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NEW DELHI: Boeing Co said on Friday it would set up a facility in India to convert 737 passenger planes into dedicated freighters to tap into regional and global demand for the service.

The investment, which adds to the US manufacturer’s expansion into India on top of a record plane order by flag carrier Air India, comes despite a global economic slowdown that has weakened the global air cargo market.

The International Air Transport Association (IATA) said global cargo demand in January fell almost 15% year-on-year.

Air freight rates are 28% below the levels seen at the same time last year, data provider WorldACD said on Thursday.

Boeing said it would set up the conversion facility in Hyderabad with Indian maintenance, repair and overhaul provider GMR Aero Technic.

The deal adds to Boeing’s $1 billion supply chain sourcing from India and will help support India’s ambitions to become a global cargo hub, Chief Strategy Officer Marc Allen told reporters in New Delhi He did provide any details about when the facility would be set up or the size of the investment.

The planned facility comes amid a push by Boeing to expand in India, including a $24 million investment to set up a logistics centre for airplane parts. Salil Gupte, president of Boeing India, said there was demand to convert more than 1,700 passenger planes globally into freighters over the next 20 years, with about 600 coming from Asia.

Air India agrees to buy 250 planes from Airbus as part of mega deal

E-commerce demand and electronics manufacturing is growing in India, strengthening the outlook for freighters, he told reporters. “So it is only fitting that we have the capability to have a line to make those freighters here in India, not just for India, but for the region and for the world,” he said.

The dearth of travel triggered by the pandemic triggered a record-breaking scramble to convert older passenger jets into freighters.

But analysts say that aircraft lessors could now be stuck with excess freighters, or be forced to cancel conversions, as cargo rates fall.

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