Lessors: 737-400 freighter replacement still years away

Replacement of the global 737-400 freighter fleet is still years away thanks to high lease rates for 737-800Fs and continued passenger demand for potential feedstock 737-800s. 737NG freighter conversions are the future of the narrowbody segment, Vern Titcomb, senior vice president of capital markets at lessor Crestone Air Partners, said during a panel discussion at Cargo Facts Symposium in Nashville, Tenn., recently. [caption id="attachment_415366" align="alignnone" width="1024"] A Kargo Xpress 737-400F bearing a special pandemic-era livery. (Courtesy/Kargo Xpress)[/caption] But for the moment, there isn’t a good economic alternative for the 737-400 freighter, Dora Alexander, chief marketing officer at Hamden Aviation, said during that panel. “Just because the 737-800 freighter is more economical on a per-ton basis fuel-wise, that doesn’t necessarily mean for emerging markets and other operators that it’s not still the economically better choice to stick with their existing classics for the time being,” she said. While Crestone Air Partners has leased both 737 Classics and 737-800 freighters to operators, Hamden Aviation has favored the 737-400 freighter type. Leasing costs A 737-400 freighter usually leases for $80,000 to $90,000 per month, whereas lease rates on the 737-800 are between $180,000 and $190,000 per month, Mylene Scholnick, senior adviser for World Star Aviation , said. This difference is important for second- and third-tier operators, for whom working cash is a constant concern, she added. According to Scholnick, as much as 70% of the global 737 freighter fleet is leased, many of those units from lessors such as AerCap and BBAM. Meanwhile, increased passenger demand is making the conversion of 737-800 aircraft prohibitively costly, Alexander said. “It’s slowing the process down, but it’s a healthy kind of brake system,” she said. “There was an excess of converted aircraft in the space that’s slowly being absorbed.” Most operators will fly their 737-400 freighters for three to five more years, Scholnick said, at which point 737-800 freighters will begin to replace them. In the meantime, challenges to the -400 freighter include higher maintenance costs, noise restrictions, fuel costs and engine availability, she added. Lessor risk Risks are greatest for lessors in the 737 freighter conversion market, the panelists agreed. Lessors brought the current market on themselves, Scholnick said. Watching Amazon’s pandemic-era scale-up in the 737 segment , lessors converted a glut of 737-800 freighters, she added. As a result, mass speculative conversions without a pre-determined end user have largely stopped since then, Alexander said. Titcomb agreed. “The risk is big enough that it’s prohibitive,” he said. “You’re hardly seeing anybody speculatively convert aircraft anymore.” Cargo Facts LATAM 2027, the essential event for stakeholders in Latin America, will take place Feb. 10-12 at the Marquis Reforma in Mexico City. Learn more and register by Jan. 8 to take advantage of early-bird pricing.

Lessors: 737-400 freighter replacement still years away

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