ACC Aviation Director of Leasing, Dave Williams, sat down with Michael Doran from LARA Magazine to discuss the benefits of ACMI leasing for airlines during uncertain times.

Remaining flexible and adapting rapidly to the market is the way forward for many airlines, most of which are currently reluctant to invest in new aircraft and the staff required to operate them. Leasing appears to be the way forward as the global airline market remains uncertain. Michael Doran discusses the options available.

As airlines emerge from the pandemic, they face the challenge of matching capacity with uncertain demand. As a result, carriers of all types, including start-ups, are turning to wet lease airlines to fill the gaps while they wait for greater market stability.

What is Aircraft Leasing?

When airlines need additional aircraft quickly to meet unexpected demand or cope with seasonal fluctuations or operational difficulties, they turn to short-term leases. This is where the distinction between dry, damp, wet and hybrid leases becomes important.

As is often the case in the aviation industry, each of these lease options has its own acronym, the most common being ACMI, which stands for Aircraft, Crew, Maintenance and Insurance. In a wet lease, the supplying airline (lessor) provides all four of these elements to a customer airline (lessee), whereas in a damp lease, the lessee airline provides its own cabin crew. In a typical ACMI arrangement, the lessee pays the lessor according to the number of block hours operated and arranges its own ground services, such as fuel, catering and handling.

Dry leases generally refer to leasing the aircraft without crew, maintenance or insurance to a lessee, who adds the aircraft to its Air Operator Certificate, provides aircraft registration and supplies its own crew.

Rise of Uncertainty and the Role of ACMI Wet Lease

In 2019, ACC Aviation (ACC) completed 85,000 hours of ACMI leasing, which its Director of Leasing, Dave Williams, told LARA is the equivalent of operating an airline with more than 30 aircraft for a year.

“So we were by far the market leader in this segment, and the beauty of it is we work with every type of carrier, whether it’s an international airline with 500 aircraft or your regional turboprop operator with one aircraft,” he said. “We work with all different types of aircraft from turboprops up to widebodies, with narrowbodies and everything else in between.”

When the pandemic arrived, ACC had to pivot towards a more flexible model as airlines struggled to deal with the changing landscape that rendered traditional network planning and lead times unworkable.

“Airlines like to plan things 12–18 months in advance, but they were trying to plan things one, two or three months in advance, and even that was not enough lead time because of the ever-changing restrictions,” he explained. “So 2021 is a good example of short-notice ACMI capacity that you could add very quickly this year in Europe.”

With around 30% of the fleet grounded and crews sitting idle, it may seem unusual that an airline would lease more aircraft, but it can be a safer option when balanced against the costs of bringing aircraft and crews back into service. The choice is therefore between investing in having resources ready to operate at very short notice, without any guarantee the system will not be shut down again, or sourcing those resources through an ACMI wet lease until the market stabilises.

For operators like ACC, market intelligence is vital in knowing where aircraft are located and available at short notice, as are long-standing relationships with ACMI airlines that have aircraft and crew ready to operate when required.

“A large majority of ACMI airlines normally have customers that would book a year in advance for the following summer, but this year they didn’t have that,” he said. “Such is the nature of the market this year that they were ready to go at short notice, and they made bold moves to have crew and aircraft ready to step in and fill the gap.”

2022 Outlook

Looking ahead to 2022, airlines and network planners are trying to determine the trends for the coming summer. However, Williams said it is a blank sheet of paper with no obvious trends, although there is undeniable evidence of pent-up demand in the market.

“Airline network planners are struggling to predict what the demand is, and that’s where, for the peak season, the ACMI option offers that flexibility because they don’t have to commit to adding 10 more aircraft on a dry lease for five years,” he said. “They can plug in ACMI for a summer season, and they don’t have to scale up resources such as crews, maintenance and head office functions.

“That’s why we see, coming out of this pandemic, a flexible way for airlines to scale back up and retain market share or grow in markets where other airlines have disappeared. So it’s going to be quite an aggressive market to capture that share, and airlines can plug in that flexible ACMI solution.”

ACC saw a supply shortage in the ACMI market during July and August, which is not uncommon during the peak summer season. However, Williams said that with so many variables affecting travel, nothing is certain for 2022.

“We have invaluable data going back 20 years on this market, which is quite a niche market that you can’t find out much about on Google. It’s not like the dry lease market, where there’s lots of public data and statistics available,” he added. “There’s not much information on the ACMI market, and that’s why airlines turn to us. We know the market inside out.”

To speak to our team today, please call +44 1737 232 239 or email leasing@accaviation.com.