The conditions of the pandemic rocked aviation trends from top to bottom. While the situation has been devastating for some airlines, other carriers have taken advantage. One of the models that have emerged that have been beneficial for some operators is the rise of Power by the Hour (PBH) agreements. Namely, these agreements help new low-cost carriers to jump more effectively into the new era.

PLAY and flypop both have between preparing for their launches in a post-pandemic world, but how have they been able to adapt over time? Photo: PLAY

Six decades in the making

The term Power by the Hour in industrial terms dates back to the 1960s, when Rolls-Royce began leasing engines by the hour from carriers. Overall, today the phrase refers to users who only pay for their products when they’re in action.

Demand for aircraft has fluctuated widely over the past year, with thousands of aircraft immobilized, returned, canceled and withdrawn. So, with this changing environment, donors and airlines have sought to agree on conditions more suited to the new world. Overall, given that it is difficult to manage passenger activity, airlines must find a way to hold back planes against a backdrop of low or no return on ticket sales.

IBA Aero notes that a PBH lease may offer a viable short-term solution for the lessor and the airline. Lessors can avoid the costs of storing and taking back unused aircraft, while carriers simply need to cover the costs of maintenance, insurance and day-to-day storage. It is important to note that airlines avoid leasing the actual aircraft, shifting this factor from a fixed cost to a variable cost.

In particular, emerging airlines have succeeded in confirming the exact price of the plane they want at an attractive price. If they wait until demand increases again to sign a deal, they may have to pay a much higher rate. This aspect gives the operator the freedom to take his time to plan his launch.

Silhouette of a departing plane during sunset
Hourly power is not a new phenomenon, but there has been a noticeable resurgence. Photo: Getty Images

All about timing

The company can experiment with different areas before concluding on what works for them. Speaking exclusively to Simple Flying during our recent webinar, flypop CEO Nino Singh Judge highlighted just how integral PBH has been to his airline as it prepares for its launch.

“The number one factor is being able to lock down four planes – Power by the Hour – and being fully prepared to travel as a passenger when the market is there. freight is in high demand. So the plane will be used. We will start doing freight and be fully ready to become passengers “, The judge told Simple Flying.

“Really, it’s our choice to do what we want. We have the luxury of waiting because we have blocked all of these trades at the bottom of the market and not at the top of the market. And that’s the critical factor in a startup during a pandemic. You have cheap capital, cheap planes, cheap crew. Now is the perfect time to start an airline.

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flypop is preparing to launch flights to India’s second largest cities from the UK with its Airbus A330s. The airline is keen to fill the large body with members of the prominent Indian diaspora in the UK and transport them to airports across India.

However, with India’s travel restrictions still in place after more than a year and the country currently on the UK’s red list for travel, the carrier has had to postpone its debut. Thus, PBH has helped it control costs while conditions remain volatile.

Flypop Airplane
flypop has identified underserved market segments between UK and India that could be easily supported with the Airbus A330. Photo: PLAY

Master the costs

The benefits of PBH spill over into airline operations. Ultimately, passengers will feel the impact as these carriers will be very precise with their schedules while still being able to offer low fares due to the saved costs.

Like the flypop, London Stansted figures prominently in the operations of the Icelandic outfit. During the same webinar, PLAY CEO Birgir Jonsson shared details of this process.

PLAY Airplane
PLAY made its maiden flight on June 24 when its A321neo landed at London Stansted from Icelandic Keflavik Airport. Photo: PLAY

The airline’s A321neos will be well deployed across Europe before expanding to the east coast of the United States. Without a doubt, it had to tread carefully before its recent launch to make sure the price was right.

“It’s all about the price. We have to offer the best price. And to be able to offer the best price, you have to have the lowest cost. And we are very sure that we have an extremely competitive cost base. And we have a lot of flexibility to, especially now, at the start of our operation, essentially control the way we put our supply on the market based on negotiations or Power by the Hour conditions ”, Jonsson added.

“So we can basically go into that market and focus on the best times of the week, the best start days. And that together, with a lower cost base, we are confident it will work. “

A temporary solution

Nonetheless, PBH deals are generally not long term. However, they are helping carriers take off, especially during times of market transition like now.

Boeing 737 Jet Silhouette
Several wide-body and narrow-body jets are the subject of Power by the Hour agreements, opening up many exciting opportunities in the aviation industry. Photo: Getty Images

Although dating back more than half a century, this approach has seen an influential return in aviation. Overall, it’s times like these that getting back to basics is best for business.

What do you think of this Power by the Hour approach to which some airlines around the world adhere? Do you think it will be crucial in helping low-cost airlines in the new climate? Let us know what you think of these new airlines and their outlook in the comments section.

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