Two years ago when lease rates on passenger aircraft were high, the market for Boeing 737 conversions was slow. But as rates softened, Aeronautical Engineers Inc. (AEI) in Miami, Florida saw the business for conversions for this type of aircraft pick up significantly. Today the market is strong and is predicted to stay so, through the end of the second quarter 2008.
“Fuel prices clearly rocked the air cargo industry,” comments David M. McDonald, AEI vice president, Operations. “However, banking issues not withstanding, interest in conversions appears to be picking up. I expect 2009 to be a good year for our B737-300 and B737-400 conversions.”
The company received its FAA Supplemental Type Certifi cate (STC) to convert B737-400 passenger aircraft to full freighters in August 2007.
Unique position
Unlike other companies involved in aircraft conversions, the AEI conversion is unique in that it allows more useable cargo volume and greater loading flexibility due to overall its higher position weights.
“Our B737-300 is the only design that has nine full 88-inch by 125-inch positions,” says McDonald. “Other designs only have eight, 88-inch by 125- inch positions plus an LD3 (60.4-inch by 61.5-inch) position.”
Due to AEI’s door placement and interior design on the B737-300, it’s the only conversions that can fit an AAA container in the Number One position.
“AEI’s 9G barrier allows us to mount emergency equipment and a dual fl ight attendant seat to the 9G, allowing up to four supernumeraries on the B737,” he adds.
Another advantage AEI has is it’s part of a trifecta of companies under common ownership through which it provides manufacturing, STC design and support, and a full service maintenance repair organization (MRO). While some consider AEI to be small, together, AEI and its partners employ over 350 employees and have a top line well over $50 million per year.
“By having control over the design, manufacturing, and conversion, we are able to maintain an inventory of parts and components so that we do not experience supply delays like other hamper converters who use outside manufacturing,” McDonald says.
Since its establishment in 1958, AEI has converted over 350 aircraft, more than any other conversion company. This includes such aircraft as the DC-6, L188, CV-580, and DC-8. Of the more recent aircraft, AEI converted 223 B727s and 40 B737s. Typically a conversion takes 90 days to complete.
Customer satisfaction key
“A top concern for customers is to have its aircraft conversion vendor deliver on its promises,” he says.
That includes being ready for the aircraft when it is being delivered, completing the conversion on time, and providing 24/7 support after the sale when customers have questions or have had an incident during loading or unloading that requires repairs to the aircraft.
“Our time tested design has proven very reliable, so we very rarely have component failures that require new parts,” McDonald says.
Market reach
AEI currently holds 78 STCs, including STC’s for the installation of cargo doors and cargo interior in Convair CV240/340/ 540/600, McDonnell Douglas DC8’s, Boeing B727-100, B727-200, B737-200, B737-300. Although AEI’s B737 STC has been Civil Aviation Administration of China (CAAC) approved for about two years, the company has not converted any aircraft in China to date.
“I expect that to change in 2009 as we are working on several deals in that market,” reveals McDonald.
Meanwhile, AEI is delivering B737 freighters all over the world, despite the fact the US domestic market has been very slow. One client in New Zealand replaced most of their Pemco fleet with AEI freighters in 2007.
“While the expectation is that many 727 operators will move to 737s, high 737 prices have prevented the market from moving to the 737 as of yet,” McDonald remarks. “Most of our conversions are for leasing companies who are placing aircraft worldwide.” Among them are companies in India, South America, New Zealand, and Europe.
While AEI had considered a B757 program, corporate executives decided that there was no room for another such conversion program given the number of 757s available, the cost of such a program, and the number of companies already in the market. Consequently, AEI reached an agreement to convert aircraft for Alcoa-SIE’s clients.
“The conversion business is small and the people at Alcoa-SIE were aware of AEI’s expertise in converting aircraft,” McDonald explains.
The arrangement provides Alcoa a first class, full service MRO and a well trained conversion staff at a reasonable cost while allowing AEI to service its existing customers who chose the 757F for their operations instead of a 737.
AEI is also the leader for converting B727-200 passenger aircraft to freighter configurations. Its first B727-200 conversion was in 1994. Since then, over 170 aircraft have been modified. The cargo conversion includes the installation of a cargo door, class E cargo compartment, smoke detection system, 9G barrier, and a cargo handling system. After modifi cation the aircraft can carry twelve 88-inch by 125-inch containers or optionally twelve 88-inch by 108-inch containers.
