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Aircraft Leases
Aircraft Leases
Wet lease
The term wet lease (rental literally "wet", as opposed to dry lease )
refers to a contract of hiring a aircraft including all ancillary services
such as insurance, crew and maintenance (usually defined with the '
acronym ACMI aircraft, complete crew, maintenance, and
insurance).
The wet lease agreement is usually signed between the two airlines:
the lessor to the lessee actually provides a service provided, and not,
as in the case of dry lease , the effective availability of the vehicle, the
lessee in fact acting on behalf of the lessor a number of flights, using
an entirely his own, but classified with the IATA code of the landlord
himself.
The typical use of the wet lease is to ensure the lessor the "coverage"
of its services at particular times, for example in periods with special
traffic peaks or when the aircraft normally used by the lessor are
grounded for maintenance of greater importance.
Dry lease
A dry lease is a leasing arrangement whereby an aircraft financing
entity, such as GECAS and ILFC (lessor), provides an aircraft without
insurance, crew, ground staff, supporting equipment, maintenance,
etc. Dry lease is typically used by leasing companies and banks,
requiring the lessee to put the aircraft on its own AOC and provide
aircraft registration. A typical dry lease starts from two years onwards
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 used by a major airline and a
regional operator, in which 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. This saves the major airline the expense of training
personnel to fly and maintain the aircraft, along with other
considerations. 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. DHL has a joint venture in
the United States with Polar Air Cargo, a subsidiary of Atlas Air, to
operate their domestic deliveries.
In the United Kingdom, a dry lease is when an aircraft is operated
under the AOC of the lessee.[3]
The term Dry lease (rental literally "dry", as opposed to wet lease ) is
defined as the form of lease used specifically for the aircraft in which
the vehicle is rented without attachments such as insurance , crew,
ground handling, maintenance.
Seasonal
Demand
One of the most common reasons for Wet Leasing an
aircraft is related to the seasonal demand. Many charter
operators and sometimes the national airlines as well will
have to cope with a degree of seasonality; for example,
during the summer season these operators will have a lot
more passengers to transport and in such cases they will
generally wet lease an aircraft for a period of 6 months to
cover the increase in demand.
New
Route
Trials
Start up operators and existing operators are not always
sure about the commercial viability of certain routes they
want to fly, for this reason it is often prudent to first enter
Out
of
Gauge
Long
Term
Outsourcing
Another very good reason for wet leasing rather than
purchasing would be when an airline is required to operate
a route or a project that is apart from their main business
activity; for example a passenger airline that wants to
cover some small cargo routes but dont want to invest in
buying new aircraft for this and taking on board new
pilots, may opt to outsource the aircraft and crew in form
of an Aircraft Wet Lease contract. Although Wet Leasing is
not always the most cost efficient solution, in this
scenario, it may be that wet leasing turns out to be
cheaper than hiring and getting everything into place on
purchase or dry lease basis.
AOG
Finally, a typical reason for taking an aircraft on wet lease
would be during AOG situations (Aircraft on Ground). In
these scenarios airliners will sub-contract an aircraft from
another airline and since they will already have all traffic
rights in place for the route they want to operate, it makes
more sense to just Wet Lease the aircraft.
LATEST NEWS:
DRY LEASE
dull response. The eight 777-200 LRs with AI are 235-seaters, against
the usual industry norm of 290-300 seats.
However, the carrier's officials are hopeful that a deal will be struck
this time.
"We still have two more weeks to go. Generally, customers apply for
tender at the very last moment," said a senior Air India official on
Sunday.
The idea behind the plane seating configuration was to operate the
aircraft on ultra long-haul routes like Chicago, New York and Toronto
on premium fares, but that did not materialise, sources said. This
forced the airline to deploy them on medium haul sectors such as
Hong Kong, Shanghai and London rendering the aircraft operations
economically unviable.
AI had almost got into an agreement with Air Canada to lease these
planes but the deal fell through at the last minute due to the seating
configuration, sources added.
There are many carriers like Kingfisher Airlines, which have been
forced to give away its 34 aircraft to lessors as it has failed to pay Rs
1,000 crore as yearly rent. "There are hundreds of other aircraft that
are lying idle. It is not easy for Air India to lease their planes," said an
airline official.
AI had acquired the 777s as part of its 67 aircraft order from Boeing
in 2005. At present, it has 20 777s, of which eight are 777-200 LRs
while the rest are 777-300 extended range planes.
AI decided to do away with the Boeing 777 by leasing them as soon
as it got an indication about the delivery of Dreamliners early this
year.
The first dry-lease tender was floated on January 2.
Since January, the airline has been trying to do away with these
aircraft following the decision to operate the 787 Dreamliners in their
place.