Eyrix — Blog

Block-hour charter agreements: how ACMI billing actually works

A block-hour charter agreement prices flying by the hour rather than by the flight. The operator supplying the aircraft charges an agreed rate for every block hour flown, and the customer pays for hours, not for departures. It sounds like a billing detail. It isn't — it decides which parts of an operation earn money and which parts only cost it, and that shapes how the fleet has to be planned.

What a block hour actually measures

A block hour is not an hour in the air. Block time runs from the moment the aircraft first moves off the parking position — chocks off — to the moment it comes to a stop at the destination stand and the chocks go back on. Taxi-out, any hold before departure, taxi-in: all of it is inside the block.

Some contracts define the same window as engine start to engine shutdown instead, which produces a slightly different number for the same flight. Neither is more correct; what matters is that the definition is written into the agreement, because the whole invoice is calculated from it. Block time always exceeds airborne time, and the difference is not trivial — a short sector into a congested airport can carry thirty or forty minutes of taxi and hold that is billable to the customer and consumes the same aircraft and crew hours as flying does.

How ACMI agreements bill by the hour

ACMI stands for the four things the supplying operator provides: Aircraft, Crew, Maintenance and Insurance. The customer — usually another airline covering a capacity gap, a seasonal peak, or an AOG — provides the commercial side: it sells the seats, and it pays the variable operating costs the block-hour rate doesn't include. Fuel, airport and handling charges, navigation fees, de-icing and catering are normally the customer's account.

Two mechanics do most of the work in these contracts:

• The block-hour rate. A single price per block hour, per aircraft, covering the four ACMI elements. It's a rate, not a fare, so it doesn't move with how full the aircraft is — a leg flown with forty passengers bills exactly the same as the same leg flown full.
• The minimum guaranteed block hours. The customer commits to a minimum number of block hours per aircraft per month and pays for them whether or not they are flown. This is what makes the arrangement financeable for the operator, whose costs — leases, crew salaries, maintenance reserves — run continuously regardless of utilisation.

Anything flown above the guarantee bills at the agreed rate. Anything below it is paid for anyway. So for the operator, the guarantee sets a floor; for the customer, unflown hours inside the guarantee are money spent on capacity they didn't use.

Why this creates a different planning incentive

A scheduled carrier earns per seat sold against a timetable that is fixed months ahead. The aircraft flies whether or not the last rows fill, and planning is largely about keeping a known pattern running. Block-hour billing inverts that relationship. Revenue is a direct function of hours flown, which makes two things that are ordinarily background inefficiencies into visible, quantifiable losses:

• Idle time is unbilled time. An aircraft sitting between contracts isn't underperforming against a target — it's earning nothing at all that day, against costs that continue.
• Positioning legs consume the asset without producing revenue. A ferry flight to reposition a tail for the next contract burns block hours, crew duty and maintenance life, and none of it appears on an invoice. The same is true of a deadheading crew occupying seats to get somewhere they can legally operate from.

That's why utilisation is not a dashboard metric for an ACMI operator but the business itself, and why the five gaps that quietly erode aircraft utilisation are worth catching at the moment the roster is built rather than in the monthly numbers. Every one of them shows up eventually as block hours that were available and never sold.

Why the billing model makes the planning harder

Charging by the hour doesn't only change what is worth optimising — it changes what a plan has to decide. A scheduled operator's rotations repeat; an ACMI or charter operator rebuilds the plan around each contract, and each rebuild has to answer a commercial question and a feasibility question at the same time: does a legal tail-and-crew rotation exist for this booking, and how many non-revenue block hours does placing it there cost? Accepting a contract that fits the fleet perfectly except for two ferry legs a week is a different proposition from one that closes cleanly, even at an identical rate.

Those two questions can't be answered separately, because the cheapest placement is only cheap if it is also legal — turnaround, maintenance windows, type-ratings and FDP/rest all still bind. That is the structural reason charter and ACMI scheduling is harder than running a fixed timetable: the billing model rewards squeezing revenue hours out of the fleet, while the constraints that decide whether a rotation is possible at all don't relax to make room for it.