Costly residual values of the baseline Airbus A320 appear to have contributed to a decision by the airframer to cancel its passenger-to-freighter conversion programme.
Airbus has axed the programme ahead of starting production and begun dissolving the partnership Airbus Freighter Conversion, which the manufacturer and its modification division EFW had formed with Russia's United Aircraft and Irkut.
The airframer cites "economic reasons" for the cancellation, adding that there is "more demand" for passenger twinjets in the sector and not enough for the cargo version.
"Against the backdrop of these market changes and the increasing pressure on the [passenger-to-freighter] business case, the partners have concluded to stop and freeze the P2F programme," said Airbus.
But EADS added that a key reason for the decision is that the residual value of the A320 is not falling quickly enough to make the conversion economical. "There are not enough used A320s on the market," it said. "The residual value of the A320 is really very high and we don't think it'll drop down in the medium term."
Airbus cites financial data for the Boeing 737 to claim that its A320neo would not have a knock-on effect on residual values for its baseline A320 model for several years.
Chief operating officer for customers John Leahy said that the values of earlier-variant 737s did not begin falling significantly until deliveries of Next Generation 737s reached a "critical mass" equal to half the total deliveries of the previous model - after which there was a 20% slide in values. Based on this estimate, he said, A320 values are "unlikely to be impacted" before 2023.
EADS said the "necessary legal procedures" are under way to end the Airbus Freighter Conversion venture. "The project was at the end of the design phase," it added. "It makes sense to make the changes before the start of production."
Airbus Freighter Conversion was 32%-owned by EADS EFW while Airbus had 18%. United Aircraft and Irkut equally shared the other 50%.
Lessor AerCap, the first customer for the conversion, delivered a 20-year-old A320 prototype - serial number 211 - to the EFW modification plant at Dresden in late March. Conversion was due to start in November this year.
AerCap agreed to launch the A320 P2F programme in 2008, when it emphasised strong demand for the modification, and originally expected to convert up to 30 twinjets.
European cargo carrier West Atlantic was to take a handful of early converted airframes on lease from AerCap, with the first arriving by the end of 2012.
West Atlantic sales director Russell Ladkin said: "This is a disappointment. With increasing fuel costs, an efficient freighter was a key part of the decision process to select the A320 over the established competing products.
"Lowest unit cost is everything and we'll now be working with our customers to find the right solution for the capacity niche we saw the A320 fill."
Cancellation of the programme will not have a material impact on AerCap, said the lessor. It added that it would focus on "alternative solutions" for the aircraft it had identified for conversion, including lease as passenger jets, sale or part-out.
Russian manufacturer Irkut - a 25% stakeholder in Airbus Freighter Conversion - has disclosed little additional information about the decision. It has simply stated that the major tasks achieved by June included preparation of a conversion kit detailing the layout of systems to be fitted to the airframe.
It had also produced design work documentation as part of the preparation for certification. Irkut said it has "gained experience" through its joint work on the P2F programme, and added: "The partnership with Airbus on production of critical components [for other aircraft] will continue."
EADS added: "We're not excluding the possibility of relaunching the A320 conversion programme if the market conditions are right."
Source: Flight International
