The Complex Art of Aircraft Utilization

DALLAS — Aircraft are the most vital and valuable assets of an airline. Without flying aircraft, no carrier can generate profits. Therefore, the efficient utilization of their fleets is a critical factor in determining the long-term survival of an airline in the global air travel market.

Since the inception of commercial aviation, carriers have been studying the intricate art of aircraft utilization. They have developed noteworthy strategies to maximize profits for their respective airlines.

In this post, we will explore the techniques and methodologies that all types of airlines employ to optimize the use of their aircraft.

Low-Cost Carriers

Low-cost carriers (LCC) such as Wizz Air (W6), Southwest Airlines (WN), and Ryanair (FR) are considered some of the most successful and admirable aviation businesses ever created.

The remarkable achievements of these LCCs worldwide can be attributed to significant cost reductions achieved through economies of scale and an understanding of passenger psychology. Additionally, their extensive network of routes and large fleet of aircraft contribute to their success.

Ryanair, for example, operates a fleet of 270 Boeing 737 family aircraft and serves over 80 hubs across Europe. Some of these hubs require only one aircraft to be based at the airport. In May 2023, the airline confirmed an order with Boeing to purchase 300 Boeing 737-10 aircraft, with a total list price of US$40 billion (€36.3 billion).

However, the key to their profitability lies in their high rate of aircraft utilization per day. For instance, FR's aircraft are utilized for an average of 9.1 hours per day. This means that each of its aircraft performs an average of three or four flights daily, resulting in a greater number of seats offered and higher profits.

Quick Turnarounds

There is a saying in commercial aviation that airplanes only make money in the air. This statement holds that for every minute an aircraft spends on the ground, the airline incurs expenses for airport parking and ground handling costs during turnarounds.

To mitigate these costs, FR operates with minimal downtime, allowing for as little as 15 to 20 minutes between flights. This is significantly less time compared to what premium airlines allocate for aircraft reconditioning before the next leg.

During these brief 20 minutes of turnaround for the Boeing 737, FR efficiently delegated tasks among its employees. For instance, some members of the cabin crew may assist with checking passengers' tickets, while others clean and prepare the aircraft cabin for the upcoming flight. This division of labor enables the airline to optimize its operations and make the most of the limited turnaround time.

New Aircraft: Fuel Efficiency

Low-cost carriers face a significant challenge when it comes to maintaining the safety of their aircraft while achieving high levels of utilization. This challenge is closely related to an aircraft's flight cycle.

The lifespan of an aircraft is not only determined by the total number of flight hours but also by the number of flights it completes. Each time the cabin is pressurized for a new flight, there's a chance that fatigue cracks can develop on the fuselage. Once the aircraft reaches its pressurization limit, this issue poses a significant risk to its operational safety.

In addition to this, while LCCs save money by reducing ground costs, they incur increasing fuel burn costs for every hour the aircraft spends in the air.

To address these challenges, carriers like WN and FR invest in new aircraft periodically, typically every decade. Newer aircraft incorporate advanced technologies that help reduce the effects of fatigue and minimize fuel burn per flight.

This is why LCCs, more often than not, have the youngest fleets in the commercial aviation market. For example, WN has an average fleet age of 12.8 years, W6 has an average fleet age of 6.3 years, and IndiGo (6E) has an average fleet age of 4.3 years.

Allegiant: the Low-Class LCC

Allegiant Air (G4) stands out as a unique example of a low-cost carrier with a completely different approach to travel. Unlike other LCCs, the carrier focused on cost reduction not through using new aircraft but by operating older aircraft with low utilization.

While this strategy may seem unconventional, airplanes tend to depreciate rapidly, losing up to half their value within the first seven years of operation. This allowed G4 to acquire these aircraft at significantly lower prices without the pressure to maximize their utilization for profitability.

Allegiant operated an aging MD-80 fleet until its retirement in 2018, with an average age of 27 years. These aircraft were utilized for an average of less than seven hours per day, aligning with the carrier's route network and minimizing the need for extensive maintenance associated with high aircraft utilization.

While this economic model is not prevalent in the industry today, G4's innovative approach to low-cost travel will be remembered as a pioneering strategy that offered a substantial margin of profitability.

Leasing Companies

Shifting our focus away from LCCs, let's delve into a niche segment of the aviation market that remains relatively untouched by most airlines: ACMI carriers or wet-lease companies.

These airlines specialize in providing their services to other airlines in need of aircraft for short-term periods. This could be due to reasons like an Aircraft On Ground (AOG) situation, a sudden surge in demand, or even special charter requests from non-aviation companies.

Prominent ACMI operators like SmartLynx (6Y), Wamos Air (EB), and the HiFly Group primarily rely on ad hoc requests from airlines rather than operating on regularly scheduled flights within a dedicated route network. Particularly during the European summer season and the Hajj period, which is the Islamic pilgrimage to Mecca, wet-lease companies may have their aircraft flying extensively, seven days a week, across the globe.

Interestingly, for leisure companies such as TUI Group or Condor (DE), it is common to transport their passengers on flights operated by ACMI carriers rather than on their aircraft. This is because the fleets of ACMI aircraft are optimized for profitability during low-demand seasons, requiring expansion only during the short summer period.

On the other hand, ACMI aircraft could sit idle for a few weeks during times of low demand. ACMI's new aircraft are uncommon—they would not turn a profit during idle periods.

The HiFly Group, for example, has an average age of more than 18 years for its fleet, which is primarily made up of A330 and A340 aircraft. The delivery of an Airbus A330neo (CS-TKY) in 2019 countered the fleet's aging.

The Time Conundrum with South America

When European or American airlines plan their transcontinental flight schedules, they often encounter a perplexing challenge due to the time zones of South America.

Most South American countries are situated in time zones that differ by only one to three hours from New York. Compared to Central European Time, the time difference is merely four hours.

This poses difficulties for airlines in scheduling their flights. Immediate return flights are not feasible due to the arrival time at their respective hubs. Additionally, these flights would not align with the departure banks for connecting flights to the rest of North America and Europe.

Consequently, carriers are left with two options: either turning around their aircraft and flying back with inefficient schedules or leaving their planes parked at the destination airports for eight to ten hours, allowing them to return to their hubs just in time for the first departure banks of the day.

This is one of the factors contributing to the relatively high cost of flights to South America. However, some airlines have devised strategies to capitalize on the extended parking times of their fleets at their destinations.

Clever Solutions

In 2017, American Airlines (AA) invested US$100 million to construct a maintenance hangar at Sao Paulo-Guarulhos Airport (GRU) to conduct maintenance on their long-haul aircraft before their return flights to the United States. This not only allows them to utilize their grounded aircraft but also takes advantage of the relatively lower salaries of South American workers at the airport.

On the subject of South America-Europe flights, it is quite common for airlines to incorporate additional flights within Europe for aircraft that have extended waiting times before their scheduled departures.

LATAM Airlines (LA) previously employed this approach by operating the daily LA704 flight from Santiago de Chile (SCL) to Madrid (MAD), which then continued to Frankfurt (FRA) as LA705 in the afternoon, accommodating newly booked passengers. The aircraft would return to Spain just before midnight to fly back to Chile during the night.

It is not typical to see airlines transporting passengers between two foreign countries for additional revenue. However, certain airlines are granted this right under the "Five Freedoms of the Air" treaty established by the International Civil Aviation Organization (ICAO), with specific operational conditions.

Lastly, let's discuss Qantas (QF), which executed a remarkable strategy for its flights between the United States and Australia. Before the pandemic, this Pacific carrier operated three transoceanic routes from Sydney (SYD), Melbourne (MEL), and Brisbane (BNE) to Los Angeles (LAX) using three different aircraft.

Upon the return of one aircraft to Australia, the second airplane would operate an additional leg from Los Angeles to New York (JFK), while the third aircraft would remain at LAX to undergo A-Checks maintenance at their newly constructed hangar, designed to accommodate A380-size aircraft.

The Board Game of Commercial Aviation

Observing the ingenuity with which airlines come up with plans to make the most out of their planes is quite impressive. After all, aircraft are the backbone of their operations, and airlines need to extract the utmost value from them by ensuring they are constantly in use for various purposes.

Airlines have consistently proven themselves to be the key players in the intricate game of commercial aviation, continuously adapting and strategizing to navigate its challenges and secure profitability.

Featured image: Southwest Airlines aircraft. Photo: Ryan Scottini/Airways