A short overview of Dry leasing
Dry leasing is a leasing formula giving the operational responsibility to the lessee.
Generally we can distinguish the following types of dry leasing :
- Finance Leasing (Full Payout Lease). You effectively acquire all
financial benefits and risks without actually acquiring legal title.
The leasing rate is computed to collect the full value of the asset (plus finance charges)
during the contract period. At the end of the lease, the asset is sold to a third party and
you can receive a share of the sale proceeds (if the lease is not being extended).
Generally, you will not be able to become the owner of the asset at any time -
unless a private arrangement is made within the contact.
However, you usually have the option to extend your lease and as you will have paid for almost
the full value during your initial lease period, the rental payments for subsequent periods
will be minimal (sometimes referred to as "peppercorn rental").
- Operating Lease. Often with a shorter time frame than financial leasing,
operating leasing is more like a regular rental. The lessor expects to be able to either sell the
asset in the second-hand market or to lease it again and will therefore not need to recover the
total asset value through lease payments. There may also be an option to extend the leasing period
at the end. As with finance leases, you will not be able to become owner of the asset at any time but,
contrary to financial leases, you will not share in the sale proceeds.
- Sale and leaseback. An owner sells the aircraft and leases it back
from the buyer. Legal ownership of the aircraft passes to the leasing company/buyer
but the right to use it stays with the original owner.
This is of course only a general overview of the dry lease contracts.
Detailed solutions can be offered based on your exact requirements.
We also evaluate existing lease arrangements to optimize your cost basis.
Besides a single operator deal we can also offer an interchange agreement involving 2 operators.
An interchange agreement is a form of a dry lease permitting one operator to dry lease an aircraft
to another operator for short periods of time, thereby providing greater operational flexibility and
use of large transport category aircraft by operators.