IBA’s latest freighter market data has revealed that aircraft conversions have declined, while feedstock prices remain high on certain platforms.
The aviation advisory firm reported strong year-on-year growth in cargo-tonne km (CTK) last year, with demand rising 11.3% above 2023 and 7.5% above pre-pandemic levels.
And IBA expects that high demand to continue this year, albeit bringing softer growth, with CTKs increasing around 5%.
As anticipated, conversion activity reduced last year, compared with 2023. A321 P2F conversions initially had strong values, but have now settled down.
Jonathan McDonald, manager – classic & cargo aircraft at IBA, noted that while the A321s started the beginning of the conversion programme with a buoyant value profile, they saw a slight reduction in values, which seem to have now settled back.
“There’s quite a lot of debate on the values of the A321s because, obviously, the feedstock is quite high in the passenger sector,” said Mr McDonald.
But, he said, conversion costs for the A321 were substantial, starting at a minimum of $8m – excluding maintenance costs for a 2004-built aircraft.
“We have noticed that more recent conversions are actually later-built aircraft, for instance from 2008 and 2009. I think even the odd 2012 has slipped in there,” he said.
Older A321s (2004) have lower value, while younger conversions (2008-2012) command higher prices, ranging between $20m and $30m.
It appears that early lease rates for the A321 were above $250,000 a month, but have since declined, currently fluctuating around $200,000. In high-credit, low-risk scenarios, rates could dip to $189,000, and investment in these aircraft can exceed $30m.
Generally, B737-800s have seen stable values, in the high teens ($17m to $18m) for a 21-year-old aircraft, according to IBA. Conversion costs are upwards of $6m, pushing total investment above $20m. However, some debate exists on actual values, due to feedstock price variability.
Lease rates for the B737-800P2F initially exceeded $200,000 a month, but have now settled at $170,000 to $180,000, but in some cases, older aircraft have leased below this. For riskier jurisdictions, or operators with less-favourable credit profiles, rates might push closer to $200,000.
Ironically, values for the B757 have slightly risen, despite retirements like FedEx parking aircraft. Mr McDonald added that the high value of the 757’s engines (Rolls-Royce RB211s and Pratt & Whitney PW2000s)were pushing up the aircraft’s overall value.
But he believes this is a short-term trend, driven by high engine maintenance costs, with values expected to stabilise and decline within the next two-and-a-half years.
Lease rates for the B757 are declining, despite recent value increases, but remain higher than 737-800s, due to greater capacity and range. They are also still popular with operators for long-haul or over-water routes.
B737-400 freighters were leased for $160,000 a month around 2016 but are are now below $100,000 in many cases. Historically valued at $8m to 9m, older (27-year-olds) have significantly depreciated, recent examples fetching around $4.4m if well-maintained.
In the widebody sector, the B747-400 remains remarkably buoyant in value and, as IBA suggested, 23-year-old models are trading in the mid-$20m range, citing recent price tags from China Airlines pegged at around $25m each.
Mr McDonald believes their operational longevity on major transpacific routes (such as Taipei-Anchorage and Taipei-Seoul) helps maintain steady demand for these aircraft.
B767-300 conversions continue, although costs have risen. 2004-built models typically trade in the mid-$20m range, while recent conversions have focused on mid-1990s aircraft, reflecting continued demand. Conversion costs start at $16m, but new 767 conversions today are significantly more expensive, due to high engine values, pushing total investment to around $30m.
A330s have seen a significant increase in value over the past two years, the -300 hovering over $35m in January, IBA data shows. Reportedly, conversions have become more viable post-pandemic, due to more feedstock availability, but rising demand and higher conversion costs are driving up market values.
B777s are rarely traded in the secondary market, due to high demand, making pricing data scarce, but some 2009–2010 build models – as Mr McDonald noted – have traded recently for about $80m.
