Different Types of Aircraft Leasing
While you may have thought leasing was limited to automobiles, homes, and businesses, you may be surprised to find out that aircraft leasing has a long history that dates back to the 1970s. According to Boeing’s 2019 Current Aircraft Finance Market Outlook, aircraft leasing accounts for 40% of in-service commercial aviation ownership. With the rise of more leasing companies, there has been a drive for diversification, leading to innovative solutions that are creating new levels of value for commercial airliners and others.
Aircraft leasing saves operators and prospective pilots money by avoiding the need to purchase costly assets. As aviation leasing markets continue to grow and mature, airlines are leaning on leasing as more than just an immediate reduction of CapEx (Capital Expenditure). When airlines choose to lease, they can rapidly increase or decrease the size of their fleet without their expensive assets staying grounded for long periods of time.
When compared with buying an aircraft, leasing expedites the process of getting your aircraft in the air and generating profit. More than that, leasing also provides airlines with the flexibility of short-term commitments, opening the door for further cost-savings where capacity matches traveler demand. Furthermore, innovative leasing models are connecting customers with customized solutions tailored to each business’ unique needs. Before making the leap to leasing, there are a few predominant models to consider, those of which include wet leasing, dry leasing, and leasebacks.
Different Types of Aircraft Leasing
Each leasing model features its own regulatory requirements and obligations; thus, choosing an option depends on your business’ needs. Due to the fact that the Federal Aviation Administration (FAA) assesses each agreement, it is paramount to consider all aspects of a leasing arrangement before making a decision.
Dry Lease
Dry leasing consists of owners providing aircraft to the lessee without a crew. With this model, neither party needs to have an air carrier certificate as long as the aircraft will not carry people or property for compensation or hire. That being said, the lessee has the legal responsibility and operational control under this lease type.
Wet Lease
In a wet lease, the owner not only supplies the aircraft but offers the services of at least one crew member, as per the FAA. Under this arrangement, the owner assumes operational responsibility, meaning that they must perform maintenance, procure insurance, and more.
Leaseback
With a leaseback model, the aircraft owner generally sells the aircraft to the lender or lessor, both of which immediately lease the aircraft back to the original owner. This arrangement works best for companies that wish to free up capital resources without interrupting their aircraft operations.
Choosing the Right Provider
To ensure you make the best decision for your business and operational requirements, you must choose a provider with transparent terms and proven expertise. In 2002, there were less than 100 aircraft leasing companies around the globe, two of which controlled more than 40% of the market share. By 2019, there were more than 150 providers, with the top two holding about 20% of the market share. With so many options, your considerations should include robust legal expertise, financial stability, customized approaches, integrated MRO, and more.
Conclusion
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