Aero Capital Solutions, which specializes in leasing mid-life narrow-body aircraft, never had a freighter in its fleet in its first 10 years of operation. The new investment strategy provides for the conversion of 40 Boeing 737-800 passengers into cargo.
The Austin, Texas-based lessor on Monday announced its fourth order with Aeronautical Engineering Systems Inc. for six additional conversions of the standard jet. The company initially ordered four reconfigured planes in October 2020, bought 10 more conversion slots three months later and placed two more orders last year for a total of 20 planes.
Leasing companies have been extremely active in converting used passenger aircraft, especially small single-aisle aircraft, into freighter aircraft due to the relentless growth of e-commerce. Express operators and their partners need regional aircraft that can be efficiently loaded and perform daily “milk runs” to meet overnight or time-definite delivery expectations.
The air cargo boom spurred by pandemic-induced supply chain disruptions has created a rush of investors and operators to increase cargo fleets, raising the question of whether there will soon be too much capacity when the global economy cools or normalizes.
The fleet of single-aisle freighters is three times larger than in 2019 (541 planes), thanks to a mix of conversions and new production, according to data compiled by aeronautical analysis provider Cirium.
Earlier this month, Merx Aviation signed a contract with AEI for a single 737-800 conversion. The aircraft is owned by a fund managed by affiliates of Apollo (NYSE: APO) Global Management and operated by Merx, Apollo’s aircraft leasing unit. AEI said the plane is expected to be delivered in August, but no end customer has been announced.
Merx owns and operates approximately 45,737 next-generation aircraft, but the order represents its first freighter conversion.
U.S. e-commerce sales alone are expected to exceed $1 trillion by the end of 2022 with an expected growth rate of 9.4% over 2021, according to eMarketer. Online shopping will account for one-seventh of total retail sales.
“We are confident in the upward trajectory of the air cargo market, and we will continue to invest to meet the growing needs of global cargo operators and express carriers,” said Jason Barany, CEO and Founder of Aero Capital Solutions, in a press release. .
Miami-based AEI has delivered 10 converted 737-800 freighters so far and expects to complete five more in the next two months, Robert Convey, senior vice president of sales and marketing, said in an e -mail. A representative from Aero Capital said the company had transferred seven of the freighters to a range of undisclosed cargo operators.
Aero Capital is AEI’s largest customer for the converted 737-800 freighter. It has more than 200 assets placed with more than 35 clients in 24 countries.
Modification labor and maintenance work for the new order is split between AEI Hong Kong Aircraft Engineering Co. (HAECO) Authorized Conversion Centers in Xiamen, China and Taikoo (Shandong) Aircraft Engineering Co. , (STAECO) using AEI approved design. STAECO is a maintenance joint venture in China of which HAECO is a partner.
AEI said the last tranche of aircraft will go to maintenance shops and be recreated as freighters in 2024.
Some conversions previously booked by Aero Capital are performed by Commercial Jet in Miami and KF Aerospace in Canada.
The AEI-converted 737-800 can carry up to 52,700 pounds on the main deck, with room for 11 full-height container slots plus a small container. Conversions for 737-800s take three to four months, depending on which overhaul company does the work using AEI’s modification kit. Structural changes include the installation of a large cargo door, sturdy floor beams, a rigid barrier to protect the cockpit from shifting containers and a cargo loading system. AEI versions also have jump seats for five passengers.
AEI is the only conversion company to have a special extended range rating from multiple aviation regulators that demonstrates the 737-800 is capable of full-load, single-engine flight for three hours in the event of an emergency. emergency, a capability that is particularly important on large bodies of water.
The company is also certified to modify aircraft with combination winglets. Split Scimitar winglets create different loads on the aircraft frame and engineers must take this into account when designing modifications.
Boeing (NYSE: BA) has the largest conversion program for the 737-800, with more than 112 aircraft reconfigured to freighter mode since the program launched four years ago.
AEI delivered 22 737-800 passenger-to-freighter conversions in 2021 and expects to produce 36 freighters this year, Convey said. 2021 was the first full year of production after the company received FAA certification in 2019 and began ramping up in 2020 at the onset of the COVID-19 pandemic.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
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