Aircraft leasing is an essential component of the aviation industry, offering flexibility and financial options for both owners and operators. This process allows a property owner (lessor) to transfer the use and enjoyment of an aircraft to another party (lessee) for a specified period in exchange for compensation. There are various leasing modalities, each with specific implications regarding operational control and crew provision.
Leasing contracts are primarily divided into two categories: Dry Lease and Wet Lease. In a Dry Lease, the lessor provides the aircraft without a crew, with the lessee maintaining operational control. Conversely, a Wet Lease involves the lessor supplying the aircraft along with at least the crew.
Additionally, a particular form of leasing, known as ACMI (Aircraft, Crew, Maintenance, Insurance), is commonly used in the industry. This type of lease includes all the necessary elements to operate the aircraft immediately, providing a quick but costly solution for airlines in critical situations. Let’s go deep into this one.
ACMI Lease Models
ACMI is a crewed lease option that, in my opinion, is more of a purchase of a service than a true lease. The lessee signs an ACMI lease contract for an aircraft or a fleet of aircraft, which are being operated by their current operator, albeit under the lessee’s AOC. I suppose this paragraph might be confusing, so I’ll try to simplify it:
In an ACMI lease contract, you lease an aircraft that is ready to fly on your routes. You sell the tickets, brand the flight (in-flight magazines, onboard meals, etc.), and that’s it. The company you lease the aircraft from takes care of the rest. “The rest” in this case means anything from flight planning and crew rostering to ensuring proper maintenance is conducted. ACMI customers don’t have to worry about anything other than sales; after all, they have to pay for ACMI.
The Four Pillars of ACMI
As I mentioned earlier, ACMI stands for Aircraft, Crew, Maintenance, and Insurance. Let’s take a brief look at these four pillars of ACMI leasing:
- Aircraft: Obviously, any form of leasing requires an aircraft. However, in an ACMI formula, the lessor must ensure everything required for the aircraft to be airworthy and suitable for the operations it will perform. In particular, the aircraft must have a current Certificate of Airworthiness (C of A) and ARC, and all maintenance must be performed according to current requirements. In other words, the lessor must ensure that the aircraft is perfectly airworthy. Additionally, in some cases and for extended ACMI contracts, the lessee may request that the aircraft be branded according to their preference. This is typically done using temporary stickers, which is also why many ACMI providers operate completely white aircraft. It facilitates branding.
- Crew: The aircraft is leased along with an adequate flight and cabin crew. This means the lessee doesn’t need to hire or train their own staff. Instead, all crew members come from the lessor, who must ensure they comply with all current flight operations regulations. While this isn’t a big issue for flight crew (pilots), it poses some challenges regarding cabin crew. Since an ACMI lease contract is often international, it would be beneficial for cabin crew to speak the local language, for example. For this reason, some operators opt for a combination of cabin crew and provide some of their own staff to an ACMI aircraft. Crew management can also become an issue, as in most cases, the crew must travel from their original country of employment, requiring frequent per diems and return tickets home.
- Maintenance: In an ACMI lease, the lessor is responsible for ensuring proper maintenance of the aircraft at all times. This means the lessor must have contracts with line maintenance providers at the airports where the aircraft will operate during the lease term. Sometimes, if the lessee has their own maintenance facility, the lessor may use that facility, but the costs will be reimbursed one way or another.
- Insurance: As obvious as it may seem, in an ACMI lease contract, the lessor is responsible for all insurance-related matters. This includes liability insurance for the aircraft as well as adequate insurance for the crew.
The Benefits of ACMI
ACMI serves as a perfect emergency plan for airlines with only a small fleet and no available backup aircraft. For such airlines, it’s advisable to have generic ACMI contracts signed with more than one ACMI operator. Essentially, if an aircraft goes AOG (for example, damaged by a catering truck at an airport) and becomes inoperative for days or even weeks, an ACMI contract can be secured almost immediately. The ACMI operator will provide an aircraft ready to fly and resume operations that would otherwise have to be canceled.
The most significant benefit of ACMI, in this case, is the minimal time required to initiate such lease operations. For any other type of aircraft leasing, the procedures associated with the lease take a long time and require numerous approvals or other formal actions. During that time, the airline would incur a huge loss due to flight cancellations.
Another excellent use of ACMI is for so-called virtual operators. These are often charter flight companies that want to focus on ticket sales and avoid the risk of owning an airline. Some may argue that this isn’t a typical ACMI operation (in a typical ACMI operation, both companies must have an AOC which a virtual operator doesn’t have), but in my opinion, it’s essentially the same. The only difference is that this can only be done in countries with an “open skies” agreement; this isn’t an issue among European Union member countries.
A third interesting option for utilizing the ACMI formula is to optimize fleet availability during high and low operating seasons. Imagine a European holiday charter flight operator whose peak season is during the European summer schedule (from May to September) and whose off-peak season falls in the remaining months. This operator may need to park part of its fleet during the winter, as there won’t be enough demand for flights. But if that operator had an associated airline somewhere in South America, for example, where the seasons are exactly opposite to those in Europe, both airlines could leverage the ACMI formula for mutual benefit. Not only the aircraft, but also the crew could stay busy throughout the year, and ACMI facilitates this.
The Drawbacks of ACMI
In reality, there’s only one major drawback: the cost. ACMI is probably the most expensive way to get an aircraft. In fact, in a way, it resembles hiring a private jet, except in this case, the private jet is a Boeing 737 carrying 180 – instead of 18 – passengers. This has to be expensive.
The ACMI operator must cover all aircraft operating costs and add overhead expenses for things like crew travel, accommodation, and especially business uncertainty. A typical ACMI operator may lease their aircraft for a week or for 6 months. They’ll never know, as they are a form of “aircraft rental agency.” Furthermore, ACMI operators know that most of the time their clients are under significant pressure for an aircraft and will accept a high price because the losses they suffer from canceled flights are even greater.