As new challenges and opportunities emerge, airlines must regularly adapt their business models in a constantly evolving market.
Aircraft leasing plays a vital role in the aviation industry, offering benefits and convenience to airlines to ensure a high level of flexibility, including capacity, fleet composition, and aircraft financing.
There’s no right or wrong answer when deciding on an aircraft leasing structure – but it is essential to understand the key advantages and considerations when selecting the right option for your business.
Benefits of ACMI leasing
The main difference between ACMI and dry leases is who has operational control of the aircraft.
ACMI stands for Aircraft, Crew, Maintenance, and Insurance, and is also known as wet leasing and damp leasing.
Wet leasing is when the supplying airline (the lessor) provides aircraft, crew, maintenance and insurance to the customer airline (the lessee). Damp leasing is when the lessee provides all or part of its own cabin crew.
Damp leasing is an attractive option for many larger airlines who often seek greater control over their inflight product, as it offers greater consistency of customer service and brand awareness. If the lessor has plain white aircraft available to lease, the aircraft can be branded too giving travelling passengers the perception they are flying purely on the lessee’s aircraft
ACMI leases allow the lessee to choose the aircraft type, operation period and route best suited to their requirements – for example, expanding capacity during the peak season, responding to a maintenance issue, or testing a new route.
A typical ACMI lease term can range from one flight up to 18 months.
Many companies choose ACMI leases over dry leases due to the high degree of flexibility they provide in varying periodic capacity. ACMI leases can be a cost-effective option, saving the airline from investing in the fixed operational overheads and commitment of dry leases or purchasing an aircraft.
Benefits of dry leasing
Dry leases, or operating leases as they are referred to, typically last 6-12 years and refer to an arrangement where the lessor provides the aircraft without providing crews, insurance, maintenance or operational support.
The legal ownership of the aircraft remains with the leasing company, but the lessee places the aircraft on its own air operator’s certificate (AOC) and is responsible for complete operation of the aircraft, including the payment of all variable and fixed operating costs for the lease term.
As an alternative to purchasing aircraft, dry leases can be used to help an airline preserve liquidity and protect its balance sheet. The monthly lease rent on a dry lease is typical far less than the monthly cost of financing, and the deposit far less than capital investment required when buying an aircraft outright. As a result, dry leasing is highly attractive to airlines, with nearly 50% of aircraft globally, being acquired by airlines in this manner.
ACMI leasing offers greater flexibility, however dry leasing is a more cost-effective solution over a long period, provided the operator is looking for a long term, year round commitment.
It’s important to remember that the aviation industry remains unpredictable – so even if you don’t have aircraft leasing requirements now, contingency planning is important.
Even established airlines with large, modern fleets can suddenly find themselves scrambling for capacity – as operators of the Boeing 737 MAX found when aircraft were grounded worldwide.
Since 2002, ACC Aviation has delivered market-leading leasing solutions to the aviation industry. The peerless service and emphasis on market intelligence and growing industry network have made the firm one of the fastest-growing and most respected aviation service providers.
ACC Aviation, reports an exceptionally strong third quarter, with its US office experiencing its strongest three months in its short history.
ACC Aviation has appointed Andreas Pericleous as VP Business Development, dedicated to the company’s expanding, international Consulting division. Andreas will work across the consultancy portfolio covering aircraft asset management, technical services, aviation finance and advisory.
Aircraft rejections lead to maintenance expenditure, remarketing costs, and lost revenue during the transition period; it is critical to take proactive measures during a potential aircraft rejection scenario to secure your assets and prepare for potential asset recovery and remarketing.