SINGAPORE: Singapore Technologies Engineering's aviation asset management unit has agreed to set up a joint venture with Temasek for freighter aircraft leasing, amid growing demand for freighter aircraft as e-commerce and air cargo volumes rise.
The joint venture aims to build a portfolio valued at about US$600 million (S$795 million) within five years, said ST Engineering in a news release on Tuesday (May 11). The joint venture will invest in passenger aircraft to be converted into freighters.
Global airline industry body IATA said on Tuesday that the outlook for cargo remains positive and demand is likely to be strong this year.
The air freight business has been a bright spot in aviation during the COVID-19 pandemic. Air cargo traffic is expected to expand 13.1 per cent this year, it said.
WATCH: ST Engineering puts more converted freighters in skies as airlines struggle with fewer passengers
ST Engineering will provide the associated maintenance, repair and overhaul services to these aircraft. In addition, ST Engineering will be the asset and lease manager to the joint venture.
“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 Mr Jeffrey Lam, president and head of commercial aerospace at ST Engineering.
Mr Lam added that they also welcome other "potential like-minded partners" who are looking to invest in the strong freighter aircraft leasing market.
In the medium to long-term, the joint venture intends to securitise the leasing income streams by way of a business trust to unlock capital.
Mr Uwe Krueger, head of industrials, business services, energy and resources at Temasek, said: “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."