ACMI operators boost cargo operations amid freight boom
COVID-19 devastated global passenger traffic levels but the cargo market has been booming. Players in the ACMI market have not missed out on this trend. AeroTime takes a look at the latest developments when it comes to ACMI, also known as wet lease, and cargo.
According to data from IATA, cargo demand was up 7% compared to pre-pandemic levels in 2021, the second biggest increase since 1990. The industry association forecasts another good year for air freight demand in 2022, with economic drivers remaining strong and capacity still affected by the lack of belly space in aircraft.
The two big aerospace manufacturers, Airbus and Boeing, have also announced new freighter variants of popular aircraft - the A350 and the 777X - and have already gathered orders. Preighters - passenger aircraft carrying cargo in the cabin - and passenger to freighter conversions (P2F) have all come to the fore during the pandemic.
“With the onset of the pandemic there have been a number of new entrants into the freighter market, whether that be using a Preighter or a fully configured freighter aircraft,” Jon Whaley, senior aviation analyst at consultants IBA, said.
“It should be highlighted that the use of ACMI freighter aircraft is nothing new, the only aspect which is changing is how many parties are operating within the market,” Whaley adds.
While the ACMI companies may not be as familiar as the passenger airline brands, they do provide services for some big household names. “Amazon, Federal Express and DHL all utilize the ACMI/CMI market to fulfil demand needs and provide capacity,” Whaley notes.
So what have some of the big ACMI companies been doing to expand their caro operations during the pandemic?
SmartLynx, owned by Avia Solutions Group (ASG), has been busy adding narrowbody cargo capacity and even moving into widebody freighter operations. It has also set up a new Maltese subsidiary, SmartLynx Malta, which has a contract with DHL’s European Air Transport Leipzig.
In November, Latvia-based SmartLynx said it was adding two more A321Fs to its fleet, which would take its total A321 freighter fleet to eight aircraft by the end of 2022.
The latest two A321s are being leased from Cross Ocean Partners and are being converted from passenger operations by Precision Conversions in the United States. They are set to enter the SmartLynx fleet in the first quarter of 2022. SmartLynx said at the time that it planned to double its fleet “in the near future”.
“It would not be a surprise to see SmartLynx Malta grow its freighter fleet beyond the initial A321-200 conversions,” Whaley comments.
The ACMI specialist also took a big step into the widebody long-haul market, announcing the addition of five A330 aircraft to its fleet in May and June 2021. The aircraft have the seats removed in order to carry more cargo. Conscious that the cargo boom will eventually run out of steam, SmartLynx intends to reconvert the aircraft back to passenger operations at some point in the future.
US ACMI provider Atlas Air, which operates services for FedEx and DHL among many others, is certainly one of those enjoying the cargo boom. It is expecting record revenue and earnings for the fourth quarter of 2021 and has been ordering new aircraft.
“We are operating in a very strong air freight market, and we expect industry conditions to remain favorable for the foreseeable future,” president and chief executive John W. Dietrich said when the company reported third quarter results on November 3, 2021.
Dietrich said the supply chain bottlenecks seen in 2021 were pushing more manufacturers, retailers and shippers to turn to air freight to get goods to customers more quickly.
“This current environment has also led to a structural acceleration of express growth and e-commerce adoption, which will drive both current and longer-term airfreight demand.”
Atlas Air, which says it operates the world’s largest fleet of 747 freighter aircraft, cited demand for express and eCommerce shipments as drivers behind its decision to order four new Boeing 777 freighters, announced on January 6, 2022. The first of those new aircraft is due to arrive in November 2022.
Atlas Air is due to release its fourth quarter earnings on February 17. It expects to report revenue of nearly $1.1 billion and adjusted EBITDA of approximately $325 million.
This Portuguese wet lease specialist was famously once the only second-hand operator of the Airbus A380, although that left its fleet in December 2020. The aircraft was also known for its bright and colorful Save the Coral Reefs livery.
During the pandemic, Hi Fly has picked up a new customer, start-up airline flypop. The new British airline actually wants to fly passengers between secondary cities in the UK and India. However, with the pandemic hitting passenger demand, it has instead turned to Hi Fly to help it launch cargo services.
“We are looking forward to working with the flypop team in the short-term doing cargo and in the long-term flying Indian and South Asian diaspora passengers into the Second Cities of India,” Hi Fly President, Paulo Mirpuri, said in a statement in November 2021.
All Airbus-operator Hi Fly, which uses both Portuguese and Maltese AOCs, is currently operating two A330 aircraft for flypop, with the second one starting service with the new airline in January 2022.
Independent aviation analyst John Strickland of JLS Consulting says it may be some time before ACMI companies like SmartLynx and Hi Fly shift the A330 widebodies back to passenger operations.
“It’s difficult to say when the ACMI companies could shift back the cargo capacity to passenger operations,” Strickland told AeroTime. “For the widebodies, it’s really fortunate there’s this bottleneck on cargo capacity right now. The A330s are really well placed to take advantage of that, especially while there’s a lot of long-haul capacity that hasn’t come back on the passenger side. I think the cargo deployment will continue for quite a bit longer.”
Iceland-based Bluebird Nordic has long been a specialist in the cargo market, operating for DHL, UPS and Fedex as well as running its own cargo services from Iceland, using a fleet of eight Boeing 737 narrowbody aircraft.
In August 2021, it announced plans to add 25 737-800 aircraft to its fleet, more than tripling its fleet to 33 aircraft. It cited growing demand for cargo amid the pandemic as the reason behind the move. One of the 737-800s has already entered service and the others are set to enter the fleet over the coming months.
Bluebird Nordic is also part of the Avia Solutions Group and, like sister company SmartLynx, has recently announced a move into widebody cargo operations. It concluded lease agreements via ASG for three Boeing 777-300ER aircraft in December 2021.
The aircraft are currently in a passenger configuration but will be converted for cargo operations and Bluebird will use them for freight haulage from 2024.
“Until then, Bluebird will operate the aircraft listed in our AOC as “preighters” and VIP/Corporate Pax”, explained Sigurður Agustsson, CEO of Bluebird Nordic, in a statement at the time.
Parent ASG added that if all goes well, it would likely add more widebodies to the Bluebird Nordic fleet.
Overall, it seems that cargo is providing a good source of business for the big ACMI companies at the moment, with booming cargo demand set to continue for some time yet.
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