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World Airways To Lease 3 747SF Freighters  
User currently offlinePanAm_DC10 From Australia, joined Aug 2000, 4115 posts, RR: 90
Posted (8 years 7 months 2 weeks 3 days ago) and read 3520 times:
AIRLINERS.NET CREW
COMMUNITY MANAGER

Just announced now via their website

PEACHTREE CITY, Ga., Dec. 12 /PRNewswire-FirstCall/ -- World Air HoldingsInc. (Nasdaq: WLDAE), parent company of World Airways and North American Airlines, today announced it has signed a letter of intent to lease three Boeing 747-400 Special Freighter aircraft, contingent upon approval by the lessor's board of directors. The aircraft will be converted from passenger configuration to freighters prior to delivery, with the first aircraft scheduled to be delivered in June of 2008. Additional deliveries are planned in November 2008 and May 2009.

SOURCE World Air Holdings, Inc.
CONTACT:
Media, Steve Forsyth, +1-770-632-8322, or Investors, Janice Kuntz, +1-404-352-2841, both of World Air Holdings, Inc.

Regards, PanAm_DC10


Ask the impossible to achieve the best possible
22 replies: All unread, jump to last
 
User currently offlineKC135TopBoom From United States of America, joined Jan 2005, 12128 posts, RR: 52
Reply 1, posted (8 years 7 months 2 weeks 3 days ago) and read 3494 times:

Does anyone know what airline these B-747-400s are coming from? Are these airplanes still in service, or currently stored in a desert?

User currently offlinePanAm_DC10 From Australia, joined Aug 2000, 4115 posts, RR: 90
Reply 2, posted (8 years 7 months 2 weeks 3 days ago) and read 3440 times:
AIRLINERS.NET CREW
COMMUNITY MANAGER

Quoting KC135TopBoom (Reply 1):
Does anyone know what airline these B-747-400s are coming from? Are these airplanes still in service, or currently stored in a desert?

I don't know the full history of the airplanes but they are ex UA

The three 747-400SF aircraft, to be leased under seven-year terms, were formerly operated by United Airlines as passenger aircraft.

Regards, PanAm_DC10



Ask the impossible to achieve the best possible
User currently offlineFlyer732 From Namibia, joined Nov 1999, 1362 posts, RR: 22
Reply 3, posted (8 years 7 months 2 weeks 2 days 23 hours ago) and read 3375 times:

hmm....

Should be interesting to see who will grab em up on an ACMI contract...


User currently offlineFRA2DTW From Germany, joined Feb 2004, 322 posts, RR: 0
Reply 4, posted (8 years 7 months 2 weeks 2 days 22 hours ago) and read 3292 times:

Is this a response to Atlas Air's announcement that they are considering going into the passenger ACMI with 747's, thus threatening World's MD-11 dominance of the military pax business ?

User currently offlineNA From Germany, joined Dec 1999, 10645 posts, RR: 9
Reply 5, posted (8 years 7 months 2 weeks 2 days 21 hours ago) and read 3269 times:

That the 3 aircraft in question will be ex-UA indicates they will be some of the last left parked at Victorville, 2 of them already since 4 years.
Most of the 744s UA returned to its lessors went to Corsair over the last twelve months but last I counted 5 (ships 172, 176, 183, 190 and 106) are still left there.


User currently offlineFRA2DTW From Germany, joined Feb 2004, 322 posts, RR: 0
Reply 6, posted (8 years 7 months 2 weeks 2 days 16 hours ago) and read 3124 times:

So this fleet was pretty well picked over before World got to choose? I would imagine they are all due for C or D checks. The press release stated they would be converted to SF freighters - doesn't that mean that the nose can tilt upwards for loading? Is that doable?

User currently offlineSrbmod From , joined Dec 1969, posts, RR:
Reply 7, posted (8 years 7 months 2 weeks 2 days 16 hours ago) and read 3092 times:

It's good to see WO bring the 747 back into the fleet.

Quoting FRA2DTW (Reply 6):
The press release stated they would be converted to SF freighters - doesn't that mean that the nose can tilt upwards for loading?

The SF version of the 747-400 is the conversion of a passenger or combi 744 into a full freighter configuration.

I'm surprised WO isn't opting for 744Ms, unless there aren't any on the open market right now.


User currently offlineWhiteHatter From , joined Dec 1969, posts, RR:
Reply 8, posted (8 years 7 months 2 weeks 2 days 16 hours ago) and read 3074 times:

Quoting FRA2DTW (Reply 6):
So this fleet was pretty well picked over before World got to choose? I would imagine they are all due for C or D checks. The press release stated they would be converted to SF freighters - doesn't that mean that the nose can tilt upwards for loading? Is that doable?

doable but very expensive. SF conversion is normally the side door.

Doing a full D check at the same time isn't such a major issue as there will be overlaps in the work which cut the costs down, such as structure and paint.


User currently offlineFxra From United States of America, joined Jul 1999, 705 posts, RR: 2
Reply 9, posted (8 years 7 months 2 weeks 2 days 16 hours ago) and read 3032 times:

Quoting Flyer732 (Reply 3):
hmm....

Should be interesting to see who will grab em up on an ACMI contract...

DId u notice that the press release mentioned that the holding company is leasing the plane, not WOA proper?? That theres no mention of which certificate they will be put on? ONe would asume WOA, not NOA, would get them; but u never know....

Hopefully is WOA with trips to SYD! Theres my fam ride. One can dream right?



Visualize Whirled Peas
User currently offlineLaxintl From United States of America, joined May 2000, 24826 posts, RR: 46
Reply 10, posted (8 years 7 months 2 weeks 2 days 15 hours ago) and read 2998 times:

The B744 has been in works for a little while.

The timing of this announcement however is curious as the company is in the midst of a 30 day cool down period with its pilots about to strike after the rejection of the companies last offer during November following talks that have dragged on since 2003.

I suppose this might be a carrot from the company to the pilot group to get them to come back to the table and settle.



From the desert to the sea, to all of Southern California
User currently offlineFlyer732 From Namibia, joined Nov 1999, 1362 posts, RR: 22
Reply 11, posted (8 years 7 months 2 weeks 2 days 7 hours ago) and read 2835 times:

Quoting Fxra (Reply 9):
Hopefully is WOA with trips to SYD! Theres my fam ride. One can dream right?

Took the words right outta my mouth!  Smile

I would side with them being WO aircraft...


User currently offlineTrevD From United States of America, joined Jun 2004, 327 posts, RR: 3
Reply 12, posted (8 years 7 months 2 weeks 2 days 6 hours ago) and read 2796 times:

Quoting FRA2DTW (Reply 6):
So this fleet was pretty well picked over before World got to choose? I would imagine they are all due for C or D checks. The press release stated they would be converted to SF freighters - doesn't that mean that the nose can tilt upwards for loading? Is that doable?

Looks like World ended up settling for some of the 'doggiest' airplanes out there! These airplanes have been parked for 3-4 years and all are PAST due for D checks, are overdue for landing gear overhauls and will require engine overhauls on at least 3 of the 4 engines.

And unless World (or someone else) operates these aircraft as passenger a/c between now and 2008-2009 they are likely to be in even worse shape when they eventually get converted to freighters.

Surprised World is doing this as the distressed condition of the aircraft are likely to end up causing a bunch of maintenance headaches and result in poor schedule reliability... Not something their end-user customers are going to be pleased about.

Oh, and to your other question... No, the Special Freighter (SF) or Boeing Converted Freighter (BCF) as Boeing now refers to it does not include the nose door that tils up, only the side cargo door on the port side, aft of the wing.

Trev...


User currently offlineIAirAllie From , joined Dec 1969, posts, RR:
Reply 13, posted (8 years 7 months 2 weeks 2 days 6 hours ago) and read 2783 times:

Quoting Laxintl (Reply 10):
I suppose this might be a carrot from the company to the pilot group to get them to come back to the table and settle.

Interesting observation you may just be right.


User currently offlineTrevD From United States of America, joined Jun 2004, 327 posts, RR: 3
Reply 14, posted (8 years 7 months 2 weeks 2 days 6 hours ago) and read 2778 times:

Quoting WhiteHatter (Reply 8):
doable but very expensive. SF conversion is normally the side door.

Not so much....there has never been a 747 conversion program that has added the nose door when converting to a freighter - only the side door.

Quoting WhiteHatter (Reply 8):
Doing a full D check at the same time isn't such a major issue as there will be overlaps in the work which cut the costs down, such as structure and paint.

Good point. There are definite advantages to doing the D check at the same time, however by the time these aircraft get converted they are going to have a huge package of CPCP (corrosion prevention control program) tasks to do that will be the equal to the D check itself... huge impact and big $$$$$'s !!


User currently offlineWjcandee From United States of America, joined Jun 2000, 5105 posts, RR: 22
Reply 15, posted (8 years 7 months 2 weeks 2 days 6 hours ago) and read 2775 times:

Trev, you're in the leasing business, so I have a few questions:

(1) These planes are coming from a lessor. Presumably the lessor (i.e. present owner) has the option of parting out the planes or getting some revenue from getting them flying. Sounds like they've opted to get them flying, and so here comes the lease to WOA. Is that unusual?

(2) Isn't it fairly typical to fly the planes up to the check date and then park them, so that the previous owner (UA) gets the benefit of the capital investment that they've made in the previous checks? Put another way, doesn't it make sense to park the aircraft that are at the check date before ones that aren't? I would have thought that needing a check just affects the price at which they are sold by UA to whomever the lessor will be (i.e. cheaper, because they need a check).

(3) On a seven-year lease, which is hardly short-term, wouldn't the airline assume and require that the lessor accomplish all necessary checks and the conversion prior to delivery? And wouldn't the lease rate be a function of the market rates for such aircraft? In other words, how does the requirement of a check hurt World? I would think that one would be happy to have a freshly-converted a/c that just went through a gut overhaul before delivery. It's not like World is going to have to pay for the check or the conversion. And I'm pretty confident that World has no intention of putting these a/c on their certificate until they are delivered, fully-converted and D-checked, from the lessor.

I was thinking that these aircraft coming on board probably reflects a tightening in the market for MD11 freighters and a significant increase in the number of 747-400s coming into the conversion market. I'm happy to see World doing some long-term fleet planning. It wasn't too long ago that they were just scrambling to put something -- anything -- in their aircraft. That they think they can diversify their revenue base enough to send these out on ACMI leases is a pretty good sign, at least from my perspective. I'm assuming that they're looking to offer a higher-reliability product than Kalitta, Southern, Evergreen, etc., and maybe somewhere around/behind where Atlas/Polar is. They may also be trying to leverage their Asian customer base (EVA, China Airlines, etc.) by offering a couple of different sizes of lift. I don't know whether it's going to be a successful strategy, as it appears to assume that Asian growth will continue unabated for the next nine years, but it's an interesting move.

Thanks for whatever additional insights you can offer.

All the best,

Bill


User currently offlineWjcandee From United States of America, joined Jun 2000, 5105 posts, RR: 22
Reply 16, posted (8 years 7 months 2 weeks 2 days 6 hours ago) and read 2769 times:

Just saw your comment about CPCP, which answers some of my questions. Our posts crossed in the mail.

User currently offlineTrevD From United States of America, joined Jun 2004, 327 posts, RR: 3
Reply 17, posted (8 years 7 months 2 weeks 2 days 5 hours ago) and read 2754 times:

Quoting Wjcandee (Reply 15):
Trev, you're in the leasing business, so I have a few questions:

W - great post and insightful questions... I'll do my best to answer.

Quoting Wjcandee (Reply 15):
(1) These planes are coming from a lessor. Presumably the lessor (i.e. present owner) has the option of parting out the planes or getting some revenue from getting them flying. Sounds like they've opted to get them flying, and so here comes the lease to WOA. Is that unusual?

These planes were rejected by UAL thru bankruptcy. If I understand the ownership structure correctly, they are actually 'owned' by a group of bondholders that hold the debt remaining when UAL rejected the prior leases. These bondholders are probably sitting on about $60M in face value on the debt, and while the aircraft would nominally have a market value of about $45-50M, these particular a/c probably need about $20M in maintenance (D check, gear, engines, etc...) so they are probably only worth about $25-30M in their current condition. As horrible as that is, the part-out value would probably be less than half that, especially given that most of the value would be in the engines - which all need overhauls. So you are absolutely correct, given the choice of parting out or finding some revenue generating disposition for them, the owners would obviously opt for the later.

Quoting Wjcandee (Reply 15):
(2) Isn't it fairly typical to fly the planes up to the check date and then park them, so that the previous owner (UA) gets the benefit of the capital investment that they've made in the previous checks? Put another way, doesn't it make sense to park the aircraft that are at the check date before ones that aren't? I would have thought that needing a check just affects the price at which they are sold by UA to whomever the lessor will be (i.e. cheaper, because they need a check).

Ideally what you want to do is line-up the D check with the induction of the aircraft into conversion and fly the airplane right up until then. Bankruptcy, however, changes everything and as in this case, UAL flew the aircraft while in Chapter 11, right up until the D checks and then rejected the leases putting the a/c back to the lessor/owners (bondholders). That leaves the bondholder holding the bag.

Quoting Wjcandee (Reply 15):
(3) On a seven-year lease, which is hardly short-term, wouldn't the airline assume and require that the lessor accomplish all necessary checks and the conversion prior to delivery? And wouldn't the lease rate be a function of the market rates for such aircraft? In other words, how does the requirement of a check hurt World? I would think that one would be happy to have a freshly-converted a/c that just went through a gut overhaul before delivery. It's not like World is going to have to pay for the check or the conversion. And I'm pretty confident that World has no intention of putting these a/c on their certificate until they are delivered, fully-converted and D-checked, from the lessor.

Seven years, in my view is actually a fairly short lease for this kind of deal, especially given the capital requirements needed to resurrect and convert the aircraft.

Per my numbers above, given the a/c need about another $20M to get them into a decent conditio, then add another $30M to convert them to freighters using Boeing's conversion, someone has to plop down another $50M to make the aircraft viable. So even if the bondholders are willing to take $0.50 on the dollar and settle for a written down value of $30M per airplane, you now have an airplane re-capitalized at $80M for a 15 year old 747-400BCF (SF). And using a money factor of about 1.2 for a older airplane, World would have to be paying about $1M per month to lease these airplanes for the deal to even start to look right commercially. That's close to what I expect someone to pay for a new 744F. So all this is predicated on the bondholders settling for 50% losses and someone coming in with more equity. If it were me, I would expect at least 10 year deals or else I would fear for my residual value at the end of the lease.

Quoting Wjcandee (Reply 15):
I was thinking that these aircraft coming on board probably reflects a tightening in the market for MD11 freighters and a significant increase in the number of 747-400s coming into the conversion market. I'm happy to see World doing some long-term fleet planning. It wasn't too long ago that they were just scrambling to put something -- anything -- in their aircraft.

Amen, Hallelujah and Agree 100%. By my count there are only about 20 MD-11 pax aircraft that are good conversion candidates. And you are 100% right about the influence the 747-400SF will have on the market.

Quoting Wjcandee (Reply 15):
That they think they can diversify their revenue base enough to send these out on ACMI leases is a pretty good sign, at least from my perspective. I'm assuming that they're looking to offer a higher-reliability product than Kalitta, Southern, Evergreen, etc., and maybe somewhere around/behind where Atlas/Polar is.

Also insightful, and I agree they will end up positioning themselves somewhere north of Kalitta, Southern, Evergreen, etc... and whoever else thinks they can survive in the market continuing to fly 747-200's. However, given the fact that these airplanes will probably remain parked until conversion, I think World will end up with a lot of maintenance problems, even after the conversion and D check. Airplanes don't like to sit parked for years and years and I believe World's dispatch reliability will be impacted for a long time after conversion due to the length of time the aircraft remain parked on the ground.

Again, good post and enjoyed the discussion!!

Trev


User currently offlineSFORunner From United States of America, joined Jul 2004, 324 posts, RR: 0
Reply 18, posted (8 years 7 months 2 weeks 2 days 4 hours ago) and read 2730 times:

Quoting TrevD (Reply 12):
some of the 'doggiest' airplanes out there

We prefer the term "rustbucket" here.

 duck 


User currently offlineWjcandee From United States of America, joined Jun 2000, 5105 posts, RR: 22
Reply 19, posted (8 years 7 months 2 weeks 1 day 5 hours ago) and read 2583 times:

Thanks, Trev. This is very interesting. Now I wonder what would happen if Boeing followed through on its effort to get the list price for the conversion down near $22 million, as they seem to have promised to try to do a year or so ago. (Doesn't mean they were able to do it, but I did read something that said that they were trying to get the price down without getting it down so low that they cannibalized orders for brand-spankin'-new 747-400Fs.) That's, say, $8 million saved per a/c, and maybe a few million for synergies between the D-check and the structures work that has to be done anyway for the BCF at TAECO (most likely). Of course, now that there seem to be a significant number of orders for conversions, the price might not need to drop that low. But if we could get say $10 million per airplane off your fix-em-up numbers, I wonder how that might give the lessor the possibility of offering World a somewhat better deal than the same price as new. Otherwise, you're right that it seems kind of odd; the last thing that WOA needs is unreliable aircraft if they're trying to beat Evergreen, Kalitta, etc. OTOH, as soon as those leases are rejected, and the bondholders are stuck with assets wasting away in the desert with no source of income, they may be very willing to make a deal. With respect to those DL MD11s that were owned by Northwestern Mutual and Disney (801, 802, 803, 804, and 811), there was a proposed deal in place with UPS to buy 'em and convert them (at least 3 of them) the very day that the Court approved the rejection of those leases, and I guess they'll be off to AeroNavali or IAI as soon as spots are available, which apparently isn't for many, many months. (Until rejection, the lessors were perfectly happy to have them parked, because DL was still paying the monthly lease charge; the ones that DL sublet to WOA were apparently sublet at a substantially lower number than the price DL was paying the lessors, so the moment they could reject the leases, they did.)

Also, the progress of the BCF program explains the 2008 date. With all the hoopla about it the past few years, I didn't realize that it wasn't until like October of this year that TAECO got the prototype up for flight test. So they're going to be pretty overwhelmed with work between now and 2008. I wonder whether Boeing is going to be looking for other potential vendors. In October, it looks like IAI signed a deal to convert six 747-400 combis for EVA into SF's (which probably prompted Boeing to rename its program BCF). They're doing that work for $100MM, or about $17MM per a/c, which seems pretty good; maybe the combis don't require as much work. But their first aircraft won't be enrolled until 3Q 2007; I think they're still working on getting the STC.

Thanks for the very knowledgeable and informative post.

Best,

Bill


User currently offlineTrevD From United States of America, joined Jun 2004, 327 posts, RR: 3
Reply 20, posted (8 years 7 months 2 weeks 12 hours ago) and read 2467 times:

Hi Bill,

Last I heard, Boeing's list price for their BCF conversion was right around the $25M mark. And that does not include any upgrades for weight or the cargo handling system which is treated as BFE (buyer furnished equipment). Those 2 can add $1M - $3M to a conversion, so before any discounts that price is probably around the $26M - $28M level. And from what I've seen, Boeing's conversion seems to be winning all the business. They are sold-out through 2008 and that's already after they have opened up additional mod lines, so I would not expect heavy discounting, (maybe 10% or so). That still gets you to the net $25M for a conversion, but here's the kicker...that price is in 2005 year dollars and Boeing charges escalation on it's mod programs. With escalation running around 3-4% per year, that increases the delivery year price by 17% for a 2009 year mod slot, so your $25M mod is now $29.25M

The reason I'm so down on those particular aircraft is the leases were already rejected in the court some 3 years ago, and the aircraft have been sitting parked already for 3+ years (hence my worries about reliability...). So the bondholders have already been sitting stuck with the assets for quite some time. Given that, my guess is the bondholders are looking at the WOA deal as the best deal they are likely to get, the question in my mind is who is going to be willing to put in the additional equity to do the mod plus the additional maintenance to bring the aircraft back into flyable condition.

All the best...

Trev


User currently offlineWhiteHatter From , joined Dec 1969, posts, RR:
Reply 21, posted (8 years 7 months 2 weeks 12 hours ago) and read 2464 times:

Quoting TrevD (Reply 14):
Quoting WhiteHatter (Reply 8):
doable but very expensive. SF conversion is normally the side door.

Not so much....there has never been a 747 conversion program that has added the nose door when converting to a freighter - only the side door.

That's the point. Just like Boeing can saw the tail off a 747 for the fuselage transporter, it is possible to retrofit a swing nose. But it's hellishly expensive and a lot of work, which is why nobody has gone there.

Too many $$$ for too little potential benefit, unless it's been installed from new.


User currently offlineWjcandee From United States of America, joined Jun 2000, 5105 posts, RR: 22
Reply 22, posted (8 years 7 months 2 weeks 12 hours ago) and read 2457 times:

Quoting TrevD (Reply 20):
Given that, my guess is the bondholders are looking at the WOA deal as the best deal they are likely to get

Very, very interesting, and very informative, Trev, from the mod information to the a/c info. What a pleasure to have some actual facts with which to have fun speculating!!!

I really appreciate the knowledgeable response.

All the best,

Bill


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