Aircraft leases

Aircraft leases are a number of types of leases used by airlines and

other aircraft operators. Airlines lease aircraft from other airlines or
leasing companies for two main reasons; to operate aircraft without
the financial burden of buying them, and to provide temporary
increase in capacity. The industry has two main leasing types, wet
leasing which is normally used for short term leasing and dry leasing
which is more normal for the longer term leases. The industry also
uses combinations of wet and dry when for example the aircraft is
wet-leased to establish new services then as the airlines flight or cabin
crews become trained they can be switched to a dry lease.

Wet lease
The term wet lease (rental literally "wet", as opposed to dry lease )
refers to a contract of hiring a aircraft including all ancillary services
such as insurance, crew and maintenance (usually defined with the '
acronym ACMI aircraft, complete crew, maintenance, and
insurance).
The wet lease agreement is usually signed between the two airlines:
the lessor to the lessee actually provides a service provided, and not,
as in the case of dry lease , the effective availability of the vehicle, the
lessee in fact acting on behalf of the lessor a number of flights, using
an entirely his own, but classified with the IATA code of the landlord
himself.
The typical use of the wet lease is to ensure the lessor the "coverage"
of its services at particular times, for example in periods with special
traffic peaks or when the aircraft normally used by the lessor are
grounded for maintenance of greater importance.

Another use of the wet lease, though not particularly common, is to

allow carriers included in the so-called blacklist issued by ' the
European Union , which prevents them for safety reasons to operate
in the Union itself, to perform services in Europe.

A wet lease is a leasing arrangement whereby one airline (lessor)

provides an aircraft, complete crew, maintenance, and insurance
(ACMI) to an airline [or other type of business acting as a broker of
air travel] (the lessee), which pays by hours operated. The lessee
provides fuel and covers airport fees, and any other duties, taxes, etc.
The flight uses the flight number of the lessee. A wet lease generally
lasts one month to two years; anything less would be considered an
ad-hoc charter. A wet lease is typically utilized during peak traffic
seasons or annual heavy maintenance checks, or to initiate new
routes.[1] A wet leased aircraft may be used to fly services into
countries where the lessee is banned from operating.[2]
They can also be considered as a form of charter whereby the lessor
provides minimum operating services, including ACMI, and the
lessee provides the balance of services along with flight numbers. In
all other forms of charter, the lessor provides the flight numbers.
Variations of a wet lease include a code share arrangement and a
block seat agreement.
Wet leases are occasionally used for political reasons; for instance,
EgyptAir, an Egyptian government enterprise, cannot fly to Israel
under its own name, as a matter of Egyptian government policy.
Therefore, Egyptian flights from Cairo to Tel Aviv are operated by Air
Sinai, which wet-leases from EgyptAir to get around the political
issue.
In the United Kingdom, a wet lease is when an aircraft is operated
under the Air Operator's Certificate (AOC) of the lessor.[3]
When an air carrier provides less than an entire aircraft crew, the wet
lease occasionally is also sometimes referred to as a damp lease,

especially in the UK. A wet lease without crew is occasionally

referred to as a "moist lease".[1]

Dry lease
A dry lease is a leasing arrangement whereby an aircraft financing
entity, such as GECAS and ILFC (lessor), provides an aircraft without
insurance, crew, ground staff, supporting equipment, maintenance,
etc. Dry lease is typically used by leasing companies and banks,
requiring the lessee to put the aircraft on its own AOC and provide
aircraft registration. A typical dry lease starts from two years onwards
and bears certain conditions with respect to depreciation,
maintenance, insurances, etc., depending also on the geographical
location, political circumstances, etc.
A dry lease arrangement can also be used by a major airline and a
regional operator, in which the regional operator provides flight
crews, maintenance and other operational aspects of the aircraft,
which then may be operated under the major airline's name or some
similar name. This saves the major airline the expense of training
personnel to fly and maintain the aircraft, along with other
considerations. Fedex Express uses an arrangement of this type for its
feeder operations, contracting to companies such as Empire Airlines,
Mountain Air Cargo,Swiftair, and others to operate its single and
twin-engined turbo-prop "feeder" aircraft. DHL has a joint venture in
the United States with Polar Air Cargo, a subsidiary of Atlas Air, to
operate their domestic deliveries.
In the United Kingdom, a dry lease is when an aircraft is operated
under the AOC of the lessee.[3]

The term Dry lease (rental literally "dry", as opposed to wet lease ) is
defined as the form of lease used specifically for the aircraft in which
the vehicle is rented without attachments such as insurance , crew,
ground handling, maintenance.

The dry lease is mainly used by airlines to acquire the long-term

availability of the aircraft, which will be managed by the company
itself like those of property, without taking the heavy financial
commitment made after purchase. The landlord, in this case, it is
almost always a bank or a specialized finance company.
A typical dry lease for a minimum period of two years, requires that
the company holding its own Air Operator Certificate and who are
responsible for the registration of the aircraft. The financial conditions
are studied in order to take account of the depreciation of the vehicle,
of insurance and maintenance and also vary depending on the
geographical location and political situation in which the airline.
In contrast with the dry lease is the so-called wet lease , in which the
aircraft is rented complete with everything required for its operation.

A dry lease is the most common type of lease, an example

being when XYZ Airlines leases an aircraft from a leasing
company or another airline. It involves the use of only the
aircraft. A wet lease involves using not only another party's
aircraft, but also their crews (be it flight or cabin crews) and
usually the fuel and insurance are included in the full cost for
the wet lease. The wet lease is commonly used to supplement
service during busy seasons in one's particular region, or to
used to maintain service levels on routes due to unforeseen
events (crew shortages, training issues, replacement a/c
deliveries late or deferred). Many airlines' cargo flights are not
even flown by the airline themselves or even their a/c. Atlas Air
is one of the big wet-lease operators when it comes to cargo.
They fly cargo flights for British Airways, Alitalia, Qantas, China
Airlines, and many others. One of the big names in wet-leasing
for passenger flights is Air Atlanta Icelandic, whose plain white

airplanes are commonly seen plying routes for many European

airlines. World Airways is also another well-known name in wetleasing. Some of their a/c are wet-leased by the same airlines
so much that the aircraft retains the paint scheme of the
airlines that wet-lease them.

Reasons for Wet Leasing

In the aviation industry it is fairly common to hear about
Aircraft Wet Leasing; Aircraft wet lease is a common term also
known as ACMI lease; which includes the Aircraft, Crew,
Maintenance and Insurance. It is a bit like renting a car with a
driver instead of buying a car. An Aircraft Wet Lease should be
considered as a turnkey solution and is mostly used for short
term time periods. In this article we will review why airlines
would go for a wet lease rather than purchasing or dry leasing
an aircraft.

Seasonal
Demand
One of the most common reasons for Wet Leasing an
aircraft is related to the seasonal demand. Many charter
operators and sometimes the national airlines as well will
have to cope with a degree of seasonality; for example,
during the summer season these operators will have a lot
more passengers to transport and in such cases they will
generally wet lease an aircraft for a period of 6 months to
cover the increase in demand.

New
Route
Trials
Start up operators and existing operators are not always
sure about the commercial viability of certain routes they
want to fly, for this reason it is often prudent to first enter

into an aircraft wet lease contract and take the aircraft on

wet lease basis rather than committing to a purchase or a
dry lease. At the end of the wet lease period, the operator
can then decide based on the results whether the new
route is a success.

Out
of
Gauge

Long
Term
Outsourcing
Another very good reason for wet leasing rather than
purchasing would be when an airline is required to operate
a route or a project that is apart from their main business
activity; for example a passenger airline that wants to
cover some small cargo routes but dont want to invest in
buying new aircraft for this and taking on board new
pilots, may opt to outsource the aircraft and crew in form
of an Aircraft Wet Lease contract. Although Wet Leasing is
not always the most cost efficient solution, in this
scenario, it may be that wet leasing turns out to be
cheaper than hiring and getting everything into place on
purchase or dry lease basis.

AOG
Finally, a typical reason for taking an aircraft on wet lease
would be during AOG situations (Aircraft on Ground). In
these scenarios airliners will sub-contract an aircraft from
another airline and since they will already have all traffic
rights in place for the route they want to operate, it makes
more sense to just Wet Lease the aircraft.

LATEST NEWS:
DRY LEASE

Air India finds no takers for dry

lease of Boeing 777
Mail Today Bureau
10, 2012 | 00:00 IST

New Delhi Last Updated: September

Tags: Air India | Boeing | Boeing 777 | Dreamliner | Air India

debt | Air India restructuring
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Air India (AI), the cash-strapped national carrier, is not finding

potential customers to dry-lease its five wide-bodied Boeing 777-200
LR (Long Range) for six to 10 years despite having floated tenders at
least thrice.
Industry sources say that poor seat configuration of these planes
besides slowing demand and global meltdown are the reasons for the

dull response. The eight 777-200 LRs with AI are 235-seaters, against
the usual industry norm of 290-300 seats.
However, the carrier's officials are hopeful that a deal will be struck
this time.
"We still have two more weeks to go. Generally, customers apply for
tender at the very last moment," said a senior Air India official on
Sunday.
The idea behind the plane seating configuration was to operate the
aircraft on ultra long-haul routes like Chicago, New York and Toronto
on premium fares, but that did not materialise, sources said. This
forced the airline to deploy them on medium haul sectors such as
Hong Kong, Shanghai and London rendering the aircraft operations
economically unviable.
AI had almost got into an agreement with Air Canada to lease these
planes but the deal fell through at the last minute due to the seating
configuration, sources added.
There are many carriers like Kingfisher Airlines, which have been
forced to give away its 34 aircraft to lessors as it has failed to pay Rs
1,000 crore as yearly rent. "There are hundreds of other aircraft that
are lying idle. It is not easy for Air India to lease their planes," said an
airline official.
AI had acquired the 777s as part of its 67 aircraft order from Boeing
in 2005. At present, it has 20 777s, of which eight are 777-200 LRs
while the rest are 777-300 extended range planes.
AI decided to do away with the Boeing 777 by leasing them as soon
as it got an indication about the delivery of Dreamliners early this

year.
The first dry-lease tender was floated on January 2.
Since January, the airline has been trying to do away with these
aircraft following the decision to operate the 787 Dreamliners in their
place.