Dry leasing of aircraft

By Avinash VJ

Here's a detailed breakdown of dry leasing in the aircraft industry:

Nature of the Lease:

• In a dry lease, the lessor owns the aircraft and leases it to the lessee for a predetermined period, typically ranging from months to several years.
• The lessee pays the lessor a fixed periodic lease rate for the use of the aircraft.

2. Responsibilities of the Lessor:

• The lessor's primary responsibility is to own the aircraft and maintain ownership throughout the lease term.
• They are responsible for ensuring the aircraft is airworthy and compliant with aviation regulations at the start of the lease.

3. Responsibilities of the Lessee:

• The lessee assumes operational control of the aircraft, including crewing, scheduling, maintenance, and insurance.
• They are responsible for obtaining all necessary operating permits and licenses for the aircraft's operation.
• Lessees also bear the cost of fuel, airport fees, landing charges, and any other operational expenses.

4. Flexibility:

• Dry leasing offers flexibility to lessees in terms of fleet management. Lessees can choose aircraft types, configurations, and lease durations that suit their operational needs.
• It allows airlines and other operators to expand or adjust their fleet size without the upfront capital investment required for aircraft ownership.

5. Financial Implications:

• Unlike wet leasing (where the lessor provides not only the aircraft but also crew, maintenance, and insurance), dry leasing typically involves lower lease rates since the lessee assumes a greater degree of risk and operational responsibility.
• However, the lessee incurs additional costs for crewing, maintenance, insurance, and other operational expenses.
• Dry leasing can be financially advantageous for lessees who have the capability to manage these operational aspects efficiently.

6. Regulatory Considerations:

• Dry leasing agreements must comply with aviation regulations and legal requirements specific to the jurisdictions involved.
• These agreements typically address issues such as liability, insurance coverage, maintenance standards, and lease termination conditions.

7. End of Lease:

• At the end of the lease term, the lessee returns the aircraft to the lessor in an agreed-upon condition, subject to any excess wear and tear provisions outlined in the lease agreement.
• The lessee may have the option to renew the lease, negotiate a new lease agreement, or return the aircraft and explore other leasing or purchasing options.

Dry leasing provides airlines, charter operators, and other aviation businesses with a flexible and cost-effective means of acquiring aircraft to meet their operational requirements without the long-term financial commitments associated with ownership. However, it also requires lessees to manage various operational aspects of aircraft ownership, including crewing, maintenance, and insurance, which can entail additional responsibilities and costs.