Aircraft Leasing and Its benefits over Buying new Aircraft

Aircraft Leasing, When Airline Lease an Aircraft for Operations in place of Buying new Aircraft directly from Aircraft Manufactures. it is the kind of legal agreement between the Lessor and the lessee to use Aircraft of Short or Long term with or without ACMI (Aircraft, Crew, Maintenance, Insurance)

Types of Leasing

Types of Leasing in Aviation industry are mentioned below:

1-Wet Leasing

Wet Leasing, It is a kind of renting Full furnished Flat with all Basic equipment like Tv, Sofa. Wet Leasing is also known as ACMI (Aircraft, Crew, Maintenance, Insurance). It is a combination of the service provided by the lessor to the lessee. Lessee has to pay monthly Installment to Lessor and has to pay operational charges for the service such as Food Catering, Fuel Charges, Airport fee, Handling charges

But If Airline Uses its own cabin crew, then it will call as a “DAMP Lease” But the Cockpit Crew is of Lessor

2-Dry leasing

Dry Leasing Basically, leasing an Aircraft without ACMI (Aircraft, Crew, Maintenance, Insurance). In Dry Leasing, the Cabin and Flight Crew are of the Airline or Operator. here the Operator or Airline has the Responsibility to Manage and maintain the Aircraft. Here the Aircraft operator is Legally Responsible for the Aircraft. It is mostly for the long term and the airline has to pay yearly or monthly installment

3-Sale and Leaseback

The sale and Leaseback Model are one of the reasons for its huge success when indigo started that time Airbus is struggling to get into the Indian market Indigo used this opportunity and ordered the A320 and that received a huge discount at that time and later they sell the Aircraft to the leasing company at some profit and also Leasing company get aircraft at less price than market price and then Indigo take the same aircraft on lease from the leasing company and save cost on maintenance and Leasing company also get sure customer and there risk also reduced. It results in a lot of cost savings let me explain the same with an example 

Airbus A320 costs around USD 46.65M and Indigo gets each aircraft at USD 25M and later sells the same to a Leasing company at USD 30M at this point they already make a profit and then they lease the same aircraft and pay leasing cost which is very less than new aircraft cost, It  provided more benefits such as maintenance is the done by the leasing company 

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Why do airlines lease aircraft

1. To meet seasonal or unexpected Demand or passenger flow
2. To Ensure smooth Operations During a Lack of Crew or Technical Staff
3. New Airline can get time to Train Its Own staff with the help of Leased Aircraft
4. To protect them from Unexpected Loss due to the grounding of Aircraft or Unwanted maintenance
5. To Avoid Delays in the Delivery of New Aircraft

Benefits of aircraft leasing

1. It will save the Airline from the cost of Setting up an MRO Facility (Maintenance, Repair, and overhaul)
2. Help new Airlines to Start their Operations Without waiting for the delivery of New Aircraft 
3. Save operation costs for airlines as they save a lot on Maintenance, Crew cost.

Aircraft leasing companies

1 GECAS- GE Capital Aviation Services

2- AerCap

3-SMBC

Example of an Airline Successfully using Leasing

Indigo Airline – it is the largest airline operator in India with the most aircraft and in FY19 it has a total of 137 Aircraft out of which 117 are on lease and 20 are owned by Airline. they use Sale and Leaseback mode of leasing

FAQs

1-What is leasing and example?

Leasing is kind of legal agreement which allow lessee for a particular period of time and he has to pay monthly or yearly Installments

2-   What is lease in aviation?

Leasing of Aircraft for operations can be Dry or Wet Leasing as per airline requirements

3- What are the types of aircraft leasing?

 There are mainly two types of leasing Wet and Dry but Nowadays one more called Sale and Leaseback is a new kind of leasing

4 4 Largest aircraft leasing companies?

The largest Aircraft leasing company is AerCap Holdings N.V. based in Dublin, Ireland they owned around 900 aircrafts