Aircraft lease

Aircraft leases are 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 longer-term leases. The industry also uses combinations of wet and dry. For example, when the aircraft is wet-leased to establish new services, then as the airline's flight or cabin crews become trained, they can be switched to a dry lease.


Operating leases of jet airliner accounted for less than 2% of the fleet in 1976, then 15% in the early 1990s, 25% in 2000 and 40% in 2017, with lessors involved in 62% of second hand mid-life aircraft transactions since 2000: 42% in Europe and 29% in North America.[1] In 2015, over $120b of commercial aircraft were delivered worldwide and half of the global lessors were based in Ireland.[2]

Having an aggressive growth mandate, more aggressive, smaller entrants, have overpaid for many of their assets in the sale and leaseback market then undercharged on lease rates in order to win the campaigns, with lower maintenance reserves and return conditions : lease-rate factors have fallen to 0.6% per month (7.2% per year), even reaching 0.55% (6.6% per year).[3] Despite Air Berlin and Monarch Airlines bankruptcies, their leased aircraft have been rapidly placed at "normal market rates" due to traffic growth as global revenue passenger kilometers are up by 7.7% over one year through September 2017, and Airbus struggles to deliver A320neos due to engine supply delays.[4]

In 2007, Beijing allowed Chinese banks to start leasing units, and nine Chinese lessors were part of the 50 largest in 2017, led by ICBC leasing in the top ten, having the value of their managed fleet grew by 15% since 2016.[5] In a few cases, Chinese lessors forgot they had to get secondary leases and missed the redelivery timing, stranding aircraft for a few months.[6]

Rentals are often anchored to LIBOR rates. A320neo and B737 MAX 8 lease rates are $20-30,000 higher than their predecessors: by 2018, a B737-8 can be leased for slightly more than $385,000 per month and a 12 year term with a good credit can be lower than $370,000 per month for an A320neo (0.74% of its around $49 million capital cost), generating $53 million of revenue and over $8.5 million in an end of lease compensation for maintenance, while still being worth $20 million.[7]

Airlines which cannot afford a good deal on factory direct aircraft or carriers who prefer to maintain flexibility can lease their aircraft with an operating lease or a finance lease.

Wet lease

A wet lease is a leasing arrangement whereby one airline (the lessor) provides an aircraft, complete crew, maintenance, and insurance (ACMI) to another 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 1–24 months; a shorter duration 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.[8] A wet-leased aircraft may be used to fly services into countries where the lessee is banned from operating.[9]

They can also be considered 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.[10]

Dry lease

A dry lease is a leasing arrangement whereby an aircraft financing entity (lessor), such as GECAS or AerCap, provides an aircraft without crew, ground staff etc. Dry lease is typically used by leasing companies and banks, requiring the lessee to put the aircraft on its own air operator's certificate (AOC) and provide aircraft registration. A typical dry lease lasts upwards of two years 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 made between a major airline and a regional airline, in which the major airline provides the aircraft and 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. A dry lease saves the major airline the expense of training personnel to fly and maintain the aircraft, along with other considerations (such as staggered union contracts, regional airport staffing, etc.). 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 in the US. DHL has a joint venture in the United States with Polar Air Cargo, a subsidiary of Atlas Air, to operate their domestic deliveries.


At the end of July 2015, the top 50 aircraft lessors managed 8,184 aircraft : 511 turboprop regional airliners, 792 regional jets, 5,612 narrowbody and 1,253 widebody airliners.[11] In 2017, the 150 lessors are managing 8,400 aircraft worth $256 billion with 2,321 aircraft on backlog from 28 of them, their penetration having stabilised at 42.6%.[12] Aircraft lessors are often banks, hedge funds or financial institutions.

Aircraft financing is a $140-billion a year industry, dominated by Ireland due to the rise and collapse in 1992 of pioneer Guinness Peat Aviation (GPA), of which the former executives manage the largest lessors: Aengus Kelly is the CEO of AerCap, the world’s largest, Domhnal Slattery heads the third largest, Avolon, and Peter Barrett runs the fourth, SMBC Aviation Capital while the second largest, GECAS, formed from the hulk of GPA.[13]

2017 Top 20 operating lessors by Fleet & Backlog,[12] number of aircraft in 2015[11]
RankOperating LessorFleetBacklogValue
3Air Lease Corporation27135713,1209251182716244
4SMBC Aviation Capital (ex RBS)44520013,7966393-73788
5BOC Aviation28517612,65310256-1620436
7BBAM (incl NBB & FLY Leasing)39015,2843413-235754
8Aviation Capital Group2501325,3974273--2649
9ICBC Leasing Co2774512,48816173-1313129
11Macquarie AirFinance202404,72613176-416012
12CDB Aviation Lease Finance151495,56926120-206832
13Aircastle Limited1924,93814141-57759
15Boeing Capital Corp1741,36911
16China Aircraft Leasing Limited901384,2786347--434
17ORIX Aviation1673,99115148-213214
18Standard Chartered Aviation120104,07718
19Jackson Square Aviation1174,68125110--9713
20BoCom Leasing1144,3288149--3811

Lessors have a preference for narrowbodies over widebodies due to more remarketing opportunities and the substantial reconfiguration time and cost. Reconfiguring an A330-300 can attain $7 million and even more for a B777-300ER or an A380: introducing IFE - $1.5 million ($5,000 per seat), replacing business seats - $1.5 million ($30,000 each), replacing economy seats - $1 million ($5,000 each), a new lavatory or galley - $100,000, moving a monument - $35,000, class dividers - $50,000, passenger service units - $9,000 per passenger, sidewall panels - $6,000 each, updating the IFE database - $125,000, repainting the aircraft - $100,000, engineering costs - $100,000.[14]

United Kingdom

In the United Kingdom, a wet lease is when an aircraft is operated under the air operator's certificate (AOC) of the lessor.[15] An arrangement where the lessor provides the aircraft, flight crew and maintenance but the lessee provides the cabin crew is sometimes referred to as a "damp lease", a term especially used in the UK. It is also occasionally referred to as a "moist lease".[8] In the United Kingdom, a dry lease is when an aircraft is operated under the AOC of the lessee.[15]


  1. "Mid-life aircraft trading patterns and the impact of lessors". Flightglobal. 7 March 2017.
  2. "Ireland to play important role as aviation leasing sector faces challenging year". Irish Examiner. January 27, 2016.
  3. jamie Bullen (1 Sep 2017). "Undisciplined lessors create a race to the bottom". Flightglobal.
  4. Sean Broderick (Nov 13, 2017). "Narrowbody Nirvana Traffic". Aviation Week Network. Airbus troubles helping single-aisle demand surge.
  5. Ellis Taylor (13 June 2018). "Chinese lessors continue on growth trajectory". Flightglobal.
  6. Henry Canaday (Jul 30, 2018). "Asset Management In China Grows Up". Aviation Week Network.
  7. "A320neo and B737-8 Lease Rentals Remain Below Expectations". Aircraft Value News. August 20, 2018.
  8. 1 2 "Aircraft Leasing: ACMI, Dry / Wet Lease Definition".
  9. "EU Ban list" (PDF). Archived from the original (PDF) on 2011-04-30.
  10. Yoav Zitun (2011-03-23). "Egypt Air removes Israel from map". Ynetnews.
  11. 1 2 "The Leasing Top 50 2015" (PDF). AirFinance Journal. 1 November 2015.
  12. 1 2 "Commercial operating leasing market dynamic". V1ewpoint (55). Flight Ascend Consultancy. Spring 2017. pp. 4–7.
  13. Tim Hepher, Conor Humphries (Jan 26, 2018). "Global air finance titans ponder whether boom will ever end". Reuters.
  14. Aircraft Value News (March 19, 2018). "Lessors Seek to Minimize Widebody Reconfiguration Costs".
  15. 1 2 UK Civil Aviation Authority – Aircraft Leasing

Further reading

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