Wet Lease in Aviation: case Study of an Airline: Finnair

Abstract

The objective of this thesis is to study wet leasing in the aviation industry. Furthermore, to understand why airlines utilize it and how does it affect airlines´ performance. Wet leasing, also referred to as ACMI-leasing, means a leasing agreement between two operators, which comprises of everything needed for operations: aircraft, crew, maintenance, and insurance. The author decided to conduct a case study by studying a single airline, Finnair. Finnair has been forced to renew their strategy during the past years due to the impacts of the Covid-19 pandemic and the war in Ukraine. The crises caused major flight cancellations and therefore an overcapacity in Finnair´s resources. This drove them to offer wet lease services for multiple airlines. Additionally, prior to the crises they had already been using wet lease services as a lessee themselves. Thus, Finnair as a subject would provide diverse viewpoints for the study. The goal of the study is to understand wet leasing in general and its effects to airlines´ economy, operational efficiency, and employee experience. Also, the study tries to predict the future of wet leasing within the industry.

The aviation industry is complex due to its characteristics. Cyclicity greatly impacts the seasonal demand, and the industry is very vulnerable for global disruptions. The pandemic brought almost the whole industry to a standstill, which caused major damage to airlines´ businesses. Now it seems that the turbulence is over and the industrial performance indicators are ascending again. The future of the industry however is driven by sustainability. To improve their overall performance, airlines could use wet leasing. It is a great way to bring the resources of two operators into equilibrium. Also, as wet lease operators can provide resources on a short notice, it could solve capacity issues caused by sudden disruptions. However, using wet lease services is expensive and regulated, therefore it should be utilized thoughtfully.

Data was collected by arranging and analyzing interviews with industrial experts and employees. Supporting material was gathered from industrial publications. Additionally, Flightradar24´s data was utilized to study the fleet usage of Finnair.

The study revealed that wet leases managed to create revenue and work in Finnair at a time when they had idle resources. Also, it positively affected their operational efficiency as the aircraft would have otherwise stayed grounded. In the long run, wet leasing capacity out however conflicts with the company’s strategy and therefore will not be performed in the future. On an industrywide level wet leasing will probably become more popular, as it is a useful tool for counteracting the negative effects of the characteristics of the industry.