expansions. Shipping giants like AP Moller-Maersk,

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CMA CGM and Mediterranean Shipping have been fighting to build competitive air cargo divisions. Startups have emerged.

Boeing has relied on rising freighter sales to sustain its production rate and announced a freighter variant of its upcoming 777X. Airbus is attempting to compete in this market with a freighter version of its widebody A350. Both aircraft manufacturers’ optimistic sales forecasts are based in part on higher freight demand. Used freighters have also benefited, attracting lessors and investors.

In the meantime, conversions from passenger aircraft to cargo aircraft have reached a record high, as data from the expert IBA show, and the number is increasing: slots are booked until the end of 2024. Two weeks ago, Hawaiian Airlines agreed to fly ten converted Airbus A330 freighters on behalf of Amazon. com, which had not previously ventured into anything larger than mid-size Boeing 767s.

The problem is not only that investments in traditional cargo planes are being over-provisioned, but also that smaller planes — which are better suited to carrying smaller volumes more often for express deliveries — are being refitted for demand that may not materialize.

Conversions within Boeing’s narrow-body 737 family have numbered 52 this year, IBA said last week, compared to a pre-Covid-19 yearly average of about 30. In May, Boeing opened a 737 conversion line at London’s Gatwick Airport. Even aircraft with fewer than 150 seats are entering the market: Brazilian aircraft manufacturer Embraer signed a deal with Nordic Aviation Capital last month to convert up to ten of its E-Jets into cargo aircraft.

These are big investments. Today, a five-year-old 737 or A330 can sell for around $30 million, and conversions can cost around $5 million and $15 million, respectively. IBA data shows that valuations of converted freighters are yet to plummet. They almost certainly will.

Freight rates have doubled during the pandemic, but only because passenger planes have been temporarily grounded — their cargo holds typically account for half of air freight supply. This couldn’t last, and neither could pandemic shortages. The normalization is already taking place: In October, spot air freight rates fell for the second month in a row and were 20% below the previous year’s value according to Xeneta data. In addition, the global economy is slowing, weighing on air freight demand this year, although supply has increased, figures from the International Air Transport Association show.

While predictable, transportation executives and aircraft investors pinned their hopes on e-commerce, mistaking lockdown-induced spending behavior for a permanent change in consumer behavior. In the airline industry, which has otherwise had a terrible pandemic, that may be forgivable. But now they have to face the consequences.

Warehouses are taking over Loop 303 near Phoenix, a city that leased 16 million square feet of industrial real estate in the first half of the year, as companies seek to shift the way they move goods to avoid supply chain bottlenecks . Photo illustration: Adele Morgan

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