In passing, I frequently discuss airline wet lease contracts. I know some OMAAT readers are well aware of what that entails, whereas others might be unfamiliar. Therefore, in this post, I would like to elaborate on this topic a bit more — what constitutes an airline wet lease agreement, how airlines take advantage of it, and what it means for travelers?
In this post:
The fundamentals of airline wet lease agreements
In simple terms, a wet lease refers to a contractual agreement between two airlines, where one airline supplies an aircraft, crew, maintenance, and insurance (ACMI) to another airline.
Wet lease agreements can take various forms. A wet lease could last for a day, a week, a month, or a year… it varies widely! Here are some examples.
Hi Fly is a Portuguese carrier that operates exclusively as a wet lease provider. This airline does not run its own regularly scheduled flights, but rather conducts flights on behalf of other airlines when needed. Hi Fly mainly utilizes secondhand aircraft that previously operated for other airlines, making it a unique operation.
Hi Fly frequently provides flights for other carriers
Then there are airlines like airBaltic. Although this airline runs its own scheduled flights with Airbus A220s, it also leases those same aircraft to other airlines. airBaltic has a partnership with Lufthansa Group, so it’s common to find that your flight with this airline is actually operated by airBaltic.
airBaltic does wet leases for other carriers
To be thorough, I should mention a few additional points. Another type of lease agreement is a dry lease instead of a wet lease. In a dry lease, an airline supplies an aircraft to another airline, but without the crew or any additional services. This is a less prevalent type of arrangement. There’s also a damp lease, where the airline provides everything included in a dry lease, along with pilots.
Since this can lead to misunderstandings, it’s important to make one further distinction. For instance, Qatar Airways operates former Cathay Pacific and Virgin Australia Boeing 777s. Although those planes have the same interiors, this does not represent a dry lease arrangement between airlines.
This is because the respective airlines returned those aircraft to the leasing firms, which then leased them to Qatar Airways. Therefore, it’s not a dry lease between airlines, since those planes are unrelated to their previous airlines, despite the interiors.
Qatar Airways operates former Cathay Pacific 777s
Lastly, I believe it’s crucial to clarify that a wet lease agreement is not the same as a codeshare agreement. A codeshare agreement enables an airline to market another airline’s flight when they are in partnership. This differs from a wet lease, which is solely about gaining additional aircraft access.
Reasons airlines engage in wet lease agreements
Why would airlines partake in wet lease agreements? Let’s examine this from both parties’ viewpoints.
There are multiple reasons airlines may wish to lease planes to others:
– For certain airlines, like Hi Fly, that forms the foundation of their business model; these airlines can lease planes for more than their operating expenses, making it a reliable venture as long as demand persists.
– Some airlines may find themselves with surplus aircraft, whether it results from changing market conditions (like the closing of Russian airspace), a shift in their business model (like airlines downsizing to lessen losses), etc.
– Some airline startups may realize their business model is unsustainable and are losing money, prompting them to pivot to leasing planes, which helps minimize losses and stabilize revenue (carriers like Norse Atlantic, for instance)
– Some airlines possess a strategic advantage for this arrangement, as they are based in countries with lower labor costs, providing an interesting arbitrage opportunity.
Air Belgium aimed to enter the wet leasing market
Conversely, there are several reasons airlines may wish to lease aircraft from others:
– Airlines sometimes serve markets with very seasonal demand; in these situations, it can be more cost-effective to lease planes during peak seasons rather than maintaining them year-round.
– Some airlines aim to reduce their capital expenditures, as purchasing planes can be prohibitively expensive, making a wet lease a favorable alternative.
– For airlines located in countries with high labor expenses, leasing an aircraft from another airline based in a country with lower costs can be a sensible choice.
– Occasionally, airlines face temporary supply changes due to certain aircraft being grounded or more undergoing maintenance, making leasing an efficient way to increase capacity.
Qantas is leasing (both wet and dry) Finnair A330s to enhance capacity
Implications of wet lease agreements for travelers
What should passengers expect if they find themselves on a flight that operates as part of a wet lease agreement? While this doesn