(Bloomberg) --
Booming demand for freighter planes spurred Israel Aerospace Industries Ltd. to announce a new site for converting passenger jets to cargo use in Abu Dhabi, its second such expansion within a week.
IAI will establish two conversion lines for Boeing (NYSE:BA) Co. 777-300ER wide-body planes at a maintenance facility run by Etihad Aviation Group, complementing its own 777 site in Tel Aviv, the companies said Wednesday.
Demand for freighters is surging as coronavirus lockdowns accelerate a shift to online shopping at a time when passenger jets are flying less, limiting access to belly space that usually accommodates most airborne cargo. The pandemic has also prompted the retirement of older planes, swelling the supply of models ripe for conversion, including the relatively efficient twin-engine 777.
“We’ve seen a sharp increase in demand over the past few years and the 777 is going to be the plane for the future, so this will give us the extra capacity we need,” Yossi Melamed, IAI executive vice president and general manager for aviation, said in an interview.
Melamed said the company sees a market for 150 freighter conversions over the next five years, adding that demand for the 777 should be buoyed by its bigger cargo volume versus Boeing’s own purpose-built 777F, which is based on the smaller -200 passenger variant. The aircraft would be a natural successor to 747 and MD-11 freighters, he said.
The agreement with Etihad builds on one signed with the leasing arm of General Electric (NYSE:GE) Co. for 777 conversions in 2019. Work started in Israel on the first plane under that accord earlier this month and will take about 130 days.
The move into the Middle East comes after IAI said Aug. 19 that it will open a site in Addis Ababa to convert smaller Boeing 767 wide-bodies in conjunction with Ethiopian Airlines Group, adding to facilities in Tel Aviv and Mexico.
The Israeli firm also has two conversion sites for Boeing 737 narrow-bodies in China, and agreed earlier this year to establish another in Naples, Italy, with Atitech SpA.
Melamed said long-haul specialist Etihad is a desirable partner for its engineering expertize, while adding that communication between the companies has been possible only as a result of the normalization of relations between Israel and the United Arab Emirates last year.
IAI decided against working on the Airbus SE (OTC:EADSY) A321 passenger plane, which other conversion specialists are offering, but is looking at options for bigger Airbus models, Melamed said.
The European planemaker said in July it is separately planning to produce a from-new freighter version of its bigger A350 jet by 2025, while Boeing is looking at launching a dedicated cargo variant of the updated 777X.
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