Air Transport Services Group, the world’s largest lessor of freighter aircraft and a contract cargo airline for customers such as Amazon and DHL Express, has dissolved its joint venture converting Airbus A321 passenger aircraft to all-cargo configuration because demand for A321 freighters has collapsed.

Beaverton, Oregon-based Erickson Group Ltd. announced on Tuesday that it had acquired full ownership of 321 Precision Conversions from ATSG through its subsidiary Precision Aircraft Solutions, an overhaul specialist that designs and markets conversion kits. Erickson is a diversified aerospace company best known for manufacturing and operating a heavylift helicopter.

The price paid for ATSG’s 49% stake was not disclosed, but an industry source familiar with both companies said it was minimal. The source requested anonymity so as not to jeopardize ongoing business relationships.

The conversion process involves teardown of the passenger compartment and installation of new features, such as a wide cargo door, heavy-duty floor beams and a loading system.

Precision Aircraft Solutions through its history has focused on passenger-to-freighter conversions of the Boeing 757 aircraft. With a dwindling supply of age-appropriate 757s available for retrofit, Precision targeted the A321 as its next business opportunity. Many industry specialists have likened the A321 as a suitable replacement for the 757 in cargo operations because of its similar capacity and improved fuel efficiency.

Precision and ATSG, which exclusively leased Boeing 767 medium widebody converted freighters until 30 months ago, formed their joint venture in 2017. ATSG’s strategy was to make money from aftermarket conversions for other companies and leasing of A321 freighters to all-cargo airlines.

The joint venture has completed more than 30 cargo reconfigurations, according to a Precision spokesperson. Current operators include Blue Dart in India and Miami-based Global Crossing Airlines. ATSG has separately leased at least two A321 freighters to Raya Airways in Malaysia. 

Elbe Flugzeugwerke, a joint venture between Airbus and Singapore-based ST Engineering, is the only other company that carries out A321 cargo conversions.

But the A321 freighter market was slow to take off and has dried up in the past 18 months amid a slowdown in airfreight demand and a glut of narrowbody freighters. When direct-to-consumer online retail sales exploded during the pandemic, leasing companies and private equity companies invested heavily in acquiring passenger aircraft for conversion, with the expectation that express delivery companies would need more aircraft for growth and fleet replacement. 

E-commerce is still growing, but at a much slower pace than four years ago. The A321 had trouble displacing the better known Boeing 737-800 as a cargo aircraft. Record-levels of conversions resulted in oversupply, leading to many aircraft being dumped in the market at low lease rates or put in storage when lessors couldn’t find airline customers.

Latvia-based SmartLynx Airlines, which operated a fleet of A321 converted freighters from 321 Precision and EFW, shut down its cargo operation last March after DHL pulled its contract. 

Meanwhile, airlines are motivated to hold onto mid-age A321neo passenger aircraft after hundreds of newer jets were grounded because of a defect with Pratt & Whitney gear turbofan engines, causing maintenance delays and capacity loss for airlines. In many cases, owners of parked A321 freighters are removing the engines and leasing them to airlines because they could make money that way at a time when standard-size cargo jets aren’t needed. 

 “We believe strongly in the platform, the team at 321 Precision Conversions, and the long-term demand for narrowbody freighters. We’re excited to build on this foundation and continue investing in the program’s next phase of growth,“ said Erickson Group President Dylan Garner in a news release. 

ATSG, which was bought by private equity firm Stonepeak last April after years as a public company, said it will continue to market the A321 converted freighter to cargo airlines. 

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