The ongoing COVID-19 pandemic has had a significant impact on the global ACMI (aircraft, crew, maintenance, insurance) services market, making it one of the worst affected sectors in aviation.
The decrease in passenger demand for regular flights alongside stringent air travel and border restrictions had a negative impact on commercial air carriers’ ability to fully deploy their capacity. It was even more challenging for those airlines who operate ACMI services and rely on leasing deals.
According to data from Statista, almost 46% of the total commercial aircraft currently in use are not owned by the airline and are on operating or finance leases.
Since global revenue generated by air carriers dropped to around 30% during the first six months of the global health crisis, many airlines suffered an unrecoverable impact on cash flow. Having signed valid contracts with ACMI companies but earning significantly less money than expected due to low passenger demand, some airlines were unable to meet their liabilities.
As a result, around 40% of jets dedicated to operating passenger flights were either grounded, parked, or repossessed by the asset owner, leaving airlines with spiraling losses and a slower rate of reentry into the market due to reduced capacity. By August 2020, ACMI rates had declined by more than 62% compared to the same period a year earlier, analysts from ACC Aviation, a global aviation service provider for the aviation consulting, wet leasing and aircraft charter sectors, noted at the time.
As operating conditions began to improve during 2021 and 2022, many grounded aircraft are now being removed from storage and gradually reintroduced to active service.
However, passenger traffic recovery has been slower than expected. Additionally, the process of ungrounding aircraft or purchasing new planes, as well as carrying out any necessary crew training, takes time. So, some air carriers could find that they are unable to scale up operations at the pace dictated by the market and could face a gap in capacity.
Is ACMI a supportive tool in the recovery process?
The ACMI business model offers an adaptable solution based on providing speed and flexibility in capacity management.
Benefits for the lessee include risk management, flight and cabin crew management, and capacity management while delivering financial advantages and the ability to manage unexpected situations.
Lease operations can be started quickly in response to immediate capacity requirements. Thus, to overcome the capacity gap, some airlines have begun to renew their interests in fixed-term ACMI agreements with other carriers.
Due to the ongoing uncertainty in the commercial aviation sector caused by changing travel restrictions, airlines have been unable to commit to long-term contracts on an ACMI basis.
However, since carriers are also unable to operate at pre-pandemic levels, they are eager to test new markets and aircraft types to ensure business continuity. In these cases, ACMI providers could become an attractive solution for capturing new market share.
According to ACC Aviation analysts, ACMI providers are expected to play a significant role in aviation recovery.
Analysts also expect that the aviation industry’s slow recovery from the pandemic, alongside the increasing need for commercial airlines to take on fixed-term contracts, will encourage ACMI service providers to offer competitive contracts. These include greater plane availability as well as a high degree of flexibility regarding payment terms and the duration of lease agreements.
The ACMI rates in the European market have already stabilized in comparison to the ACMI market in 2020. It is now predicted that by offering shortened terms and more flexible contracts, airlines could pick up on ACMI services as one of the main supportive tools in the recovery process.