ST Engineering, Temasek set up JV for freighter aircraft leasing

* Aims for $600 mln portfolio over five years

* Passenger jet prices have fallen due to pandemic

* Air cargo demand reached record levels in March - IATA

May 12 (Reuters) - Singapore Technologies (ST) Engineering Ltd and state investor Temasek Holdings said they have set up a joint venture for freighter aircraft leasing to take advantage of strong demand for converted passenger planes.

The JV will aim to build a $600 million portfolio of mostly narrowbody planes over the next five years through a mix of equity and debt, with the partners able to pick up passenger jets for conversions at lower than usual prices due to a fall in aircraft values during the pandemic, they said late on Tuesday.

Aviation analytics firm Cirium expects the number of passenger to freighter conversions globally to rise by 36% to 90 planes in 2021, and to 109 planes in 2022 amid growing demand for air cargo due to lower passenger flight numbers and the rise of e-commerce.

Air cargo demand reached an all-time high in March, up 4.4% from pre-COVID levels two years earlier, according to the International Air Transport Association.

ST Engineering, one of the world’s biggest converters of passenger jets to freighters, said it will provide the maintenance, repair and overhaul services for the planes in the JV’s leasing portfolio.

ST Engineering Head of Commercial Aerospace Jeffrey Lam said the joint venture would allow his company to grow its aviation leasing business beyond passenger aircraft to freighters.

“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,” he said.

“In the medium to long-term, the JV intends to securitise the leasing income streams by way of a business trust to unlock capital.”

Temasek Head of Industrials, Business Services, Energy & Resources Uwe Krueger said the JV would look to find ways to reduce carbon emisssions. (Reporting by Jamie Freed in Sydney; Editing by Karishma Singh)