Cargo plane transport flight
Saudi Arabia's relaxation of airspace rules has made Asian markets more competitive for Israeli operators. Image Credit: Pixabay

Dubai: Supply chain issues for the world’s aviation industry are still a long way from getting resolved as China, the world’s largest manufacturer, continues a zero-Covid policy.

“Because of China we have to go the extra mile to bring stuff,” said Shmuel Kuzi, Executive Vice-President and General Manager of Aviation Group at Israel Aerospace Industries, one of the big names in aircraft conversions. “We are now seeking places that can give us the solution we need – supply chain disruptions won’t be resolved in the near future.”

For IAI, which converts passenger aircraft into freighters, turnaround times are important. “Any delays will make the client nervous about losing money,” he added.

IAI, which began with a Boeing B767-300 conversion line in Israel in 2007, recently signed several agreements for cargo conversions, including converting B777-300ER aircraft for Emirates airline and establishing new conversion lines in the UAE and Ethiopia.

The company received the European Aviation Safety Authority (EASA) approval for its Boeing B737-800SF passenger-to-freighter (P2F) conversions. This means the company can offer this service to European companies and operators.

IAI, which set up a European facility in Naples last year, is scouting new locations to capitalise on the demand. “We are seeking new places because right now all our slots are already full,” said Kuzi.

Saudi move

Kuzi said that the recent decision by Saudi Arabia to drop airspace restrictions will make Israeli carriers more competitive. Before Riyadh, Israeli airlines could overfly Saudi territory to UAE and Bahrain only. Dropping restrictions on access to Saudi airspace means they will be able to use it to reach Asia too.

“This is important because all our competitors can fly above Saudi Arabia and that means they take 2-3 hours less than us (Israeli carriers) to fly to Thailand – the flight ticket prices are also half,” said Kuzi.

IPO plans

Last year, IAI’s CEO Boaz Levy reportedly said that the company will likely sell a 25 per cent stake on the Tel Aviv Stock Exchange in the first-half of 2022. Given IAI’s recent financial performance, “a lot of companies will be happy to take our shares,” said Kuzi. “But, unfortunately, we don’t have any news on the IPO yet.”

The Israeli company’s net profit surged 86 per cent year-on-year to $78 million in the first quarter of 2022. Sales stood at $1.2 billion, slightly higher than $1.02 billion in the same period last year.

“This has been by far IAI’s best quarter in company history, and a direct year-over-year continuation of the record results in 2021,” said Levy in a statement.

Cargo demand

Global demand, measured in cargo tonne-kilometers, was 8.3 per cent below May 2021 levels. This was an improvement on the year-on-year decline of 9.1 per cent seen in April, according to the International Air Transport Association (IATA).

“The return of Asian production as COVID-19 measures eased, particularly in China, will support demand for air cargo,” said Willie Walsh, IATA’s Director-General in a statement. “The strong rebound in passenger traffic has increased belly capacity, although not always in the markets where the capacity crunch is most critical.

“But uncertainty in the overall economic situation will need to be carefully watched.”