Courting Chapter 11: Leasing Large Aircraft from Carriers without Proven Records of Reliability

Reliability is paramount in large-aircraft leasing, and locating reputable 737 charter carriers can determine success or failure for many airlines seeking additional lift

With every major U.S airline having filed for chapter 11 at least once since 2002, the airline industry is a high-risk and high-cost arena.  Maintaining profitability is a major challenge for airline executives when faced with a soft economy, rising prices, fuel costs, wage expenses, and the need to meet seasonal consumer demand, particularly considering multi-million dollar asset costs anytime additional lift capacity is needed.

“There are airlines failing all over the planet right now.  There are a number of people trading in this business that are right on the thin edge.  In recent months there have been several airlines in theU.S.alone that have gone to Chapter 11.  The market is constantly changing, and clients are getting dumped on a regular basis that thought they had lift secured,” says Chris Lapointe, general manager of Flair Air, a Canadian large-aircraft charter firm. 

Maintaining competitiveness without major capital outlays to meet cyclical demand requirements is vital.  To meet these requirements, many airlines are looking to charter carriers for short and longer-term lease arrangements in lieu of making large capital expenditures on asset acquisition.  But choosing a reliable carrier can be fraught with risk in itself.  With flights scheduled, if the charter company suddenly folds, consequences can be disastrous for any airline.  And it is little less harsh if a charter company’s planes don’t arrive, don’t fly, or have mechanical issues—all delaying the airline’s promised service. 

As with any industry, there are always unreliable operators.  In the airline business it is a significant undertaking to enter into any lease agreement with a charter company—as you are essentially trusting them with a portion of your business.   For these reasons it is paramount for an airline to select a reliable charter carrier as a partner in service: the right firm can virtually guarantee that flights proceed without a hitch, whereas an ill-advised choice may bring aircraft mechanical failures, delays, poor service and ultimately financial setbacks.

“Normally it’s reliability we look for,” says Stephen Arbib, Vice President of Sales at SkyLink Aviation.  “We have to make sure because we are the ones on the hook with our clients.  Ultimately when we’re dealing with the clients, we’re the ones contracting through them, so whatever operator we deal with, we have to make sure they are reliable.” 

For SkyLink Aviation, reliability is just as important as safety.  SkyLink specializes in providing aviation to governments, such as the United States, UK, Canada, Italy, Germany and others, and international organizations such as NATO, the International Red Cross, the United Nations and USAID. The company is involved in non-combatant operations only, including emergency airlift and evacuation, troop rotations, peacekeeping, delivery of humanitarian assistance, logistical support, and mission-critical fuel supply.

SkyLink flies over 600 worldwide charter operations per year. The countries SkyLink charters to include Iraq, Saudi Arabia, Afghanistan, Lebanon, Kuwait, Somalia, Mozambique, Angola, Rwanda, Western Sahara, Ivory Coast, Sudan (including the Darfur Region),Peru,Cambodia, all the countries ravaged by the Tsunami in 2005, and others.

“When you’re hiring a charter service to move military troops into a disaster recovery or war zone on a moment’s notice, it is obviously an urgent matter,” says Arbib.  “Reliability is a primary thing we look for when we enter into an ACMI arrangement.”

SkyLink has chartered flights of various sizes through over 100 different agencies worldwide, and over the years in the industry Arbib has heard it all: unreliable charters that show up late--or not at all, overbooking, delays, planes pulled out of service with no replacement, not to mention charter carriers folding.

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