How Hi Fly Converted Operations Amid Low-Demand for ACMI Leasing

MILAN – Two runways and no commercial flights. The ‘master’ of Beja airport, in Portugal, is the airline Hi Fly.

An untitled fleet is scattered across the parent company, headquartered in Lisbon (Beja for flight operations), and the subsidiary is based in Malta. No scheduled flights but in pre-Covid periods an uphill request for ACMI and charter.

Since the outbreak of the pandemic, Hi Fly has been forced to convert part of its fleet into preighter to meet the increase in cargo demand.

Even the only A380 in the fleet had the same fate but a few weeks later the airline returned the double-decker to the lessor, Doric Aviation, amid “drastically reduced demand for very large aircraft” (Clark, 2021).

Hi Fly has started to increment its offer between 2018 and 2019, that is when the carrier took delivery of several aircraft, including the new A330neo, as Planespotters.net shows (Planespotters.net, 2021).

Pedro Aragão, CC BY-SA 3.0 GFDL, via Wikimedia Commons

Another evidence of the increase in Hi Fly operations comes from Cirium’s Traffic data. The aviation portal shows that the airline went from 9 million passengers carried in 2018 to 60 million in 2019, an increase of 534.5 percent. Despite this, the load factor decreased from 70.4 to 63.7 percent.

A lower figure than other airlines, citing the Portuguese flag carrier TAP, which in 2019 recorded a load factor of 80 percent (Cirium, 2021). Considering the type of operations for which Hi Fly is designated, the load factor is a naturally low variable.

Unlike a national airline that studies a fleet suitable for its operations, Hi Fly’s main business, namely the ACMI leasing (keyword short: short term and short notice), often leads to using larger aircraft than the actual need.

And they are mainly on-call jobs, planes are immediately required and there’s no time to elaborate plans to fill the flight. Also, because, broadly speaking, Hi Fly has a marginal interest in aircraft capacity.

Jeff Gilbert (GFDL 1.2 http://www.gnu.org/licenses/old-licenses/fdl-1.2.html or GFDL 1.2 http://www.gnu.org/licenses/old-licenses/fdl-1.2.html), via Wikimedia Commons

The leasing is usually paid hourly by the lessee who requests it. The lower the weight, the lower the fuel consumption. Hi Fly should instead be happy in deploying aircraft with few passengers on board, here’s why the low percentage of load factor is not that bad.

Meanwhile, a new competitor, who could steal an important market share from Hi Fly, landed in Malta. Latvia’s SmartLynx, devoted as well to ACMI and charter flights, expanded its presence in 2019 by founding a subsidiary on the Mediterranean island.

The Baltic airline is currently flying out of Malta with 13 aircraft, including 6 A320s, 3 A321s, and 4 A330-300 preighter aircraft. An A321PCF (Passenger Converted Freighter) is also expected this year, Planespotters.net outlines, but the fleet could increase to 10 A321s by 2023 (Kaminski-Morrow, 2020; Planespotters.net, 2021).

Moreover, according to aviation intelligence company IBA, in 2020 SmartLynx “engaged in the most wet-lease transactions over five years.” (Abdel Aziz, 2020).

Global grounding of passenger aircraft is known to have led to a dramatic decrease in available cargo space. Thus, airlines began to look to the cargo market introducing passenger to freighter-converted aircraft.

Anna Zvereva from Tallinn, Estonia, CC BY-SA 2.0 https://creativecommons.org/licenses/by-sa/2.0, via Wikimedia Commons

But it’s not that simple. As stated by IBA’s analyst Jon Whaley, in a wide picture passenger to freighter conversions “will likely have a minimal impact on capacity and Available Freight Tonne Kilometres (AFTKs).”

Whaley believes that the lack of available cargo space “has been compounded by the increased volume of global e-commerce trade and demand for PPE supplies” (Whaley, 2021).

Added to this is the crisis of the tourism sector, caused by the pandemic, which mainly affects ACMI leasing. The aircraft supply remains significantly greater than the actual demand. Nonetheless, according to Dave Williams, wet leasing could find its redemption in the near future.

“The pandemic paved the way for an environment of extremely competitive ACMI rates,” Williams says. “In August 2020, ACMI rates declined by over 62 percent compared to the same period a year earlier” (Williams, 2020). However, it’s understood that demand must increase.

Steve Lynes from Sandshurst, United Kingdom, CC BY 2.0 https://creativecommons.org/licenses/by/2.0, via Wikimedia Commons

Hi Fly is a versatile airline, and it will probably be able to adapt better than competitors to change of flight operations. There’s still an open question on the choice to keep the A340-300 in active service, which is not the ideal aircraft to ensure a long-term vision.

The airline had planned to replace the -300 version in 2022 with 10 A330neos (Bailey, 2019), but deliveries stand at 3. In periods of abnormal traffic, Hi Fly can’t be blamed after all. Also, preighter operations are the essence of a provisional solution justified by the lack of passengers.

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