0%

News/Events

    We issued a press release today

    Avatar
    21
    Jun

    Spectre parent company Jetran to boost Swiftair 757F fleet with three Precision conversions

    Spectre parent company Jetran to boost Swiftair 757F fleet with three Precision conversions

    US-based Jetran inked a deal with Precision Aircraft Solutions to convert three ex-American Airlines 757-200s to freighter configuration [FATs 005011-5016]. Following conversion, Jetran will deliver the trio of 757-200PCFs to Spain-based Swiftair [FATS 005017-5020].

    As a major player in the aircraft trading business, Jetran has previously been involved in sourcing 757 feedstock for conversions, but this is the first series of 757 conversions for which Jetran is the direct customer. Touch labor will be performed by Flightstar Aircraft Services in Jacksonville (VQQ).

    The first aircraft (24613) arrived at VQQ two months ago and was already inducted for conversion. The second aircraft (24614) isn’t far behind, and landed at VQQ last week, according to FlightRadar24. The third aircraft (25296) remains in storage.

    Although Swiftair has never operated 757s on its own AOC, the carrier has gained familiarity with the platform following last year’s acquisition of fellow Spanish cargo operator Cygnus Air, which operates two 757-200PCFs. As for Swiftair’s future cargo customer for the incoming 757Fs, no formal announcement has been made. The number of aircraft being added, however, would suggest a partnership with an express company. We note that the majority of Swiftair’s jet freighter fleet is already in service on behalf of DHL Express, and so it would not be surprising if this commercial relationship were to expand.

    For Swiftair, fleet growth is not expected to end with the trio of 757-200PCFs. Not only is the carrier expected to take additional 757 conversions, but earlier this year Sweden-based West Atlantic Group accepted what amounts to a takeover offer from Spain-based LUSAT Air S.L., the holding company that owns Aviation Leasing Spain, Cygnus Air, and Swiftair. For now, Swiftair’s freighter fleet comprises thirty-six aircraft; six ATR 42-300Fs, ten ATR 72-200Fs, an ATR 72-500F, two 737-300Fs, seven 737-400Fs and ten EMB-120ERFs.

    Avatar
    17
    Oct

    Cargo Facts

    SPICEJET ADDS 737 NG FREIGHTER, MORE ON THE WAY

    India-based low-cost carrier SpiceJet took redelivery of its maiden freighter, a Bedekconverted 737-700BDSF (29042, ex-Xiamen Airlines), to support the launch of a newly created cargo subsidiary, SpiceXpress [FATs 004645-4646]. The aircraft, on lease from Spectre Cargo, is the first of four Spectre-leased 737 NG freighters SpiceXpress plans to put into service over the next few months as part of the carrier’s initial foray into freighter operations.

    In the coming months, SpiceXpress’ new freighter, “Bolt,” will be joined by three more 737 NG freighters – an additional -700BDSF and two 737-800BDSFs.

    The freighter, named “Bolt”, represents a number of milestones, as it not only makes SpiceJet the first combination carrier in India to operate narrowbody freighters but is also the first 737 NG freighter in Asia. In the coming months, Bolt will be joined by three more 737 NG freighters – an additional -700BDSF and two 737-800BDSFs. Although local media reported SpiceJet’s forthcoming freighter redeliveries as imminent within the next couple of months, Cargo Facts expects redeliveries to continue into 2019.

    While Spectre Cargo Capital has already acquired a number of 737-700 and -800 feedstock units for future conversion to freighter configuration, only one -800 (30498, ex-Transaero Airlines) is known to be owned by Spectre. This unit was inducted for conversion at Bedek’s Tel Aviv MRO last year, and will be Bedek’s first 737-800 P2F conversion. Like the 737-700BDSF delivered this week, the -800 is also bound for SpiceJet. A second -700 has also been inducted for conversion at the HAITE facility in Tianjin (TSN).

    Apart from the -800 in Tel Aviv, Spectre has at least five additional 737-700s in storage at Singapore Seletar (XSP) and likely owns other units through various special-purpose vehicles (SPVs) stored elsewhere. Touch labor for SpiceJet’s first 737-700 conversion took just over three months, according to Cargo Facts’ FAT database. SpiceJet’s 737-700BDSF has a maximum payload of about 20 tonnes (45,000 lbs.) and is equipped with an Ancra Cargo Loading System.

    Returning to India’s first 737 NG, we note that other Indian carriers such as Air India and start-ups like Quikjet have dabbled with freighter operations in the past, but to date have found little success. One exception has been Blue Dart Aviation, a company that started out as the air arm of Blue Dart Express and now serves a similar function for DHL, which bought Blue

    Dart. Blue Dart Aviation commenced operations with a single 737-200F in 1995, and today operates a total of six 757-200Fs.

    SpiceJet, however, is convinced that India’s recent ecommerce boom will be the catalyst that finally drives the development of a domestic air cargo market. Noting the influx of investment from e-commerce players like Amazon and Flipkart, Ajay Singh, chairman and managing director of SpiceJet, told reporters at a launch event for SpiceXpress that the market for time-sensitive express deliveries in India is positioned to become a significant business. The SpiceXpress freighter has already entered revenue service for the airline on routes between New Delhi (DEL) and Bengaluru (BLR). In the future, the carrier plans to begin opening international routes, such as Kabul (KBL) and Hong Kong (HKG).

    A recent report from IATA also highlighted the potential of air cargo in India, alongside some remaining concerns. The country’s outbound cargo market surpassed 1 million tonnes in 2017, representing 16.9% year-over-year volume growth, while Mumbai (BOM) and Chennai (MAA) airports also grew their cargo handles by nearly 20%. Growth is supported by rising populations and average incomes, but difficulties doing business in the country could hinder air cargo growth from reaching its full potential in India. IATA noted two major factors – policy concerns and ease of doing business – that stand to impact the future of Indian aviation and that would likely affect air cargo. While the association said liberalization and policy stimulus would likely have positive effects on Indian aviation, the protectionist rhetoric that is currently dominating global trade conversations is likely to hold back growth in the country. Also, while India has improved its spot on the World Bank’s Ease
    of Doing Business survey from 132 to 100 over the past
    five years, continued improvement is “critical” to sustain
    growth in aviation.

    Avatar
    01
    Oct

    SpiceXpress 737 freighter

    Spectre delivers launch 737-700F to Launch SpiceJet’s cargo subsidiary SpiceXpres. 737-700F and 737-800s to follow within a few months

    Avatar
    23
    May

    In transit

    Spectre Cargo Solutions will take its first Boeing 737NG freighter in June but, as President Kevin Casey explains, the freighter market is still in a state of flux

    There is little doubt, he says, that e-commerce is driving the market at present. Growing middle classes with disposable income are becoming used to online ordering, especially in China, expecting the orders to be delivered within a couple of days. Major Asian e-commerce platforms such as Alibaba and JD. com are enjoying this surge of demand and looking to expand beyond local customers and the Chinese domestic delivery area, and are tailoring their maturing platforms to attract and serve customers in the rest of Asia as well as Europe and North America. In a recent move, Walmart announced it will be acquiring a 77% stake in Flipkart, the leading Indian platform.

    An obvious result of this is the need to get those deliveries to the customer as fast as possible, hence the surging demand for time definite delivery capability via dedicated main deck freighter aircraft. A prime example is the 737 freighter, a mainstay of hub and spoke freighter operations around the world, and for which

    demand is still ‘super strong’ (around 30 737 Classic conversion this year, he estimates). However, Casey says in some cases operators have recently deferred plans for 737 acquisition to focus on aircraft like the 757-200 and 767-300ER, which are in high demand from integrator like DHL and FedEx, and from northeast Asia carriers like SF Express. This is, in part, in response to their e-commerce customers’ demand for international delivery, combined with the impact of airport congestion and pilot shortages driving substantial demand for longer range and larger aircraft.

    He cites the example of Amazon Prime, using a fleet of Boeing 767-300ER freighters operated by ATSG and Atlas Air; as well as renewed demand for new production medium and widebody freighters (just this year, Boeing has received 777 Freighter orders from All Nippon Airways (2), Lufthansa (2), Qatar Airways (5), and Turkish Airlines (3)); and even 747-400Fs coming out of desert storage.

    newly converted 737-700 and -800 freighters. But even at just 1.0 to 1.1% lease factors, this can easily mean over $200,000 per month for a 737-800F, slightly less for a 737-700F.

    While these lease factors are well below the 1.5 to 1.7% typical of 737-300/400F, on a cash basis the monthly rent is substantially above the 737CL. However, as Casey points out, the substantially lower fuel and maintenance costs of the NG more than offset the
    higher monthly rent, particularly with higher utilization and, increasingly, as fuel prices recover. And when taken together with the NG’s increased payload, range and congested operations capability, it is easy to see why the 737NG freighter is expected to experience strong demand despite its continuing to be the ‘darling of the air finance world’ and its attendant high market values.

    He adds that inadequacy of feedstock to meet 767 demand may ultimately contribute to making ST Aerospace/EFW’s Airbus A330 PTF conversion
    even more attractive, as the A330-200 and -300 bracket the 767-300ER freighter in terms of volume (one less and one more container) and have comparable payload/range capabilities.

    The ongoing popularity of the 737-800 in passenger service is driving limited feedstock availability and high cost, factors which are contributing to some operators temporarily focusing instead on larger aircraft.

    In addition to pure availability, challenges to early adoption of the 737NG freighter include the acquisition cost. Not every operator has the ability to acquire a $20 million 737NGF to fill the role of a $9 million 737 Classic freighter. This is the gap that Spectre fills by leasing

    However, he says things are expected to change as soon as 2019/2020, when market values are projected to sag and realign with Base Values, facilitating the adoption of 737NG freighters for expansion and replacement of retiring aircraft. This applies most imminently to the -700, as there are several major airlines with plans to exit substantial numbers of aircraft in the next two years as they take delivery of the later MAX models. The increased availability of aircraft is projected to cause a drop in price, and may be improve availability of CFM56-7B engines which presently are in tight supply.

    Casey says Spectre Cargo Solutions is in a good place, with 12 aircraft to deliver over the next 18 months (with more than three of each of the -700 and -800 models this year) as the market comes its way. The aircraft will be given a C check and converted at various locations. n

    Avatar
    19
    Jan

    Spectre seeks to narrow the B737 gap

    MORE than an apparition, Spectre Air Capital (SAC) has emerged on the passenger to freighter (P2F) conversion stage announcing a firm order with Israel Aerospace Industries (IAI) for 15 Boeing 737-700 and 737-800 aircraft plus options, aiming to fill a gap for narrowbody cargo aircraft.
    One of the key names behind the well-funded Texas-based aircraft lease finance company is its president, Kevin Casey, an experienced P2F dealmaker who left B737 conversion specialist PEMCO World Air Services as president in March 2015 after eight years in the role.
    Casey then joined a VIP aircraft modification specialist to “stretch my wings a little bit, to see what I was capable of doing”.
    But there was still a P2F question buzzing in his ear: “What does the future of widebody and narrowbody cargo aircraft look like, and where are they going to come from?”
    He now has an answer, after teaming up with well-heeled aircraft leasing entrepreneurs and Spectre co-founders: Jordan Jaffe and Loddie Naymola. Casey knew that the B737 classic passen

    passenger feed stock for conversions was coming to an end and that the next generation B737s of -700s and -800s were the narrowbody future. Demand would be driven by rapidly growing e-commerce that fuels network capacity demand from express parcel operators across the globe, but with Chinese operators at the front of the queue.
    In June this year, Aeronautical Engineers Inc signed an agreement to provide 15 firm orders and 15 options for B737-800SF conversions with an undisclosed customer.
    A month later, Boeing unveiled six orders for its B737-800 Boeing converted freighter (BCF).
    Says Casey: “Before the B737 classics fell away we needed a new programme and capital.”
    Casey saw a business model where a lease specialist like Spectre would buy a fleet of passenger aircraft, have them converted to freighters by Supplemental Type Certificate (STC) holders and then leased to a growing customer base of express carriers.
    As Casey set about raising the required B737 capital himself, he was invited to advise Jaffe on how best to utilise a fleet of

    B767-300ERs bought from American Airlines, most of which are now destined for operation on behalf of Amazon.
    He also took the opportunity to present his vision of how the -700 and -800 are going to be among the primary heirs apparent to the classics and potentially even to a “substantial portion” of today’s B757 market.
    Says Casey: “I had done business with Jordan very successfully on some B737-400s a few years earlier. So that conversation on the 767 programme led to ‘hey we understand you are raising capital, what are your thoughts on building your company within our capital structure’.”
    A war chest of funding was available via Spectre and so the idea took wing.
    Jetran, the separate family business run by the Jaffes, has bought and sold many hundreds of aircraft and many hundreds of engines and exercised enormously large fleet size transactions.
    Leveraging existing back-end aircraft maintenance, engine and record inspection expertise, the incremental cost to utilise those same resources for the freighter focused trading is nominal.

    Says Casey: “It creates very little drag on the freighter business and so it allows the freighter piece to scale very cost effectively.”
    Casey categorises the B737 P2F market in this way: “The classics will give way to age and they have insufficient pedigree to enter import restricted areas.
    “The future was going to be other aircraft types, and it was going to take some special knowledge and trading expertise to supply regional express carriers with aircraft that allow them to continue to make a profit.

    737-700F in conversion

    A door opens for the 737-700F

    “I chose to focus on narrowbody and me¬dium widebody aircraft because the large widebody market is incredibly different.
    “There are 110 or so narrowbody freight operators, each with an average of 5.5 or six airplanes.”
    That is the market, and the Spectre busi¬ness model will be bespoke conversion projects, working with known customers: “To acquire and convert assets and build their engines, airframes and components to a standard that is determined in ad¬vance and will be custom built. And when I say bespoke I mean it.”
    Spectre will also supply other customers with existing classic freighters as well as “actively pursuing new freighter conver¬sion projects to fill some of the gap”.
    The Texan company will focus on oper¬ating leases, where Spectre remains the beneficial owner of the aircraft asset.
    “While it does sell aircraft and engines, operating leases on 737NGs, 757s and 767- 300s are the primary thrust of the Spec¬tre objective, along with operating leases for existing classic assets for the next few years.
    “We can do a three year lease on an existing classic asset, right up through a seven plus year lease on a newly converted -800, where you are easily talking about an aircraft that could be in excess of $20m, post-conversion.”
    The operating lease on such an aircraft is probably more than the average B737 clas¬sic freighter operator is prepared to pay, but Casey advises: “follow the numbers”.
    He says that a B737-400F, freshly convert¬ed to the tune of around of around $8.5m, will lease out for $130,000 to $140,000 per month depending upon the credit, but cautions that there is going to be a time when that ubiquitous airplane is “consid¬ered a little long in the tooth because they stopped making them in 1999, and there are not a whole lot of aircraft in those last few years available at the moment”.
    The average lease factor − for a newly

    converted Classic freighter − is 1.6% per month which is “a pretty high rate if you compare that to a brand new aircraft which is in the order of 0.6 or 0.7”, says Casey, who explains that the higher rate is due in part to the much shorter perceived life of the converted freighter.
    The -800 is 14% − or 1.5 pallet positions − larger than the -400 classic, and with a lease a little north of $200,000 per month but with “substantially lower” (minus 25%- 37%) maintenance and fuel (minus 16%) costs.
    For a typical operator flying anywhere from a low of 1,100 hours a year at $1.75

    ‘The future was going to be other air¬craft types, and it was going to take some special knowledge and trading expertise to supply regional express carriers with aircraft that allow them to continue to make a profit’
    Kevin Casey, Spectre

    per gallon and 1,400 hours at $3 per gal¬lon, that aircraft is going to save the -800 operator between $60,300 and $94,938 a month.
    “It also carries 12% more weight and pro¬vides 14% more volume, it has direct navi¬gation capabilities, meets all noise and emissions regulations and can operate in congested areas like London-Heathrow, and Beijing and Shanghai.
    “The point is that not everyone can go out and buy a $20m aircraft, to replace an $8m airplane. Operators that today are buying or renting aircraft that were originally worth $8m and are today worth maybe $4.5m will struggle to find the bank financing to buy a $20m airplane.”
    Continues Casey: “That is where Spectre can come in, because we have the ability to buy whole fleets of aircraft, and there is a ‘know your customer’ requirement by the top tier aircraft lessors and in-house trad­ing departments from the big airlines.”

    Thus the longstanding Jaffe business re­lationships come into play. Time to market is also a critical issue, and a factor in the launch order with Tel

    Aviv-based IAI, a major supplier of high tech aerospace solutions to defense and commercial markets worldwide, including its Bedek Aviation Group P2F conversion specialist.

    “Time to market is a big deal and as a trading company, if you don’t have some­thing to trade then you’re not in business.

    “IAI ticked all the boxes in respect of competency and capability, and are one of three primary B737 freighter conversion and technical support companies. They have ample staying power and their prod­uct is second to none.”

    IAI is also the STC holder for launch cus­tomer for Alaska Airlines’ B737-700 P2F programme, an airline Casey knows from his PEMCO days: “To Alaska Airlines’ credit, they push you to be your best.”

    Casey has “crawled all over” the Alaska P2Fs and has been very impressed by IAI’s “level of design, engineering and installa­tion workmanship”.

    Another key factor is that Boeing and AEI have sold a majority of their early slots on the -800s, which means that demand has to be met elsewhere in the short term.

    And with its -700 now in certification and Spectre’s launch -800 going into work shortly, helped by it being a derivative of the -700, Casey says that IAI “very likely has potential of being the first to market”.

    He concludes: “Whether it is first, second or third, we are not capacity constrained because of STC holder prior commitments and this allows Spectre and our customers to access aeroplanes that they might not otherwise have had.

    “This is by no means negative towards Boeing or AEI, but an acknowledgement of the quality of the IAI product and of a deci­sion taken for having the right aeroplanes at the right time with a very competent

    Avatar
    13
    Oct

    Spectre Air Capital Announces Launch Order for B737-700 & 800 Freighter Conversions

    Spectre Air Capital announces launch order for B737-700 & 800 Freighter Conversions
    Texas-based aircraft lease-finance specialist Spectre Air Capital announced at the annual CargoFacts Symposium an initial order of 15 firm plus rolling options for 737-700 and 737-800 passenger- to-freighter conversions with Israel Aerospace Industries (IAI), and a launch order from Seoul Korea-based Air Incheon for three 737-800 freighters on long-term lease for delivery beginning in 2017.

    “Demand for express freighters is at an all-time high, with hundreds more required in the coming years to meet the demand created by rapid growth in e-commerce and expansion of the global middle class,” said Jordan Jaffe, Spectre’s CEO and co-founder. “The classic freighter feedstock is becoming increasingly scarce and overly expensive for their age. We intend to leverage our ability to purchase in fleet-sized transactions to offer next-generation freighters with attractive economics. Spectre’s order means that 737-700 and 737-800 freighters will be available on a turnkey basis for lease and purchase to forward-thinking customers beginning from Q1 2017 (-700F) and Q3 2017 (-800F), with Spectre taking the attendant technical, financial and schedule risks inherent with aircraft acquisition and PTF modification programs such as these.”

    Spectre’s large 737NG freighter commitment follows its 20-aircraft Boeing 767-300ER program collaboration earlier this year with aircraft trading partner Jetran, the majority of which will become freighters and be operated in support of e-commerce giants such as Amazon’s Prime Air and China-based Alibaba. Spectre Cargo Solutions (SCS) is the freighter aircraft focused arm of Spectre Air Capital, a Texas-based aircraft trading and leasing company whose principals have bought, sold and leased 500+ passenger, freighter and special mission aircraft. SCS’ leadership, including president Kevin Casey and Asia-based Sam Goh, is well regarded and among the most experienced freighter conversion team in the business, with hundreds of cargo conversions sold, performed and supported spanning Boeing 737 F/C/QC, 757 F/C, 767F and 747F.

    Avatar
    27
    Sep

    737-800 Freighter Spectre – Air Incheon Deal

    Following up with its fleet renewal and upgrade plan, Air Incheon signed a Letter of Intent with Spectre Aviation (USA) for the lease of 3 B-737-800FNG. The first aircraft is scheduled for delivery in September 2017, with the remaining two aircraft following in March and September 2018 respectively. With its higher payload, longer range and lower fuel burn, the 737-800F will allow KJ to reach further and more efficiently into the South and West China, SE Asia and Russia Far East markets.

    Avatar
    27
    Sep

    Cargo Aircraft Solutions

    Spectre announced the formation of a freighter-focused unit to assist customers with their narrow and wide body freighter needs including turnkey operating lease. Spectre’s Cargo Aircraft Solutions (CAS) team has special expertise in the freighter aircraft segment including passenger-to-freighter (PTF) modification, freighter feedstock sourcing, and airframe and engine maintenance.
    CAS’ principal has lead three major passenger-to-freighter STC development programs (737-400 Freighter, 737-400 Combi, 757-200 Combi), has sold and executed over 100 passenger-to-freighter conversions, has supported 60+ customers operating 130+ Boeing 737Fs and 757Fs in 25+ countries and 20 regulatory environments, and has performed VIP modifications on Airbus and Boeing aircraft.
    The CAS team has also advised express freight carriers on AOC set up, freighter aircraft model selection and fleet development, network optimization, Part145 set-up, and has even assisted airlines in aircrew hiring and training.

    Avatar
    27
    Sep

    National Aero Stands

    National Aero Stands, LLC (NAS) is a division of Spectre Air Capital formed following the July 2016 acquisition of Stands-on-Demand, Inc. Over the last 5 years Stands-On-Demand has become a leader in providing on-demand rental of aircraft engine transportation stands to the global aviation community including major leasing companies, airlines, and maintenance organizations, most of whom Spectre interacts with on a regular basis.

    National Aero Stands is involved in all aspects of the engine stand marketplace. From purchasing, leasing, and sales to inventory management and refurbishment services, National Aero Stands utilizes its 150+ aircraft engine transportation stands to support clients on a global scale.

    Dedicated to the aftermarket, we purchase, lease and manage all major models of shock-mounted aircraft engine transportation stands. We take on the burden of owning, tracking, managing and maintaining engine transportation stands, and we honor our client commitment to have the right high quality aero equipment where and when it is needed, all supported by aviation professionals dedicated to your success and satisfaction.

    Avatar
    06
    Apr

    737-700 & -800 Freighters: The Argument for Leasing

    AIRCRAFT VALUE RISK. The world’s aircraft appraisers agree that 737NG market values, particularly the revered 737-800, are likely to trade above base value depreciation curves for the next several years, and potentially even increase in value. The reason is the first few years of 737MAX and A320NEO production will mainly satisfy fleet growth demand, while new deliveries to replace older retiring 737NGs will only begin to happen from 2020 or even later, depending on global economics conditions.

    Boeing projects that 450 narrow body aircraft will retire annually beginning early next century. This means that 737NG freighter feedstock purchased over the next 3 to 5 years will potentially be much more expensive than their true market values, and that the airline or the lessor is at high risk of a major value correction as older 737NGs begin to retire in large numbers.

    And, should a global economic slow-down occur, airlines will shed their oldest aircraft as they reduce network capacity. This will substantially amplify such an overpayment.

    STC RISK. Major aircraft modifications, such as supplemental type certificate (STC)-based passenger-to-freighter conversions are inherently at risk of design change requirements discovered after early modified aircraft enter service and experience reliability or safety concerns.

    These changes can be significant and can have an effect on the utility and desirability of early production aircraft. One mitigation strategy is to lease early-year freighters in order to mitigate these risks to ownership investment and maintain the flexibility to trade out early freighters for younger and often better freighters.

    OLDEST AIRCRAFT QUALITY RISK. The oldest 737-700s (from 1997) and 737-800s (from 1998) will be the first to exit fleets. In fact, the oldest and ugliest are already exiting now. And for good reason. These are Boeing’s earliest and in some cases, least capable versions. But more importantly, airlines exit their most maintenance-intensive, least reliable aircraft first. And they exacerbate their poor condition by swapping the weakest engines and other major components onto these aircraft as they are retired and offered for sale.

    AIRCRAFT ACQUISITION RISK. Buying the wrong airplanes at the wrong price are among the most common problems airlines experience when looking to the secondary market for mid-life aircraft. Generally speaking, airlines are perceived as deep-pocket buyers with minimal experience in discerning true market value, often with the ability to over-pay for an asset, and frequently justified by some vague strategic objective.

    There is a better way to acquire airplanes than “Hello, I’m from Deep Pockets Airlines; I have a thick wallet (and minimal real-world experience) to buy your (likely overpriced) used airplane”.

    TECHNICAL INTEGRATION RISK. Once the freighter conversion feedstock has been acquired, now comes the risky process of investing substantial additional capital to bridge the previous operator’s maintenance program to your approved maintenance program, and restore the airframe, engines and major components to a condition that makes sense for your unique circumstances and market outlook for spare parts, utilization, etc.

    In addition to all the records research, heavy maintenance & spare parts provider selection, contracting, oversite and technical/financial oversite, there is the main event – the passenger-to-freighter (PTF) conversion selection and management.

    One US-based PTF STC-holder is reported by customers as averaging 60+ days late in delivering freighters. This could have a hidden project cost impact exceeding half a million dollars or more. Combine this with MRO cost-overruns, workmanship problems (that will haunt you for years), and the PTF provider selection and program management becomes a major area of concern.

    One of the best ways to mitigate this is to lease (or buy) a turnkey freighter from Spectre. Our principals have successfully executed more than 100 freighter conversions in the past ten years and are ready to help with your fleet development program, including the time consuming and financially risky technical integration elements, all for one upfront lease (or purchase) price.

    REMARKETING RISK. Eventually airlines must dispose of their aircraft. If you lease it, you meet the return conditions (or negotiate major deviations) and simply walk away. But if you own the aircraft, you’re responsible for its disposal. And just like owning versus leasing a car or residence, the process of selling can be stressful, time consuming and surprising costly when taken together with the overall cost of using the asset.

    When one buys an asset, we often assume we’ll get top dollar at the end of our use and that this top dollar will be easily and quickly obtained. Reality is generally something different. The same is true in the airline business.

    Finance will model scenarios of ownership vs. leasing a freighter that is 15 to 20 years old when it enters service. Assuming the airline has the cash or credit to buy (and no higher & better use for the cash), ownership can initially appear attractive. But important real-world consideration which these models often gloss over is that remarketing (disposing of) the asset years later will not be a simple or as lucrative as initial financial models suggest. Remember trying to sell that old car you once had….? The market value for an aircraft varies widely over its life, often due to uncontrollable exogenous global events. It you own the asset, these swings will impact the price for your aircraft.

    And without the substantial global sales network of an aircraft trading/leasing partner like Spectre, disposing of the aircraft will almost certainly be at scrap/part-out value, reducing the investment recovery potentially by millions of dollars.

    UNIVERSAL BENEFITS OF LEASING. Flexibility, cash flow, and retention of borrowing base are well known and certainly apply to 737NG freighters as well.

    Leasing is less capital intensive than cash purchase. The airline can use its cash for other purposes rather than keeping it tied up for years in an aircraft.

    Leasing shifts the residual value risk to the lessor. Aircraft values, unlike most property, depreciate over time. Companies that tried to sell their aircraft in 2001 – 2003 saw a significant loss in value over what they probably anticipated.

    Leasing is better than financing if a company does not need the tax write-off from depreciation. If an airline expects significant profit during the aircraft’s operation, the tax depreciation of an aircraft is one way to protect those profits. If the airline does not or cannot take the tax write-off, it still can write off the lease payments as an expense.

    Leases can be for relatively short periods compared to the useful life of a typical aircraft. And a lease allows you to walk away at lease end without being concerned with selling an owned aircraft. Those who completed their lease in 2001-2003 did not face the loss of residual value that the owner did.

    EVENTS

    ISTAT CONFERENCE
    MARCH 5-7, 2018
    San Diego, CA USA

    CARGO FACTS ASIA
    APRIL 19-20, 2018
    Hong Kong

    ISTAT Europe
    SEPTEMBER 23-25, 2018
    Hilton Prague, Prague, Czech Republic

    CARGO FACTS 2016
    OCT 10-12, 2018
    Miami, FL USA

    FORMULA ONE RACE
    OCT 21-23, 2018
    Austin, TX USA

    JETRAN/ISTAT FOUNDATION
    CHARITY GOLF TOURNAMENT
    OCT 27-28, 2018
    Horseshoe Bay, TX USA

    GLOBAL AIRFINANCE CONFERENCE
    NOVEMBER 2-3, 2018
    Hong Kong

    GLOBAL AIRFINANCE CONFERENCE
    JANUARY 22 – 24, 2019
    Dublin, Ireland