In its simplest form, the term leasing means transferring of a property (in our case this would be an aircraft) from the owner to the party buying it. However, the title of the property remains with the owner – known as the Lessor until, at least the maturity of the lease. The person or party buying the property is known as the Lessee.

Now the inevitable question – why an airline would want to lease an aircraft. There are two main reasons for that.

Airlines lease equipment in order to help them expand their operations and open new routes or add additional flights to its schedule.
Not only commercial airlines, but charter operators also at times need more equipment to strengthen their operations, especially during the peak season.

Airline operators usually go for the leasing option to better manage their financial resources.
Most often buying an aircraft is usually not a feasible option. Borrowing to purchase aircraft is also not a cheap option. This is the reason why rent and lease is increasingly popular in the airline industry.

The lessor provides the aircraft and depending on the lease type the aircraft comes with crews, maintenance and insurance as well.

The three main types of aircraft lease are:

A wet lease is an agreement under which the Lessor provides the aircraft inclusive of sufficient crews to operate the schedule of the Lessee, including Maintenance and Insurance, the so called ACMI - Aircraft Maintenance Crew Insurance. As per the agreement, the Lessor will charge for block hours, this means that whether the airplane flies or not the lessee will be responsible for paying the agreed minimum guaranteed block hours.

The Lessee has to bear all expenses for fuel, hotel accommodation, crew ground transport, catering, landing/parking/storage fees, local taxes and any import duties. Other than that, the Lessee has to cover the insurance for passengers and cargo and in some cases the cost of additional war risk in insurance as well.

Under damp lease, the Lessor provides the aircraft to the Lessee only with cockpit crew, purser and again including of the Maintenance and Insurance, but without the remaining cabin crew. Lessee provides his own cabin crew. As in the wet lease, the Lessee has to bear all expenses for fuel, hotel accommodation, crew ground transport, catering, landing/parking/storage fees, local taxes and any import duties. Other than that, the Lessee has to cover the insurance for passengers and cargo and in some cases the cost of additional war risk in insurance as well.

The term dry lease means the lease of an aircraft from a Lessor, usually Banks and Leasing companies are involved in such transactions as Lessor. A dry lease excludes crew, maintenance, insurance, etc. The AOC (air operator’s certificate) must be provided by the Lessee under a dry lease and the Lessee has to register the aircraft. The Lessee pays also a maintenance reserve based per Block Hour and Cycles to the Lessor to cover heavy checks, components, Landing Gear, Engines.

1. Operating lease: the aircraft is usually leased for a period of 1 – 7 years. Lessee pays a fixed monthly rental rate to the Lessor or in some case also on PBH – Power by the Hour basis.

2. Financial lease / Lease Purchase:
Lessee usually pays a down payment to the Lessor followed by fixed monthly rates to the Lessor. In this case the Lessee will become the owner of the aircraft – the asset – at the end of the Lease period.