The wholly owned aviation asset management unit of Singapore Technologies Engineering (ST Engineering) and the Singapore-headquartered investment company Temasek have announced the intention to create a 50-50 joint venture for freighter aircraft leasing to meet the expanding demand for freighter aircraft as e-commerce and air cargo volumes expand globally.
The JV has set a five-year target of establishing a US$600 million portfolio of passenger aircraft for conversion to highly efficient freighters. Additionally, ST Engineering will provide the associated maintenance, repair and overhaul services to these aircraft and will be the asset and lease manager to the JV.
The portfolio will be made up of narrow-body aircraft, providing an option to operators to reuse older passenger aircraft and give them a new lease of life as more fuel-efficient freighters. The JV will set relevant environmental, social and governance (ESG) criteria for its investments and work with prospective clients to help reduce their carbon footprint through the use of sustainable aviation fuels and enhanced engine maintenance programs. The JV will also target the purchase of passenger aircraft at lower prices as their value has fallen owing to the fall-off in passenger demand during the COVID-19 pandemic, the financing of which will be 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/Head of Commercial Aerospace, ST Engineering. Uwe Krueger, Head, Industrials, Business Services, Energy & Resources, Temasek, added, “As an investor and shareholder, we are focused on embedding sustainability in our investment approach. The joint venture with ST Engineering represents an opportunity for both of us to identify solutions for the reduction of carbon emissions, even in a traditionally carbon-intensive industry, by putting capital to work in those solutions.”
