Leasing can seem like an interesting prospect to do with your aircraft when you aren’t flying it that much and aren’t really interested in selling at the moment. But as with all things aviation related, nothing is as simple as it seems.
There are three main types of leases:
The first and most common is a Dry Lease. This is a lease that basically gives the lessee the right to use the aircraft and nothing else. Your monthly payment does not cover fuel, crew, maintenance or anything else. A Dry Lease is commonly used by financial institutions as a structure to offer finance on the aircraft, but can also be used as a lease between two entities. Often, dry leases have longer term structures of a year or more.
As an opposite of a Dry Lease, there is a Wet Lease which is a lease that includes fuel, pilots, maintenance, and insurance. In effect, the ‘all in’ price of the aircraft on a pro-rata basis. These are, in essence, a charter flight. A Wet Lease can be very tricky as most of the aviation authorities will deem this a charter and not a lease, and as such, the aircraft should be operated under an AOC. If it is not operated by a charter operator, heavy penalties can occur to the aircraft owner.
The last type of lease is called ACMI. This acronym stands for Aircraft, Crew, Maintenance, and Insurance, and the lease payment covers those items. These are rare with private aircraft, but sometimes occur when an operator needs to use another operator’s aircraft on a short term basis.
So should you lease your jet? When we are asked this question, our number one piece of advice is to look very carefully at the terms of the lease. A lease sometimes, but rarely, benefits the owner. Often, the lessee will want to change the register of the aircraft. This will subject you to the laws in that country with regards to securing your legal interest in your aircraft. Many times the rules are extremely different on a foreign register than on your own. This makes it difficult to repossess your aircraft in the scenario that the lessee stops paying the monthly fee. Another effect of leasing is the hours added to your aircraft. The higher time accrued during a lease will reduce the value of your aircraft at an increasing rate, while only earning a set fixed monthly fee for you as an owner. Above and more superficially than these, is the wear and tear on your aircraft’s interior – a factor which is rarely accounted for in lease rates.
With this said, leasing can sometimes work, but it is a case by case scenario. You have to read the lease terms judiciously to ensure your interest is protected. Also, it is important to see if your loan (if you have one against your aircraft) even allows for a lease. Often times this is not the case. Your aircraft broker should be able to advise and assist you with any lease questions or concerns if you choose to look into this as an option.
Blogs are written from real world experience by Colibri Aircraft’s individuals. If you have any questions or comments about the topic of this blog, please feel free to contact us at enquiries@colibriaircraft.com
