Podcast: Hamden Aviation discusses LatAm’s freighter appetite

Jeff Lee
Hello and welcome to this episode of cargo facts connect, the podcast of cargo facts, the newsletter of record for the air cargo and freighter aircraft industries for over 40 years. I’m Jeff Lee, editor of cargo facts and it’s Friday, the 17th of May. This week, the team was in Panama City, where we brought together the region’s industry executives at Cargo Facts LATAM. The Latin American freighter landscape is unique and presents some interesting opportunities in the eyes of some lessors. One such lessor is Hamden Aviation, which specializes in emerging markets and is looking to grow its freighter portfolio. I spoke to executive vice president Dora Alexander and financial analyst Angel Mora to find out more.

Jeff Lee
So we’re here at cargo facts LATAM in Panama City, and I’m here with Dora Alexander and Angel Mora from Hamden aviation. Hello, guys.

Dora Alexander
Hi, how’s it going?

Jeff Lee
So how are you finding the event?

Angel Mora
Well, first of all, glad. It’s my first cargo facts LATAM, and my first cargo facts overall. And, honestly, it’s very surprising how welcoming people are, I would say, and it’s the nice thing about this conference is that it’s not 10,000 people. That’s not, you know, you’re just struggling to even taps on the shoulder, you know, by the end of the event, you get a good feel for who’s here and in, you get the opportunity to meet everyone. So I think if there’s, it’s a very different type of conference, but I will say that the smaller nature of it is actually very helpful to make connections with people.

Jeff Lee
Good. So, Dora, why don’t you tell us a bit about Hamden aviation and your entry into the Freighter space?

Dora Alexander
Sure, yeah, hamden aviation, we’ve been around for a little over 10 years now. And we’re based out of hamden Connecticut, just about an hour outside of New York City. And it’s kind of interesting, we actually started out in business aircraft. So and sort of our roots with Latin America are quite deep, we began in business aircraft, essentially purchasing aircraft and putting them on lease with mostly high net worth individuals in Latin America. And so that was our foray into the aviation space for under a family office. So we’re a small company. And then from there, we went into engines, built up a portfolio of three C one engines, and then from there transitioned into narrowbody freighters, and are now looking at launching two additional platforms, one on the turboprop side and exploring some new projects as well.

Jeff Lee
So what was behind that entry into the freighter space? Was it just kind of diversifying your your activities?

Dora Alexander
Yeah, it was kind of opportunistic, you know, as a small company, under a family office structure, we really wanted to kind of live out a proof of concept in terms of looking at returns, we are a finance group at the end of the day. And it was just sort of an organic entry, from a three C one market then working with classics, then having opportunities, primarily with a focus on emerging markets. So we had lessees come to us, we had opportunities and deals come onto our table. And I would say it’s kind of an organic transition into the freighter space, sort of before it was hot and exciting of COVID days. So we got lucky, actually, and really moved out of the passenger space just before COVID, sort of fortuitous in that sense. And yeah, we really liked the niche. And we liked the the focus on Latin America and on on emerging markets.

Jeff Lee
Good. Well, speaking of emerging markets, there are certainly plenty of them here in this region. What is your view on sort of the overall appetite for Freighters and maybe specifically 737 classics in this part of the world?

Angel Mora
Absolutely. So we think the appetite for classics here is still here, as we saw, you know, through the conference. And you know, we’re talking still about seven two seven. So we then started talking in, you know, we had a conference today where people are saying, well, we’re gonna phase into the classics, which is, which is music to our ears. But you know, Latin America is an emerging market, you know, you do have a lot of investment grade companies that are out there, like as, you know, Azul, Latam, etc. But there are a lot of opportunities, particularly for our company, in which we can, you know, offer our services and again, like Dora said, we specialize in emerging market, and kind of our niche is, is non investment grade, you know, these, these more special circumstances that require you to get a little bit creative. So, you know, I think we, we believe the appetite is there, again, we’re talking about phasing into classics and getting rid of the seven two seven. So there are still plenty of companies out there that are looking for classics, so

Jeff Lee
right, I mean, very often with some of these smaller companies, whether they’re startups or just smaller, non investment grade companies, sometimes it’s, it’s easier for them to move forward without going through layers and layers of approval and decisions can be made faster sometimes.

Dora Alexander
Yeah, well, and as a small company, we kind of pride ourselves in a really creative approach to understanding credit backgrounds. So chip Delaney, our CEO, he comes from a finance background and so that’s really one of our strengths that we can take a very small company and understand their cash flows do a deep dive on the on the capital structure and on the backers and it doesn’t have to be a sort of your standard external credit rate. Same type of analysis when we’re looking to see if we can work with an operator or not in one of those emerging markets.

Jeff Lee
Right. So, given you already have, you know, a business in engines, How challenging is it today to continue to find parts and materials to support these classics?

Angel Mora
Well, we’ve seen engines, particularly dash threes skyrocket over the last year and a half. I mean, in November, we bought these somewhat, you know, real numbers. But November, we bought an engine for 1,000,000, November 20 22 million. And in August of 2023, it was like 1.4, you know, that same engine. So, we’ve seen prices skyrocket for engines for APU landing gear. And so we have seen in the market that the availability is down, you know, and for something like an APU, it’s taking time, and it’s taking money to get there. But at the end of the day, it’s still, you know, a very attractive return from our perspective, which is why we like this aircraft so much. And then from the lessee perspective, it’s still, it makes financial sense to keep these aircraft operating, even with those higher costs.

Dora Alexander
Yeah, and, you know, if you build a relationship, we’re all about long term relationships. So we have, you know, even small engine jobs, or South Florida or Europe that we built long term connections with, we know that stand behind their workmanship, and that we can trust. So it is difficult, then the market is tight, there’s no question, but there’s still good product out there. And it just takes a bit more of a for more elbow grease and stick to activity to find it.

Jeff Lee
And, you know, with all that in mind, how much longer do you think you’ll keep supporting the classics, particularly with some of these engine issues and challenges that you’re facing?

Dora Alexander
Yeah, I think at this point, you know, as Angel pointed out, there definitely still is quite a run for the classics in those emerging markets, Latin America being a big part of that. So I think we’re still looking at a good six to 10 year run that we feel confident in our fleet, we feel confident in the asset type. And, you know, again, it supply and feedstock to do get low, but I still think that there are some, the later vintage 90 classic freighters in particular, that with a relatively low utilization can still, you know, take us out another 6, 10 years, that’s That’s our vision.

Jeff Lee
Now, you were talking about two new platforms earlier. Just I think the first was turboprops.

Angel Mora
Yeah, we’re working with a multibillion dollar fund, out of France for an ATR platform. So our platform there would be looking at taking 72 five hundreds from either passenger lease and then converting those and leasing them out as cargo, or just buying them pre conversion to convert or post conversion. So our strategy there echoes what sort of our idea behind Hamden is, which is emerging markets, not an investment grade, you know, that is our niche. But we want to we don’t want to roll this platform out, you know, looking to sort of build every year, perhaps 5555 and retargeting overall platform about 30 atrs by by the end of six years.

Jeff Lee
Right. And what’s your view on whether you need a large cargo door on some of these or not?

Dora Alexander
I think it’s very operator dependent. So it depends on the utilization. As you probably know, it’s it’s a relatively small percentage of currently converted turboprop freighters in the market, they do require the large cargo door, it’s about triple in terms of pricing for the conversion process. Having said that, if there’s a need, then then that’s the conversion we’ll pursue. So I think it’s much less about kind of what’s better or not. It’s really about the end user and what their what their needs are.

Jeff Lee
Okay. Now, what other types what segments are you are you looking at?

Angel Mora
We’re looking at another platform that we’re going to roll out which actually Dora is looking more into so I’ll let her speak on that.

Dora Alexander
Yeah, so I think the second platform is very much the exploratory stage, but we’re very interested in the in the E jet platform with Embraer we’re excited about it, we think it makes a lot of sense in terms of that replacement for the 300 for you know, for that sector of the narrowbody. So, it really kind of marries well with our relationships in emerging markets and our current lessee base as well as the International the international connections that we have through our team and our network. So, early days, obviously, it’s not even fully approved, but we’re interested and excited in terms of getting involved in that platform as well.

Jeff Lee
We look forward to seeing the E jet freighter start to really taking off hopefully later this year, but uh, eventually it will be certified and then we’ll see where that goes.

Angel Mora
Yeah, and one thing to add to that is that for us, we’ll now have a solution for, you know, the smaller flights through ATR. And we’ll have the e jets and we’ll have the narrow bodies. So you know, if you’re a lessee, you can come to us and say, well, they have a variety of solutions. Let’s work with them. From our point of view, that’s that’s kind of what we’re looking for. We’ll have a range of options.

Dora Alexander
Exactly. And it fits in with that sort of hand holding approach. A lot of the operators that we’re talking to, at the moment and operators that we’ve spoken with in the past, this is their first foray into that particular asset class, be it a classic, or in the future, you know, turboprop or on the Embraer side. So as a small group, we feel like that’s a strength that we can bring to the market. It’s not just to take it or leave it, you know, we can help in terms of certification process, bloating platforms, sort of a soup to nuts, kind of a handheld solution for these smaller kind of developing operators.

Jeff Lee
Right. And we, I mean, we’ve talked to operators that do prefer working with smaller lessos. So you you do have plenty of potential, especially in this region, but not just this region. So Well, thank you, Dora, and angel we look forward to seeing your expansion into these platforms. And we’ll talk to you again soon. Thank you for coming to Panama.

Dora Alexander
Thanks for having us on and we support your podcast. It’s very cool and look forward to hearing what else you guys have to offer.

Angel Mora
Yep, thank you Jeff.

Jeff Lee
Great, thanks.

Jeff Lee
That was Hamden aviation’s executive vice president Dora Alexander and financial analyst Angel Mora talking to me at Cargo Facts LATAM in Panama City this week. And that’s all the time we have today. For more coverage of the freighter aircraft market, visit cargo facts.com. Thank you very much for tuning in, and join us again next time.