How a well-timed cargo move is driving expansion at SmartLynx Airlines
The COVID-19 pandemic has forced some airlines to shrink operations, but not for ACMI specialist SmartLynx. A well-timed move into cargo operations means it is now expecting to be bigger than before the global health crisis.
AeroTime spoke to SmartLynx Chief Executive Zygimantas Surintas and Anders Ludvigsson, Vice President of Operations, about the group’s plans for expansion and hiring, recovery from the pandemic and the effects of the war in Ukraine.
ACMI companies typically provide aircraft on a “wet lease” basis - aircraft with crew - for customers that need a way to temporarily boost capacity.
Latvia-based SmartLynx previously focused on narrow-body passenger operations, but about a year before the pandemic took a decision to diversify into cargo and reduce its dependence on the passenger business.
“It has allowed us to survive this crisis,” Surintas tells AeroTime in an exclusive interview. “We saw that our business was too much concentrated into passenger operations, and we were not diversifying our income, our revenues.”
Anders Ludvigsson highlights that the ACMI business was one of the first to be affected when the pandemic hit. “I think when the pandemic started, ACMI was one of the first parts of the industry to suffer,” he tells AeroTime. “And it was not that we saw declining numbers, it was just gone, everything was gone immediately, more or less.”
Surintas admits there were doubts over whether SmartLynx was right to move into cargo when the pandemic hit, especially as it took a while for the cargo boom to kick in. But now, the company has booked more slots to convert passenger aircraft to freighters than initially planned.
SmartLynx first added converted A321 freighters to its fleet in 2020, providing services for DHL Express. Surintas says the A321 P2F will become the “flagship” of the airline. By the end of 2022, it intends to operate 11 of the P2F aircraft, with plans to grow to 30 within the next 24 months.
“We are going to be the biggest operator of this type of aircraft in the world,” Surintas declares.
In it for the long-haul
The company is also expanding long-haul operations. Last year, it added five wide-body Airbus A330s to its fleet, making modifications such as removing the seats and passenger oxygen supplies to make it suitable for carrying cargo in the main cabin. The aim is to return these to passenger operations once demand allows.
“We have identified that the long haul ACMI market will have many opportunities in the passenger business as well,” Surintas explains. “We understand that the recovery of the passenger long haul market will take more time.”
But the wide-body expansion continues. The airline announced on March 9, 2022 that it is leasing six fully converted A330-300 P2F under a six-year deal with ATSG. By the end of 2023, it therefore expects to have more than 10 long-haul aircraft in its fleet.
“Our strategic decision to enter the full freight market with a long-haul fleet is a combined decision to expand our passenger business and we want to be the largest ACMI long haul carrier within the next 24 months,” Surintas tells AeroTime. “So, we want to combine these two business lines. Here at SmartLynx, we never do small things. This is the strategy - we’re aggressive and we want to grow.”
Along with tapping into a market that has been growing during the pandemic, adding cargo operations helps to smooth out the seasonality issues that typically plague ACMI operators.
While summer peaks are busy, winters can be lean. SmartLynx typically uses the quieter period to put its fleet through maintenance or seek opportunities in countries like Latin America, Central America, or Africa.
However, the peak cargo period is at the end of the calendar year. “It’s a great opportunity to stabilize a little bit by taking the peak off that seasonality,” Ludvigsson said.
Surintas says a big driver for the cargo move was that SmartLynx saw a gap in the market to invest in modern, more efficient cargo aircraft, which will be in demand when older aircraft retire.
“We have invested into the cycle. We start to see that there will be space in the market to replace the older planes, which will leave the market slowly, with the new technology.”
Surintas says the initial plan was for cargo to make up about 10% of SmartLynx’s revenues, but now the plan is for it to account for around 40-45% within the next three years.
“We’re still staying a passenger airline, but cargo is going to be a very big part of our revenues and fleet capacity. So, this is what has changed. But you know, if you want to be successful, you need to take the risk, and we decided that we want to take that. And now it's been proven,” Surintas says.
Turning to the passenger side, another aspect of SmartLynx’s expansion is deciding to add the 737 MAX to its line-up. It announced on February 7, 2022 a deal to lease two 737 MAX 8 from Irish lessor SMBC.
While it is predominantly an Airbus operator, Ludvigsson said adding the 737 MAX was a “unique opportunity”.
“There was a unique opportunity of taking really great aircraft at a cost which was suitable for the business model. To keep it simple, we should have stayed with Airbus, but we didn't have enough available units at the price range which was suitable for us,” he explained.
The company weighed up the extra work involved in adding a new type to its operations but concluded it was worth it. “It’s a really good fit to be able to offer a broader spectrum of aircraft to our clients,” Ludvigsson said.
As airlines scramble to ramp up operations for an expected summer travel boom, SmartLynx, which provides wet lease services to airlines such as TUI and Jet2, expects a busy summer.
“We’re expecting to see a very high demand for the upcoming summer. We are very happy to see that,” Surintas says. “This is why we live. This is why we're here to bring people for the good moments in their lives or on vacations.”
With the growth plans, SmartLynx is of course hiring. Surintas said it was tough to let people go during the pandemic, and he understands that many may see aviation as a risky career move, given how badly it can be affected by crises.
SmartLynx expects to have 65 aircraft in the fleet this year, which requires around 600 flight crew members.
“I'm happy to say that we have very, very significant recruitment plans,” trained pilot Ludvigsson said. “On the flight deck side, we have probably reached about 90% of what we need. On the cabin crew side, we have close to 700-800 positions, most of which have already been filled, but there are still some opportunities.” More cabin crew opportunities will come too, when the five A330 it is currently using for cargo are returned to passenger operations.”
“It just feels good to be able to offer some opportunities for people to get back into the skies,” Ludvigsson declared.
As CEO, Surintas said he likes to find a good balance between experienced staff and beginners.
“I'm always trying to find the right balance between these two groups. And I think that we are very, very successful. I believe that we have the strongest team ever in the company.”
War in Ukraine
Of course, Russia’s invasion of Ukraine is weighing on everyone’s mind at the moment.
Surintas said the big challenge for airlines was the rise in fuel prices. However, SmartLynx is not planning to enter into fuel hedges, with Surintas noting that the price has already come down from a peak of $150 per barrel and is expected to fall further.
In terms of what SmartLynx can do to help, Surintas said the airline is keen to hire Ukrainian refugees.
To date, SmartLynx has already hired more than 30 people from Ukraine and Surintas said he personally would like to see that reach 100. “There’s mutual benefit there. We are very happy to work with the Ukrainians,” he said.
Surintas says: “We want to have some long-lasting programs, [look at] how are we going to be continuing to work with Ukraine. We are cooperating with more than one Ukrainian airline, trying to combine some business solutions, how we could keep working together.”
“We are in the Baltic states, and our countries have been occupied in the past and we understand this much more than many other countries. We stand with Ukraine,” he declared.
30 years and more to come
SmartLynx turns 30 on March 31, 2022 and AeroTime naturally had to ask what Surintas would like to see for the next 30 years.
“I would like to see fewer crises,” Surintas exclaims. But with the aviation industry sensitive to any kind of economic or political shocks, Surintas says one priority is to ensure the business is better able to handle the up and down cycle of aviation.
“We need to build our company in such a way that we would be ready for different kinds of crises,” he says.
Further geographic expansion is also on the wishlist. “I would wish for our company to have a footprint in all the different continents of the world.
Above all else though, is safety.
“First of all, be safe. It's the mission of an airline to carry people from A to B and take the responsibility to carry those people safely. This is our biggest wish,” Surintas concludes.
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