On Monday, we began a multi-part series on freighter aircraft leasing which began with a look at the way in which a business that was originally fairly straightforward has become increasingly complex – you can see that discussion here. On Tuesday, we continued with a closer look at the lessors themselves (see part II). Part III which appeared here yesterday looked at how the freighter-leasing business has changed since our first study in 2016. Today we conclude with a look at leased carrier portfolios.
Turning from lessors to carriers, we ask: Why lease? Why would an airline choose to lease a freighter, rather than buying one? Again, there is more than one answer, and which answer applies depends on the type of lease arrangement. As can be seen from the chart at right (click to enlarge), there exists no shortage of carriers with leased freighters.
The market for air cargo is far from being perfectly predictable, and dry leasing is often pursued as an option by carriers hoping to avoid purchasing the wrong aircraft at the wrong price, or by those that have found better uses for their capital.
Other types of leasing arrangements in turn, solve a different set of problems.
ACMI-leasing a freighter for example, removes the headache of providing crew and maintenance for a type that might not be compatible with the rest of the airline’s fleet, but it also allows a carrier to “test” a route. It’s easy enough to calculate the costs involved in a new route, but revenue is something else. An ACMI lease might be expensive in the very short term, but it’s vastly cheaper than being stuck with a freighter for the long term if your revenue estimates were wrong.
CMI leasing, which was almost unheard of just a decade ago, has become an increasingly hot trend in the air freight industry. It gives the lessee complete control of the aircraft (yes, backwards from the traditional dry lease), while at the same time avoiding all of the headaches on the operational side. No pilots. No training. No maintenance. It is what allows DHL to operate in the US. It is what allows Amazon to set up a “virtual airline.”
Of course, the freighter that Amazon is having Air Transport Services Group or Atlas Air Worldwide Holdings operate on a CMI basis has to come from somewhere, and often that “somewhere” is from the very company that is operating it. ATSG acquires a freighter, and its Cargo Aircraft Management leasing arm leases it to Amazon on standard dry lease terms. Amazon then hands the freighter back to ATSG, which has one of its airline subsidiaries (ABX Air and Air Transport International) operate it for Amazon in the new Prime Air network.