Sky-high aircraft and engine costs collide with air cargo boom

The air freight industry is struggling to secure enough aircraft and engines – and at prices that make economic sense.
Global economic growth and the particular strength of the technology and manufacturing sectors have left the air freight industry riding high.

However, the sector finds itself uniquely pinched by external factors outside its control, particularly runaway fuel prices.

But cargo airlines, aircraft lessors and freighter conversion shops are also reeling from the surging expense of acquiring aircraft and engines and then of maintaining those assets.

Lease rates for older Boeing 777-300ERs – prime candidates for cargo conversions – have increased $200,000 monthly in the last two years, partly because passenger airlines are holding on to such types, Anna Kopinski, director of asset valuations at mBa Aviation, said last week at the Cargo Facts Symposium in Nashville.

Another example: the oldest 777s were worth about $30 million at the end of 2024. “Now, you can’t get a half-time aircraft for anything under” $40-45 million, Kopinski adds. “That’s a lot of capital.”

The inflated values come amid a period of strength for air freight.

“Cargo demand is outpacing cargo capacity,” Pooja Gardemal, managing director of aircraft appraisal firm BK Associates, said at the event.

Air freight demand increased 4.4% year on year in August, buoyed by a rising manufacturing sector, IATA reported in its most recent monthly Air Cargo Market Analysis. “Growth reached every carrier region but remained concentrated in North America and Asia Pacific.”

Meanwhile, Airbus predicts airlines over the next 20 years will need 2,670 additional freighters, including 1,140 small, 860 midsize widebody and 670 large widebody jets, according to its 2026 Global Market Forecast, released last week.

“It has been a very robust year,” says FedEx Logistics president Marcus Balzereit, citing “immense growth” in the manufacturing, healthcare, technology, automotive and aerospace sectors.

Meeting that demand while making the economics work is the trick.

George Dimitroff, head of valuations at fleet consultancy Cirium Ascend, says midlife 737-800s are now changing hands for about $20 million. Paying that much and then converting the aircraft to a freighter is economically feasible, he adds.

Engines are driving much of the price spike, a consequence of high demand for and limited supply of new engines, used engines, spare parts and maintenance capacity.

Even “unserviceable” CFM International CFM56-7Bs, which power 737NGs, have recently been selling for $7 million, “which is unheard of in my career”, Dimitroff says.

Parts shortages are so acute that MTU Aero Engines North America this year purchased 15 GE Aerospace CF6s solely for access to the engines’ life-limited parts, says vice-president of sales and marketing Les Cronin.
Maintenance expenses are equally frustrating. “We’ve seen maintenance costs rise incredibly,” mBa’s Kopinski says.

Have a Rolls-Royce turbofan that needs overhauling? Expect to wait one year for a maintenance slot, then another four months for the work to be completed, says Titan Aviation Leasing’s vice-president of technical Juan Zapata.

Some maintenance shops are needing more time – six months – to complete overhauls, or about twice as long as previously, says Western Global Airlines chief executive James Neff.

Turbofan scarcity

Want to scoop up an engine from the aftermarket? Good luck.

“We’re starting to see this continuous shortage of engines available in the market”, which “drives up the prices”, says Zapata.

Challenge Group, which owns several cargo airlines, has so far been successful in acquiring aircraft already equipped with engines, but the severity of the problem leaves operators facing the prospect of acquiring engine-less airframes, then later sourcing turbofans, says Challenge chief commercial officer Or Zak. “There’s not much more that we can do.”

Prices will likely remain elevated, and capacity will likely remain tight for the foreseeable future, until aircraft manufacturers accelerate new-jet production. Then, more used aircraft will become available, and prices will ease, executives say.

“I think we’re looking at post-2030 before you see feedstock values for the 777-300ERs coming down to a point where it’s once again a viable option” for conversion, says Kopinski.

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