Benzinga - by FreightWaves, .
The Federal Aviation Administration reauthorization bill approved Wednesday by the U.S. House of Representatives includes language allowing Boeing an extra five years to produce 767 freighters for FedEx and UPS beyond the date when international standards mandating cleaner engine types kick in.
The bill gives Boeing (NYSE: BA) a bridge, in case the express carriers need extra capacity, until it can develop a new freighter next decade. Multiple industry sources familiar with the process said FedEx (NYSE: FDX) and UPS (NYSE: UPS) joined Boeing in lobbying Congress for a reprieve from the Jan. 1, 2028, production deadline. The legislation previously passed the Senate and will be sent to President Joe Biden to sign into law.
At face value, a split from international consensus would limit operation of freighters produced between 2028 and 2033 to the domestic U.S. market, but it's possible some countries could permit access, according to experts. Freighters delivered before the end of 2027 aren't covered by the enhanced carbon emission rules and won't face any restrictions.
Under International Civil Aviation Organization (ICAO) agreements, commercial aircraft manufacturers effectively can't sell aircraft that don't meet the 2028 carbon emissions standards. The U.S. Environmental Protection Agency adopted the fuel efficiency standard in 2021 with the FAA following suit in February.
Even if post-2027 freighters end up being limited to domestic flying, it makes sense for FedEx and UPS to buy them, said Tom Crabtree, a Seattle-based industry consultant and former Boeing market analyst, in an email exchange with FreightWaves.
"The 767-300 production and converted freighter provides the lowest trip costs of any widebody freighter in production today while simultaneously allowing service to smaller markets where 50 metric tons of payload, or more, simply isn't needed. They also have sufficient range to serve international markets to/from Europe and/or northern South America from the US" he said.
Boeing stopped making the 767 as a passenger jet many years ago. It also supplies a tanker variant for militaries. FedEx and UPS are the only customers for the 767-300 freighter. Traditional cargo airlines opt for used 767s that have been converted to a cargo configuration because they don't have the consistent, daily volumes of integrated express carriers and can't afford more expensive new models.
UPS was the launch customer for the Boeing 767 freighter in 1995. The parcel logistics giant has 88 B767-300s in its fleet, including 10 converted freighters, and 19 additional factory aircraft on order from Boeing.
"We expect to receive all outstanding orders before that time" said UPS spokeswoman Michelle Polk.
FedEx has 137 B767s flying in its network, with 15 more deliveries scheduled through mid-2026, according to the company's latest statistics.
Aviation publication The Air Current was first to unearth the 767 freighter wiaver, tucked away on page 1,038 of the FAA bill. The language doesn't mention the 767 by name, but the maximum takeoff weight of 180,000 kilograms to 240,000 kilograms squarely fits the 767.
Boeing officials have increasingly signaled that they plan to develop a freighter version of the 787 Dreamliner as a replacement for the 767F, but the first delivery is expected to take at least eight to 10 years.
"The 767F continues to be the most environmentally sound mid-size freighter available. We are working with our customers and are in communication with regulators regarding the requirements for this market segment" Boeing said in a statement before the vote. "As we look ahead to future medium-widebody freighter options, the 787 is a natural place for us to look. We continue to evaluate our options in this space and are listening to our customers. Any future decisions regarding whether to launch a new program, will be largely driven by customer needs and market demand."
FedEx operates 137 Boeing 767 freighters (pictured) in its parcel and freight network. (Photo - Jim Allen/FreightWaves)
Without the exemption, FedEx and UPS could be limited to Airbus A330 converted cargo jets, a model neither currently operates, if they need more medium-widebody aircraft in four or five years. The feedstock for 767 conversions is drying up because passenger airlines like Delta and United are holding on to aircraft longer than anticipated in response to supply chain, manufacturing and engine-related problems that have delayed delivery of replacement aircraft. The airlines probably won't be ready to let go of the 767s until "they are well beyond the age of conversion or have too many flight cycles and flight hours accumulated on them to make it worth a while to convert it" said Crabtree.
The new law will enable Boeing to compete with Israel Aircraft Industries, which installs 767 conversion kits, and an Airbus subsidiary that rebuilds A330s into freighters, and give it time to bring a 787 freighter to market, said the former chief editor of the biennial Boeing World Air Cargo Forecast. And A330 conversion providers would be able to demand higher pricing without that competition.
"Express firms like the certainty of production freighters even though they are more expensive than conversions of the same airplane models" he added. That certainty takes the form of more consistent delivery schedules and meeting of specifications.
FedEx and UPS put pressure on Congress to keep the 767 option open and keep the playing field level until Boeing brings out the 787 freighter, the sources said.
Many have interpreted the carve-out to the international fuel efficiency standards to mean that noncompliant aircraft will be prohibited from flying outside the United States. But there is no universal enforcement mechanism. ICAO's carbon emission standard will be implemented by individual countries as new domestic regulations updating their system for certifying aircraft types. Production will essentially be banned starting in 2028 because noncompliant models will not be certified for sale by civil aviation authorities in their area of jurisdiction.
Countries that ban the sale of noncompliant models are likely to ban aircraft with an exemption from entering their airspace on the basis of having an unfair advantage.
But an aviation industry source, who didn't want to be identified because of the political sensitivity of the topic, said FedEx and UPS access to airspace in foreign countries would depend on what individual governments are willing to accept. Smaller countries that typically follow FAA and European Union regulations rather than certify aircraft themselves might have fewer qualms with allowing exempted 767s to operate.
Boeing also continues to deliver 777 cargo jets to FedEx and other airlines around the world. The FAA reauthorization doesn't provide a waiver for the 777 because Boeing expects to have a next-generation 777-X ready sometime in 2027.
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