Alaska Airlines to convert 2 more Boeing jets into freighters in bet on air cargo boom

Alaska Airlines employee Jeff Ferguson loads cargo at Ted Stevens Anchorage International Airport in Anchorage, Alaska.

Mark Thiessen | AP

Alaska Airlines is turning two of its midlife Boeing 737-800s into cargo planes, a bet that the pandemic boom in air freight will continue to generate revenue even after more passengers return to travel.

The Seattle-based airline, the country’s fifth-largest, already has three smaller Boeing 737-700s dedicated solely to air freight. It’s a small number for a carrier whose mainline fleet stood at 217 planes at the end of 2021, but the pandemic has made cargo more important to airlines.

Covid forced passenger carriers to cut flights, reducing belly space in planes around the world that would normally carry everything from live animals, packages, produce and pharmaceuticals. That drove up demand — and prices — for air cargo.

Alaska has put out a request for proposals to convert the two planes to air cargo and hasn’t yet settled on a supplier. The increase in its cargo fleet could extend beyond the two planes, but it hasn’t yet committed to adding more.

“I don’t think the magic number is two,” Adam Drouhard, the airline’s managing director of cargo, told CNBC.

The new planes will be dedicated to serving destinations in the state of Alaska.

Companies including Boeing have been adding capacity to convert more passenger jets to cargo planes to capitalize on the trend.

Cargo analyst Stephen Fortune said the conversion of a passenger jet into a freighter, which entails ripping out passenger seats and overhead bins, reinforcing the plane’s floor, and cutting a cargo door for easier loading, can cost around $5 million.

Alaska debuted converted 737-700s in 2017, but Drouhard said he expects that expanding beyond the two planes will be easier than the conversions of five years ago because it’s not an altogether new program: 737-800 conversion lines are already available.

“It’s not going to be as big of a ramp up with one every eight to 10 years,” he said.

In 2021, 101 passenger planes were converted to freighters, up from 59 in 2019 and 71 in 2020, according to IBA Insight.

Most other U.S. passenger airlines don’t operate standalone freighter aircraft but have benefited from the rise in cargo demand during the pandemic. Some carriers flew passenger planes with empty seats and full cargo bellies when demand for travel plummeted in 2020.

Cargo revenue for United Airlines, which does the most long-haul international flying of the U.S. carriers, brought in $2.35 billion last year, up more than 42% from 2020 and double 2019, before Covid hit. Air freight made up almost 10% of its sales last year, compared with 3% before Covid.

Low-cost and leisure-focused airline Sun Country started flying cargo for Amazon in 2020 on freighters for the e-commerce giant’s air unit, a plan it drew up in 2019 but sped up during the pandemic.

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