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Wet lease

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{{short description|Lease of aircraft by airlines}}
{{Update|part=All but esp the table of lessors|reason=Out of date, due to mergers, etc. In particular, #1 and #2 merged.|date=September 2023}}
'''Aircraft leases''' are [[lease]]s used by [[airline]]s 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, as well as 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. In some markets, there may also be hybrid models, such as with crew provided by lessees.

== Market ==
[[Operating lease]]s 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.<ref>{{cite news |url= https://www.flightglobal.com/news/articles/insight-from-flightglobal-mid-life-aircraft-trading-434739/ |title= Mid-life aircraft trading patterns and the impact of lessors |work= Flightglobal |date= 7 March 2017}}</ref>
In 2015, over $120 billion worth of commercial aircraft were delivered worldwide and half of the global lessors were based in [[Ireland]].<ref>{{Cite news |title= Ireland to play important role as aviation leasing sector faces challenging year |url = http://www.irishexaminer.com/business/features/ireland-to-play-important-role-asaviation-leasing-sector-faces-challenging-year-378323.html |work= Irish Examiner |date= January 27, 2016}}</ref>

Having an aggressive growth mandate, more aggressive, smaller entrants have overpaid for many of their assets in the sale and leaseback market and are then undercharged on lease rates in order to win the business, with lower maintenance reserves and return conditions: lease-rate factors have fallen to 0.6% per month ({{#expr:0.6*12}}% per year), even reaching 0.55% ({{#expr:0.55*12}}% per year).<ref>{{cite news |url= https://www.flightglobal.com/news/articles/opinion-undisciplined-lessors-create-a-race-to-the-440742/ |title= Undisciplined lessors create a race to the bottom |date= 1 Sep 2017 |author= jamie Bullen |work= Flightglobal}}</ref>

Despite [[Air Berlin]] and [[Monarch Airlines]] bankruptcies, their leased aircraft have been rapidly placed at "normal market rates" due to traffic growth as global [[Available seat miles|revenue passenger kilometers]] are up by 7.7% over one year through September 2017, and [[Airbus]] struggles to deliver [[A320neo]]s due to engine supply delays.<ref>{{cite news |url= http://www.mro-network.com/leasing-financial-services/narrowbody-nirvana |title= Narrowbody Nirvana Traffic |at= Airbus troubles helping single-aisle demand surge |author= Sean Broderick |date= Nov 13, 2017 |work= Aviation Week Network }}</ref>

In 2007, [[Government of China|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.<ref>{{cite news |url= https://www.flightglobal.com/news/articles/analysis-chinese-lessors-continue-on-growth-traject-449374/ |title= Chinese lessors continue on growth trajectory |date= 13 June 2018 |author= Ellis Taylor |work= Flightglobal}}</ref> In a few cases, Chinese lessors forgot they had to get secondary leases and missed the redelivery timing, stranding aircraft for a few months.<ref>{{cite news |url= http://aviationweek.com/asset-utilization/asset-management-china-grows |title= Asset Management In China Grows Up |date= Jul 30, 2018 |author= Henry Canaday |work= Aviation Week Network}}</ref>

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 [[aircraft maintenance|maintenance]], while still being worth $20 million.<ref name=AVN20aug2018>{{cite news |url= http://www.aircraftvaluenews.com/a320neo-and-b737-8-lease-rentals-remain-below-expectations/  |title= A320neo and B737-8 Lease Rentals Remain Below Expectations |work= Aircraft Value News |date= August 20, 2018}}</ref>

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]].

==Lease types==
===Wet lease===
A wet lease is a leasing arrangement whereby one [[airline]] (the [[lease|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 wet lease is typically utilized during peak traffic seasons or annual [[Aircraft maintenance checks|heavy maintenance checks]], or to initiate new routes.<ref name="leasedef">{{cite web |url= http://www.globalplanesearch.com/view/aircraft/aircraft-leasing-def.htm |title= Aircraft Leasing: ACMI, Dry / Wet Lease Definition |access-date= 2007-06-12 |archive-url= https://archive.today/20121211063637/http://www.globalplanesearch.com/view/aircraft/aircraft-leasing-def.htm |archive-date= 2012-12-11 |url-status= dead }}</ref> A wet-leased aircraft may be used to fly services into countries where the lessee is banned from operating.<ref name="euban">{{cite web |url=http://ec.europa.eu/transport/air-ban/doc/list_en.pdf |archive-url=https://web.archive.org/web/20110430124922/http://ec.europa.eu/transport/air-ban/doc/list_en.pdf |archive-date=2011-04-30 |title=EU Ban list}}</ref> It can also be used to replace unavailable capacity or to circumvent regulatory or political restrictions.

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, a [[block seat]] agreement, and a capacity purchase agreement.

Wet leases are occasionally used for political reasons. For instance, [[EgyptAir]], an Egyptian government enterprise, for many years was not allowed to fly to [[Israel]] under its own name, as a matter of [[Egypt]]ian government policy. Hence Egyptian civilian flights from [[Cairo]] to [[Tel Aviv]], required to exist under the terms of the [[Egypt–Israel peace treaty]] of 1979, were operated by [[Air Sinai]], which wet-leased from EgyptAir to circumvent the political issue.<ref>{{cite news |author= Yoav Zitun |url= http://www.ynetnews.com/articles/0,7340,L-4046460,00.html |title= Egypt Air removes Israel from map |work= [[Ynetnews]] |date= 2011-03-23}}</ref> In 2021, Egypt changed its policy and EgyptAir started operating flights to Israel under its own banner.<ref>{{cite news |title=First 'Egyptair' flight lands in Israel |url=https://english.alarabiya.net/News/middle-east/2021/10/03/First-Egyptair-flight-lands-in-Israel |access-date=21 October 2021 |work=Al Arabiya English |date=3 October 2021 |language=en}}</ref><ref>{{cite news |last1=Villamizar |first1=Helwing |title=First Official EgyptAir Flight Lands in Israel |url=https://airwaysmag.com/airlines/first-official-egyptair-flight-israel/?amp |access-date=21 October 2021 |work=Airways Magazine |date=3 October 2021 |archive-date=21 October 2021 |archive-url=https://web.archive.org/web/20211021135946/https://airwaysmag.com/airlines/first-official-egyptair-flight-israel/?amp |url-status=dead }}</ref><ref>{{cite news |title=First official EgyptAir flight lands at Israel airport |url=https://markets.businessinsider.com/news/stocks/first-official-egyptair-flight-lands-at-israel-airport-10588515 |access-date=21 October 2021 |work=markets.businessinsider.com |date=3 October 2021 |language=en |archive-date=24 October 2021 |archive-url=https://web.archive.org/web/20211024013601/https://markets.businessinsider.com/news/stocks/first-official-egyptair-flight-lands-at-israel-airport-10588515 |url-status=dead }}</ref>

The global wet lease market is projected to grow from US$7.35 billion in 2019 to US$10.9 billion in 2029, a compound annual growth rate ([[CAGR]]) of 4.1%.{{cn|date=March 2025}}

===Dry lease===
A dry lease is a leasing arrangement whereby an aircraft financing entity (lessor), such as [[AerCap]] or [[Air Lease Corporation]], 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 [[World's largest airlines|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 Aviation|DHL]] has a joint venture in the United States with [[Polar Air Cargo]], a subsidiary of [[Atlas Air]], to operate their domestic deliveries.

===UK usage and damp leases===

In the United Kingdom, a wet lease refers to an aircraft lease in which the aircraft is operated under the [[air operator's certificate]] (AOC) of the lessor.<ref name="caa.co.uk">[http://www.caa.co.uk/default.aspx?catid=1434&pagetype=90 UK Civil Aviation Authority – Aircraft Leasing]</ref> 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 [[United Kingdom|UK]]; it is also occasionally referred to as a "moist lease".<ref name="leasedef" /> In the UK, a dry lease is when an aircraft is operated under the AOC of the lessee.<ref name="caa.co.uk"/>

== Lessors ==

At the end of July 2015, the top 50 aircraft lessors managed 8,184 aircraft: 511 turboprop [[regional airliner]]s, 792 [[regional jet]]s, 5,612 [[narrowbody]] and 1,253 [[widebody]] airliners.<ref name=AFJtop50/> 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%.<ref name=V1ewpoint2017Q2/>
Aircraft lessors are often banks, [[hedge fund]]s or financial institutions.

Aircraft financing is a $140 billion 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, [[GE Capital Aviation Services|GECAS]], formed from the hulk of GPA.<ref>{{cite news |url= https://uk.reuters.com/article/us-aviation-finance/global-air-finance-titans-ponder-whether-boom-will-ever-end-idUKKBN1FF24H |archive-url= https://web.archive.org/web/20180126195544/https://uk.reuters.com/article/us-aviation-finance/global-air-finance-titans-ponder-whether-boom-will-ever-end-idUKKBN1FF24H |url-status= dead |archive-date= January 26, 2018 |title= Global air finance titans ponder whether boom will ever end |author= Tim Hepher, Conor Humphries |date= Jan 26, 2018 |work= Reuters}}</ref>

{| class="wikitable sortable"
|+ 2017 Top 20 operating lessors by Fleet & Backlog,<ref name=V1ewpoint2017Q2>{{cite news |url= https://www.flightglobal.com/asset/16524 |title= Commercial operating leasing market dynamic |pages=4–7 |work= V1ewpoint |date= Spring 2017 |issue= 55 |publisher= Flight Ascend Consultancy}}</ref> number of aircraft in 2015<ref name=AFJtop50>{{cite web |url= https://www.gecas.com/en/common/docs/Leasing_Top_50_2015.pdf |title= The Leasing Top 50 2015 |work= AirFinance Journal |date= 1 November 2015 |access-date= 5 April 2017 |archive-date= 4 August 2016 |archive-url= https://web.archive.org/web/20160804055836/https://www.gecas.com/en/common/docs/Leasing_Top_50_2015.pdf |url-status= dead }}</ref>
|-
! Rank !! Operating Lessor !! Fleet !! Backlog !! Value ($mn) !! 2012 Rank !! 2015 fleet !! [[Turboprop|Turbo]] [[Turboprop|prop]] !! [[Regional Jet|Regional]] [[Regional Jet|Jet]] !! [[Narrowbody|Narrow]] [[Narrowbody|body]] !! [[Widebody|Wide]] [[Widebody|body]]
|-
| 1 || [[AerCap]] || 1,153 || 339 || 33,994 || 9 || 1,279 || - || 4 || 970 || 305
|-
| 2 || [[GE Capital Aviation Services|GECAS]] || 931 || 304 || 22,358 || 1 || 1,608 || 31 || 374 || 1,035 || 168
|-
| 3 || [[Air Lease Corporation]] || 271 || 357 || 13,120 || 9 || 251 || 18 || 27 || 162 || 44
|-
| 4 || [[SMBC Aviation Capital]] (ex [[Royal Bank of Scotland|RBS]])|| 445 || 200 || 13,796 || 6 || 393 || - || 7 || 378 || 8
|-
| 5 || [[BOC Aviation]] || 285 || 176 || 12,653 || 10 || 256 || - || 16 || 204 || 36
|-
| 6 || [[Avolon]] || 546 || 257 || 19,167 || 17 || 166 || - || 6 || 140 || 20
|-
| 7 || [[BBAM]] (incl [[Nomura Babcock & Brown|NBB]] & [[FLY Leasing]]) || 390 || || 15,284 || 3 || 413 || - || 2 || 357 || 54
|-
| 8 || Aviation Capital Group || 250 || 132 || 5,397 || 4 || 273 || - || - || 264 || 9
|-
| 9 || [[Industrial and Commercial Bank of China|ICBC Leasing Co]] || 277 || 45 || 12,488 || 16 || 173 || - || 13 || 131 || 29
|-
| 10 || [[AWAS (company)|AWAS]] || 231 || 15 || 5,844 || 7 || 295 || - || - || 242 || 53
|-
| 11 || [[Macquarie Group|Macquarie]] AirFinance || 202 || 40 || 4,726 || 13 || 176 || - || 4 || 160 || 12
|-
| 12 || [[China Development Bank|CDB]] Aviation Lease Finance || 151 || 49 || 5,569 || 26 || 120 || - || 20 || 68 || 32
|-
| 13 || [[Aircastle]] || 192 || || 4,938 || 14 || 141 || - || 5 || 77 || 59
|-
| 14 || [[ALAFCO]] || 60 || 124 || 2,750 || 12 || 49 || - || - || 46 || 3
|-
| 15 || [[Boeing Capital]] || 174 || || 1,369 || 11
|-
| 16|| [[China Aircraft Leasing]] || 90 || 138 || 4,278 || 63 || 47 || - || - || 43 || 4
|-
| 17 || [[Orix]] Aviation || 167 || || 3,991 || 15 || 148 || - || 2 || 132 || 14
|-
| 18 || [[Standard Chartered]] Aviation || 120 || 10 || 4,077 || 18
|-
| 19 || [[Mitsubishi UFJ Financial Group|Jackson Square Aviation]] || 117 || || 4,681 || 25 || 110 || - || - || 97 || 13
|-
| 20 || [[Bank of Communications|BoCom Leasing]] || 114 || || 4,328 || 81 || 49 || - || - || 38 || 11
|}

Lessors have a preference for [[Narrow-body aircraft|narrowbodies]] over [[Wide-body aircraft|widebodies]] due to more remarketing opportunities and the substantial reconfiguration time and cost a larger aircraft requires.
Reconfiguring an [[Airbus A330]]-300 can cost $7 million and even more for a [[Boeing 777]]-300ER or an [[Airbus A380]]: introducing [[In-flight entertainment|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 unit]]s - $9,000 per passenger, sidewall panels - $6,000 each, updating the IFE database - $125,000, repainting the aircraft - $100,000, engineering costs - $100,000.<ref name=AVN19march2018>{{cite news |url= http://www.aircraftvaluenews.com/lessors-seek-to-minimize-widebody-reconfiguration-costs/ |title= Lessors Seek to Minimize Widebody Reconfiguration Costs |author= Aircraft Value News |date= March 19, 2018}}</ref>

==References==
{{Reflist|2}}

==Further reading==
* {{cite news |url= https://www.flightglobal.com/news/articles/opinion-eye-catching-figures-belie-nuances-of-farnb-450548/ |title= Opinion: Eye-catching figures belie nuances of Farnborough deals |date= 20 July 2018 |author= Sophie Segal |work= Flightglobal}}

{{Aircraft leasing companies}}

{{DEFAULTSORT:Aircraft Lease}}
[[Category:Aircraft leasing companies| ]]
[[Category:Aviation agreements]]
[[Category:Vehicle rental]]
[[Category:Aircraft finance]]
[[Category:Leasing]]
[[Category:Economy of the Republic of Ireland]]

Aircraft lease - Revision history

Admin at 04:16, 17 April 2025

Admin: 1 revision imported

wikipedia>Iamnotflour: /* Wet lease */