When leasing an aircraft from another entity, the one leasing the aircraft is the lessee. The entity providing the aircraft for lease is the lessor. Historically, leasing contracts can become quite complicated, depending on what the lessee's requirements were. Aircraft and FAA regulations are complex. Requirements such as crew, maintenance, fuel and insurance all played into the lease.
Much of aircraft leasing has been streamlined. It is still a complex process, with many choices depending on the needs of the lessee. The aircraft, crew, maintenance and insurance (ACMI) are now commonly included as one element.
There are two basic types of aircraft leases--wet and dry. A "wet lease" is a lease that includes fuel. Generally, a wet lease will include the ACMI. This may or may not include the cabin crew, depending on the size of the aircraft. A "damp lease" is similar to a wet lease. A damp lease often meant "a wet lease without fuel." In either case now, these leases may or may not come with a cabin crew. If the lease does not come with a cabin crew, it must be determined in the lease who will train the cabin crew in safety and emergency procedures (SEP) for that aircraft type.
A "dry lease" is the most basic type of aircraft lease. The lessees in most dry leases are companies. They do not typically come with ACMI and usually begin at two-year terms. There are two types of dry leases--operating leases and financial leases. Operating leases are not usually carried on the company's balance sheet. With a finance lease, the lessee can have the option to purchase the aircraft at the end of the lease. If the payments are more than 90 percent of the market value of the aircraft or 75 percent of the aircraft's usable life, it will also qualify as a financial lease. In either of these cases, the company can carry the aircraft lease on its balance sheet and account for depreciation, insurance, maintenance and other related expenses. In these cases, the lease will look like an aircraft purchase on the company's balance sheet.
Dry leases are primarily for companies that intend to lease the aircraft for two to seven years and eventually own the aircraft. Such companies have the resources and capital to maintain the aircraft as well as hire and train flight crews, cabin crews, maintenance crews, cabin crews and maintenance teams. The company will pay for expenses related to the aircraft, including air traffic control, storage, hangar and fuel expenses.
Individuals, groups and smaller businesses will be more likely to opt for a wet lease with ACMI and a cabin crew attached to the lease. These types of leases typically last a few months up to two years and free the lessee of much of the responsibility that comes with operating an aircraft. The cost benefit can be better because the rate is usually billed in block rates per month.
Careful consideration should be given to the type of aircraft to be leased. The size of the aircraft will determine the fuel consumption, number of crew members required, maintenance costs and storage fees. Carefully balance needs versus luxury to determine what is best. Keep in mind that the longer the lease agreement, the better the lease rates will probably be and the longer you may have to grow into this aircraft.
Prices vary greatly, depending on aircraft type and the actual contract. Do not be afraid to shop with different leasing companies to find the best balance between quality and price. Do not let geography limit the search. Like searching for the best price on anything else, it may be 2,000 miles away. It may have to be shipped or ferried to the local area. This is a long-term agreement that should be carefully considered, so ensure it is done with the right dealer.
