http://www.AVBUYER.com AVBUYERMAGAZINEVol 23 Issue 8 2019 53
F AVBUYER .comWhat is an aircraft lease, what are the options available to lessees, and what are
the advantages and considerations relating to selecting the right type? Dave Higdon
asks Tony Bergeron and Frédéric Larue of Echo Aviation Leasing Corp.
ou only need to have spent a little time around
aviation to recognize the varied iterations of flying,
including agricultural, business, personal,
recreational, and sundry specialty utility
operations. And then there are the variety of airplane types
within a segment which also range widely (nowhere more so
than within General and Business Aviation).
Similarly, the mechanisms available for accessing Business
Aviation vary significantly, whether traditional ownership,
fractional ownership or charter.
Again, when you drill down into each ownership type,
you find further options – including aircraft leasing (in the
case of whole aircraft ownership), which brings with it
additional considerations.
What is an aircraft lease? What are the choices and
benefits associated with it, and how does it work for aircraft
operators? We spoke with Frédéric Larue and Tony
Bergeron, Business Aviation veterans and partners at
Montreal-based Echo Aviation Leasing to learn more...A Leasing Primer
Aircraft lessees tend to choose one of two options available:
A dry lease, or a wet lease. “A wet lease (also known as an
ACMI lease) is a structure where the owner or lessor of the
asset provides the aircraft with the entire crew, maintenance
and insurance to the lessee,” explains Larue.
“By contrast, a dry lease is a contractual agreement
where the owner of the aircraft or the lessor provides the
aircraft to the lessee without obligation to provide crew or
preserve maintenance and insurance.”
So is a wet or dry lease the best option for an operator to
choose? “It depends,” Bergeron explains. “When it comes
to deciding on an aircraft leasing structure, there’s no right
or wrong answer. Instead, the decision should be based on
the greatest added-value for the client’s missions.
“In a sense, a wet lease could be said to mirror on-
demand charter, except that the lessee gets the same
aircraft and crew every time and a fully dedicated aircraft.
However, wet leases face some limitations. They’re often
used on a short-term basis (between one and 24 months).Anything shorter than this would be considered an ad-hoc
charter.
“A dry lease, meanwhile, requires the lessee to operate
the aircraft on its own Air Operator Certificate (AOC) or hire
a third-party aircraft operator,” he continues. Moreover, a
dry lessee often digests the costs associated with the
depreciation of the aircraft. “To be worthwhile for all parties
the lease should have a term of two or more years.”Varying Constraints
Each type of lease brings its own set of limitations to the
operation that an operator needs to heed. “The biggest
constraint that a wet lease brings to an aircraft operator is
the lack of control and the opportunity cost of maintenance
and crew,” Larue explains.
“A dry lease provides much more business to an operator
who can provide maintenance, crew and a specific threshold
for safety standards.”
“To a certain extent,” Bergeron adds, “a dry lease allows
an operator to provide constructive recommendations and
influence a lessee’s decision with certain aspects of the
aircraft.”
And, according to Bergeron, “Some important factors to
note include tax considerations and regulatory restrictions
which can arise with any type of lease.”
All these details should be covered in detail by a
professional familiar with Business Aviation leasing. Such are
the intricacies of any lease agreement.Crew Considerations
The different leasing options also involve different
considerations for crew, Larue notes. “Crew is considered a
very important factor with leasing an aircraft, since a
grounded aircraft is nothing less than a costly money pit.
“With a wet lease, the owner/lessor takes care of this,
whereas with a dry lease it must be arranged by the lessee.”
And lessees can enjoy some flexibility in how they fill
those crew seats, Bergeron explains. “Several lessees may
choose to hire their own crew in order to have a fully
dedicated team committed to the aircraft at all times. As aY
Dave Higdon is a highly respected aviation
journalist who has covered all aspects of
civil aviation over the past 36 years. Based in
Wichita, he has several thousand flight hours,
and has piloted pretty much everything
from foot-launched wings to combat jets.
Contact him via [email protected]Finance 2.qxp_Finance 16/07/2019 11:52 Page 2