The Uber of aviation: How ACMI companies fill in the gaps when demand is high
The ACMI (Aircraft Crew Maintenance and Insurance) business has been referred to in the market as the Uber of legacy carriers. Like Uber and the automotive sector, ACMI companies in the aviation industry offer operators an alternative to the financial burden of taking on aircraft long-term by providing temporary access to aircraft capacity, crew, maintenance, and insurance.
ACMI leasing, also known as wet leasing, is an agreement between two operators, where one operator provides aircraft, crew, maintenance, and insurance to another carrier. Airlines typically turn to wet leasing for short to medium-term periods to cope with seasonality, during peak demand periods or to mitigate disruption to operations.
Before the COVID-19 pandemic, wet lease operations in Europe had been growing in popularity. AeroTime investigates what was driving demand and how the pandemic has affected it.
The number of passengers carried by air in the European Union from 2009 to 2019 increased from 752 million passengers to 1.1 billion passengers, according to Statista data. That’s an impressive 52 % increase in passenger numbers in a 10-year period.
Of course, in 2020, passenger numbers plummeted to 277 million passengers due to the impact of the coronavirus pandemic.
However, as airlines served more travelers from 2009 to 2019, this simultaneously drove the need for the corresponding fleet capacity to meet this demand.
Data shows that ACMI companies helped commercial airlines to meet this growth in passenger numbers.
IBA data shows an increased interest in airlines seeking wet leasing solutions to increase capacity. According to the consultancy, the EU’s non-ACMI fleet (aircraft not involved in wet lease activity) grew from 6,185 aircraft in 2016 to 6,570 aircraft in 2019, equivalent to a 6.3% fleet increase. During the same period, there was greater demand for wet leases, which saw the EU’s ACMI fleet grow by 63.5%, reaching 229 aircraft in 2019. This was against 140 aircraft in 2016.
“The most important model of [an] ACMI company is the ability to operate in various seasonality areas across the globe and have access to aircraft for trade aircraft or temporarily use for example before an aircraft undergoes a pax to cargo conversion or vice versa,” an ACMI industry expert told AeroTime.
“At the end of the day, ACMI companies are kind of Uber for legacy and traditional carriers.”
IBA’s data shows that 875 wet lease transactions, lasting for 14 days or longer, were recorded in Europe in 2019, against 136 transactions in 2015. However, during this same period, the average lease length fell from about 160 days in 2015 to roughly 90 days (approximately three months) in 2019. This shows how ACMIs had to be very flexible to step in at short notice and for short periods of time.
A major example where wet lease companies were called upon was the September 2019 collapse of UK travel company Thomas Cook. The well-known firm entered compulsory liquidation, creating a far-reaching ripple effect that stranded more than 150,000 customers overseas in 18 countries. The UK Civil Aviation Authority (UK CAA) went on to secure a fleet of 150 aircraft from 50 partners to repatriate the stranded customers. This fleet was comprised of capacity from airlines such as Atlas Air, Avion Express, easyJet, Hi Fly, Miami Air, Nile Air, Titan Airways, and Wamos Air.
Meanwhile, the grounding of Boeing’s 737 MAX in 2019 crippled the capacity of airlines already operating the aircraft. This in turn limited the availability of suitable aircraft to lease during that peak holiday period.
Seasonality plays an influence on the wet lease market and influences how airlines shift capacity across different regions. Air travel demand is high in Europe during the summer season while in the winter season demand slows down. However, in North and South America, as well as Asia Pacific and India, travel demand rockets during the winter.
European ACMI airlines have tailored their businesses to operate across a range of regions.
In May 2020, ACMI narrowbody operator Avion Express expanded beyond its European operations after receiving approval by the Federal Aviation Administration (FAA) to operate passenger flights to and from the United States through its subsidiary Avion Express Malta. In November 2019, the airline obtained a Foreign Air Carrier Certificate (FAOC) from Transport Canada to operate flights to and from the region.
Similarly, UK-based Titan Airways also deploys its fleet capacity for airlines in North America. In March 2021, the airline entered into a six-month wet lease agreement where it deployed its Airbus A321 freighter fleet for US cargo airline, Amerijet, during a period where Amerijet’s fleet was undergoing scheduled maintenance.
“ACMI supply is driven by demand,” the industry expert told AeroTime.
Recovering from the pandemic
With a busy summer 2022 expected in Europe, there may be some chances for ACMI companies to offer capacity where airlines have cut their operations and need to rebuild quickly.
Britain’s easyJet has said it will use wet leases to help operate additional slots acquired at London Gatwick airport.
"I don’t think we’ll see much wet leasing this summer from the major carriers, maybe from some of the smaller charter operators,” independent aviation consultant John Strickland of JLS Consulting said. He also points out that easyJet cut its fleet during the pandemic, while other budget rivals continued to grow.
“Now easyJet has picked up additional slots at Gatwick and elsewhere, so if they want to maximize that opportunity to fly people to the Mediterranean for holidays, they can do it partly by redeploying some of their own fleet. But they will also have to bring in capacity with the short leases, which is a less than ideal situation," adds Strickland.
Cargo also seems to be a key focus for ACMI companies, with more adding capacity as this area of the market booms and capacity remains scarce.
Traditional ACMI fleets lean strongly on passenger and cargo models such as the Airbus A320, A321F, A330 and Boeing 737, 767 and 747s. However, the companies are likely to add newer models in the coming years.
SmartLynx, for example, is adding the 737 MAX to its line-up.
“After every cycle, carriers become more educated and due to seasonality and many other reasons they understand more and more that ACMI is additional value for them. After Covid I believe we will see Boeing 737 MAX and Airbus 320 Neo as new capacity in ACMI service,” added the ACMI industry expert.
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