ASG comments on WOLF fundraise, the ACMI market and SmartLynx Latvia’s restructuring

Responding to Ishka, Avia Solutions Group (ASG) addresses the sale and recent restructuring of its former subsidiary SmartLynx Latvia (see Insight). The firm also commented on the ACMI market and answered questions about the firm’s new Dublin-based leasing platform, Waypoint Operating Lease Finance (WOLF), which is currently in the market for a $500 million capital raise (see Insight). An ASG spokesperson replied to Ishka’s questions.

Ishka: There are several questions around the SmartLynx Latvia restructuring, and the timing of the creation of a Dutch foundation just days before the sale was conducted. Does ASG control, or have entities that are linked, or have employed the beneficial ownership of the Dutch Foundation? 

Avia Solutions Group has no control, beneficial ownership or management involvement with the Dutch fund. SmartLynx Latvia management and the Dutch fund independently created their structure to acquire the business. Their offer was accepted by the Group, and the sale was conducted entirely in accordance with Latvian and EU law. The Group’s involvement in SmartLynx Latvia ceased on 23^rd October [2025] when the sale was concluded. All subsequent decisions have been managed entirely by the new ownership.

Ishka understands that WOLF will be managing ASG’s direct Boeing orderbook. Investors potentially looking at the WOLF capital raise will likely have some questions about one of the airlines in the group being sold and then immediately restructured. Can you provide some colour as to what happened to SmartLynx Latvia and whether any of the group’s other AOCs could also be at risk of restructuring? Is WOLF, as a leasing platform, a captive lessor or is it expected to acquire other leased aircraft external to the ASG Group.  

The decision to sell SmartLynx Latvia was taken in part due to a changing market, particularly e-commerce air cargo volumes declining unexpectedly due to tariffs and other macro-economic factors. In light of these factors, the Group and the airline’s management agreed that a transfer to a management-led structure would best position SmartLynx Latvia for a sustainable future.

It is also part of a wider strategic transition in Europe whereby the Group is consolidating its AOCs as part of the group’s ongoing efforts to enhance efficiency across the Group’s European AOC network. The Group currently owns European AOCs in the UK, Turkey, Malta, Slovakia and Lithuania, which, except for the Turkish AOC, offer almost equal traffic rights and operational benefits. Importantly there are no further restructurings planned.

WOLF is not a captive lessor. As an aviation asset investment management company, the expectation is that its primary focus will be on placing aircraft in its portfolio with airlines that are not affiliated with Avia Solutions Group while maintaining the flexibility to place aircraft with the Group’s ACMI operators as needed. WOLF will also be able to access the Group’s MRO network on a preferential basis, which is a key USP of the company as it means it will be able to minimise any time an asset spends off lease. WOLF will manage our Boeing orderbook, with the expectation that some of these aircraft will be operated by Avia Solutions Group, but, naturally given the supply issues around new aircraft in recent years, we also expect a good proportion of lessees of these aircraft to be non-Group affiliated carriers.

The Ishka View is that the ACMI model has been incredibly profitable in the last few years but we are seeing some signs of softening in terms of airline demand across some parts of the US and Europe. Do you see ACMI demand moderating or not across Europe in the next 12 months? 

This is why we have developed our counter-cyclical model of moving capacity to the Southern hemisphere during European winter. Our focus is expanding into Asia-Pacific and Latin America as we estimate that serving these markets will create a counter-cyclical market roughly equal to Europe’s (1.1 billion passengers).

By the end of 2025, Avia Solutions Group plans to have established or be in the process of establishing AOCs in Australia, Brazil, Indonesia, Malaysia, and Thailand. The Group’s consolidated European AOCs will also allow for more flexibility to provide all ACMI services in Argentina, Chile, Mexico, India, Vietnam, Colombia, Canada, and international routes only in the USA.

At a broader level, we are bullish on demand for ACMI globally continuing to be strong, even if demand in some markets softens slightly from recent peaks. The key point is that while it is true that the lack of new aircraft has bolstered the ACMI market recently, the future of ACMI will be being used by airlines as a way of being able to meet peaks in demand through operational expenditure rather than simply long-term capital expenditure, as is the case with ownership or dry leasing. 

Our estimate is that if an airline uses ACMI for no more than 10% of their fleet during peak demand (three to six months), they can increase profitability by 2% to 3%. Serving this global market will require economies of scale and the ability to operate worldwide, of which the Group is currently the only firm able to do. Independent consultants have valued this potential market at $30bn a year with a demand for over 1,500 aircraft.

Many thanks for answering our questions.
 

The Ishka View

It is too early to tell how the SmartLynx Latvia restructuring will play out. Ishka previously highlighted why the Dutch ‘stichting’ structure could offer the ACMI provider some breathing room as it undergoes a Latvian court restructuring. ASG points out that its involvement in SmartLynx Latvia ceased when the sale was concluded. This is true from an operational standpoint. However, as Ishka has already highlighted, ASG is by far the largest creditor and will therefore likely play a significant role in the ultimate restructuring of SmartLynx Latvia.

 

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