ST Engineering to enter freighter leasing JV

MRO provider ST Engineering and Singapore state-owned investment firm Temasek are teaming up to establish a joint venture freighter leasing company in response to rising demand for freighters.

The new company will aim to build a portfolio of aircraft with a value of around $600m within five years, investing in passenger aircraft to be converted into freighters.

ST Engineering’s Aviation Asset Management leasing arm will equally-own the venture with Temasek.

ST Engineering will provide MRO services and will be the asset and lease manager.

The portfolio of aircraft will primarily comprise converted narrowbody aircraft. The company expects to be able to purchase the feedstock at lower prices as passenger aircraft value has been affected by travel restrictions arising from the Covid-19 pandemic.

The aircraft acquisitions will be financed through a mix of equity and debt.

“This joint venture represents a significant step by ST Engineering in growing our aviation leasing business as we expand beyond passenger aircraft and engines to include freighter aircraft assets as part of our portfolio,” said Jeffrey Lam, president and head of commercial aerospace, ST Engineering.

“As we embark on this exciting venture with our partner, Temasek, we also welcome and look forward to working with other potential like-minded partners who are looking to invest in the strong freighter aircraft leasing market. In the medium to long-term, the JV intends to securitise the leasing income streams by way of a business trust to unlock capital.”

According to its website, ST Engineering does already offer freighter leasing through its Aviation Asset Management business.

The company added that demand for freighters is on the rise as e-commerce and air cargo volumes expand across the globe.

ST Engineering is already a partner with Airbus in German-based EFW which carries out such conversion work, and is extending its modification capabilities to sites in Asia and North America.