GlobalX Airlines puts aside two Airbus cargo planes due to weak market demand

Global Crossing Airlines Grounds Two Airbus A321 Freighters Due to Low Demand

Global Crossing Airlines, a startup based in Miami, has decided to ground half of its Airbus A321 converted freighter fleet indefinitely. The move is aimed at postponing costly safety modifications, as the current market for narrowbody cargo aircraft is oversupplied and operating these planes is not financially viable.

Shift in Focus Amid Weak Cargo Market

Two years ago, declining demand for domestic and regional air cargo led the company to scale back its cargo operations and concentrate on its expanding passenger charter services. These charters cater to sports teams, music tours, government contracts, and other groups. Plans to acquire additional A321 freighters were put on hold, with the hope that cargo demand would eventually rebound. So far, that recovery has not materialized, and some cargo contracts have even disappeared.

Financial Performance and Industry Challenges

Despite these setbacks, Global Crossing Airlines reported a 10% increase in revenue last year, reaching $246.3 million. The company also achieved its first positive operating income of $8.9 million, with EBITDAR—a key financial metric in aviation—rising by 25%. Executive Chairman Chris Jamroz noted these results were achieved despite significant delays in aircraft deliveries and ongoing weakness in the cargo sector, both of which negatively impacted earnings.

Obstacles in the Narrowbody Freighter Market

GlobalX is currently the only North American airline operating the A321 passenger-to-freighter model. Competing with the widely used Boeing 737-800 freighter has proven difficult, as operators are more familiar with Boeing’s long-standing cargo aircraft, and the market is flooded with these planes. During the pandemic, many lessors and operators converted 737-800s, anticipating a lasting surge in e-commerce and freight. However, as supply chains normalized and companies like Amazon built more local distribution centers, the demand for narrowbody freighters has dropped, leaving the market oversupplied.

Loss of Key Contracts

Earlier this year, DHL Express ended a short-term agreement with GlobalX, under which the airline operated several routes, including flights from Miami to Cincinnati. DHL has since transitioned to using Boeing 757 freighters for these routes, a model it has previously operated in Europe. The company also provided a 757-200 to contractor 21 Air to cover the routes formerly flown by GlobalX.

Additional Market Pressures

The U.S. Postal Service’s recent shift toward ground transportation for mail has removed another potential cargo customer. Meanwhile, new competitor 7 Air Cargo, also based in Miami, is flying similar routes to Central America and the Caribbean, often offering lower rates than GlobalX.

Industry-Wide Issues Affecting Freighter Conversions

The lack of demand for A321 freighters has led Air Transport Services Group, a major aircraft lessor, to withdraw from a joint venture focused on converting passenger planes to freighters. Additionally, engine reliability problems with new Airbus aircraft are causing airlines to keep their planes longer, reducing the supply of aircraft available for conversion. Issues with Pratt & Whitney gear-turbofan engines have resulted in early inspections, repairs, and the grounding of hundreds of planes, while CFM International Leap engines are also facing production delays.

Regulatory and Financial Considerations

Given these circumstances, GlobalX has chosen to ground two of its A321 freighters rather than invest in regulatory upgrades. Aviation authorities require all A321 operators to install a fuel tank venting system to address a fire risk, a modification costing between $300,000 and $400,000 per aircraft. One plane also needs a $200,000 pylon inspection. The other two freighters in the fleet have already been retrofitted with the necessary safety system.

“If there’s no work, why spend the money?” said President and CFO Ryan Goepel. “Freight flights bring in $4,000 an hour, while passenger flights earn $7,000 an hour. I’d rather have our pilots flying passengers.”

Fleet Expansion and Leasing Challenges

GlobalX currently operates 12 A320 and A321 passenger aircraft and plans to add seven more this year. However, the owners of the cargo planes have been reluctant to offer more flexible leasing terms, largely because demand for passenger-configured A321s remains strong. Goepel explained that parking the freighters is more cost-effective, as the company cannot exit its leases. The remaining cargo planes are still flying but are not profitable enough to justify keeping all four in operation.

Current Cargo Operations and Future Options

Most of GlobalX’s cargo activity now comes from IBC Airways, a South Florida carrier serving destinations in the Caribbean. Goepel emphasized that the grounded freighters are not being sent to long-term storage and can be quickly reactivated if new cargo opportunities arise. Other options include using the engines on passenger aircraft or leasing them out, as the engines themselves are nearly as valuable as the aircraft.