Strategic Fleet Management for Airlines: Balancing Sustainability, Profitability, and Policy Implications

Fleet management is a cornerstone of airline operations, influencing long-term profitability, environmental sustainability, and operational efficiency. This paper addresses the complex challenges airlines face in managing diverse fleets, particularly in the context of fluctuating passenger and cargo demands, aging aircraft, and the growing importance of sustainable aviation practices. We develop a mixed-integer stochastic programming model to optimize fleet management decisions, including aircraft purchases, leasing options, and the conversion of passenger aircraft to freighters (P2F). Through extensive numerical experiments and sensitivity analyses, we demonstrate that operating leases offer flexibility in meeting demand while reducing financial risk and enabling airlines to adopt more environmentally friendly policies. In contrast, purchasing and capital leases enhance long-term profitability but increase debt risk. P2F conversions emerge as a viable strategy to reduce future liabilities and accommodate rising cargo demand driven by e-commerce growth, though they may lead to higher emissions for airlines. Our findings provide actionable insights for policymakers, highlighting the need for strategic fleet management that balances financial prudence, operational flexibility, and environmental sustainability. We recommend policy measures such as tax incentives for leasing, streamlined certification for P2F conversions, and subsidies for fleet modernization to support airlines in achieving both economic and environmental goals. This study contributes to the ongoing discourse on sustainable aviation by offering a comprehensive framework for fleet management that aligns with global climate objectives and economic resilience.