January 16, 2013
Aergo Capital, a Dublin-based lessor, is shopping for 20-30 Boeing 737 Next Generation aircraft. “We’re going to be stepping into the Next Generation market,” John Sawyer, the company’s chief trading officer, tells Aviation Week. “I don’t want to be king of the Classics,” adds Sawyer, whose company has Boeing 737-300, -400s and -500s in its fleet. “If the numbers are right, we’re definitely ready to make a move.”
Aergo’s current fleet of more than 40 aircraft also includes Avro RJ85 regional jets, MD-83s and Boeing 737-200s. Its interest in the NGs is two-fold: The company would lease them for passenger services first, perhaps under five-year or six-year terms, after which the timing might be right to convert them to freighters, Sawyer says.
Aergo currently is embarking on a program, in partnership with Tampa, Fla.-based Pemco World Air Services, to convert as many as 20 737s to freighters, including six-400s and perhaps four -300s currently in its fleet. Conversions are just beginning on the first three 737-400s, which will be delivered to Colt Aviation in Sao Paulo. Sawyer says the company plans to finalize deals for two more conversions by the end of this month.
The Aergo-Pemco deal originally focused on 737-400s. But Sawyer says airlines are expressing a lot of interest in the -300s because of their cost and generally younger age, so Aergo is on the hunt for more of them as well.
The lessor, however, also hopes to work with Pemco on a conversion program for the 737-700s and -800s, which it sees as the future for narrowbody conversions. “That was the whole reason we entered this market,” Sawyer says.
Aeronautical Engineers (AEI), an aircraft conversion specialist, also sees the NGs as the future of narrowbody freighter conversion—but, like Aergo, believes that the aircraft’s time is years away while Boeing decides what it wants to do. Robert Convey, AEI’s VP-sales and marketing, notes that the timing is tricky because Boeing is cautious about starting conversions on an aircraft that is still in production.
For most aircraft, conversions start at least four years after production has ceased, Convey says. But the market is really pushing for the 737NG conversions because of the economics of the aircraft, its avionics and the ability to carry a larger load than the 737-400.
The 737NG is more expensive, but some of the airlines asking for conversions already own the aircraft, he says.