What to do if you are an aircraft leasing company struggling to lease your aircraft? For one lessor, Dublin-based Amedeo, the answer is to create its own “virtual airline”.
Amedeo has apparently been struggling to attract new lessees for its fleet of Airbus A380s – it currently has 12 under management and a further 20 on order.
They believe the best way to utilise the company’s assets is now no longer to just lease the aircraft to airlines but to operate them directly under what they believe could be a new model for air transport.
The idea is for the new airline to offer seats both to existing carriers and to potential non-traditional customers, such as Airbnb, who are looking for a way to enter the aviation market without having to deal with the complex regulatory regime. Passengers would buy their tickets through another company, but Amedeo would operate the flight using its own cabin crew, tailoring the service to suit the client.
Amedeo believe that joint ventures and codeshares are making passengers more accustomed to buying tickets with one airline, but flying with another.
However, there has been scepticism from airlines and analysts, with many citing the importance of brand and customer experience. Whilst airlines are happy to contract out back office functions, anything customer-facing is difficult to contract out because of the risk if a contractor does not deliver.
There will also be significant hurdles to overcome such as acquiring slots at airports and hiring (and training) crew at a time of pilot shortages, not to mention supplier costs.
And is the A380 the right aircraft for this type of business model? Some say superjumbo jets are heading towards extinction. Amedeo’s proposal comes at a time when the future of the A380 is being called into question – the aircraft has not won a new customer in almost two years.
Nevertheless, Amedeo is confident that their venture is built on solid ground and that operators have simply just not optimised the A380’s capabilities. They see it as an evolution of the aircraft leasing market and note in particular the desire of airlines for increasingly short lease tenors.
The company plans to apply for an air operator’s licence next year and the aim is to launch the airline in 2022.
Many commentators in the industry have noted that the plans seem risky. In particular, there is a huge amount of uncertainty around whether or not the aircraft will be employed and it remains to be seen whether Amedeo’s financiers will be willing to gamble on the company’s ability to make loan repayments in a scenario where there are no guaranteed ongoing lease rentals.
That said, airlines, and indeed the industry as a whole, are accustomed to “ACMI”-type wet leases. There is, of course, a clear distinction between the “ACMI” model and the Amedeo model. Wet leases are typically utilised for seasonality reasons or at times of peak demand, but is anyone likely to wet lease an A380 for the summer season? Further, Amedeo’s model would see them retain the liability for fuel costs and the associated exposure to fluctuating oil prices.
However, whilst the viability of the model remains to be seen, in an era where the likes of Airbnb, Uber, Deliveroo and Bitcoin have become commonplace, the aviation market cannot afford to see itself as immune from disruptive new technology-centric business models.